Matsushita Electric Industrial has signed a letter of intent to team up with China's consumer electronics maker TCL Holdings in order to increase sales in the mainland. The Japanese consumer electronics giant, best known for its Panasonic brand, said it would leverage on TCL's established distribution network and corporate image in an attempt to boost its mainland sales. The pact follows a similar move by another leading Japanese consumer electronic manufacturer, Sanyo Electric, which teamed up with the mainland's largest consumer electronics maker, the Haier Group, in order to sell each other's products in Japan and China. The deal is significant because it allows a multinational to enter the mainland market without having to deal with the well-publicised problems inherent in China's distribution and consumer products sector. Multinationals have long been using China as a cheap production base as well as trying to tap the country as a consumer market with huge potential. TCL Holdings, in which the city government of Huizhou, in Guangdong province, holds a 40.97 per cent stake, is a leading mainland home appliance maker. It holds two listing vehicles, TCL Communication Equipment, listed in Shenzhen, and TCL International Holdings, which is listed in Hong Kong. The Matsushita-TCL pact covers co-operation in sales, production, research and development and component procurement. Matsushita and TCL Holdings said the co-operation would blend the Japanese firm's advanced technologies and strong product development capability with the Chinese partner's strong production and sales force within the mainland market. Its products include television sets, audio-visual equipment, computers, mobile phones and white goods. A Matsushita spokeswoman said her company expected the sales of its own products on the TCL sales network to reach 10 billion yen (about HK$593.7 million) this year. The pact with TCL is part of the Japanese firm's overseas sales expansion strategy - Matsushita has marked China out as an important target market. Matsushita's annual sales in the mainland amount to 300 billion yen. The company has 49 production and sales firms in the mainland. It has been engaging mainland manufacturers, including TCL, for original equipment manufacturing production. TCL Holdings runs 300 sales outlets nationwide and has a 10,000 sales staff. Sales through its mainland distribution channels reached 21.1 billion yuan last year. The similar product types of the two companies would help sales and would not lead to mutual competition, said the Matsushita spokeswoman. 'TCL is mainly selling regular models while Matsushita [is selling] the high-value-added products,' she said. The two companies will also co-develop technology in audio-visual equipment while Matsushita will supply key components such as cathode ray tubes, plasma displays and compressors to TCL.