GENERAL Motors announced today it would set up a US$250 million alternative fuel research center in Shanghai.

"We believe China has the potential to become a leader in the adoption of alternative propulsion systems," General Motors Corp CEO Rick Waggoner said.

He said construction of the first phase of "The General Motors Center for Advanced Science and Research" would be finished late next year.

Waggoner also announced that GM would make a US$5 million grant to set up "The China Automotive Energy Research Center" along with Tsinghua University and Shanghai Automotive Industries Corp, or SAIC. It will be based at the Beijing campus of the university.

Waggoner made the announcements along with Chen Hong, the president of SAIC, and He Jianqin, Tsinghua's executive vice president. SAIC is a local partner of General motors and Volkswagen.

He said GM picked China for the research center because of the country's fast-growing vehicle market and the government's push to develop alternative energy sources.

"We see a lot of (government) interest in working with auto manufacturers to bring those to market as quickly as possible," Waggoner said.

China has been trying to promote cleaner and more efficient fuels as part of efforts to cut pollution and rising dependence on imported oil.

General Motors announced previously that it plans to start selling a gas-electric hybrid vehicle in China next year.

Waggoner said future development of GM's alternative vehicle product line would be decided by consumer demand and government policy.

China already is the world's No. 2 oil consumer after the United States and saw imports soar by 14.5 percent in 2006, driven by economic growth that has topped 10 percent for the past four years.

Waggoner said that worldwide General Motors expected to sell just over nine million vehicles this year, one million which would use biofuel. Most of those will be sold in the United States, Brazil and Sweden.

By 2012 as many as half of the vehicles made in the Untied States could be powered by biofuels, Waggoner said.

He said sales in China this year for all GM brands sales will exceed one million units, but he did not give a specific figure. Last year, sales rose 32 percent from the 2005 level to 876,747 units.

General Motors has estimated market share in China of 11.8 percent.

GM already has a joint-venture technology center with SAIC in Shanghai and operates three experimental fuel cell buses in the city.