Despite slowing car sales, China's auto suppliers are maintaining decent growth and making new investment.

The auto supply industry increased its sales by 32 percent to 368 billion yuan and profits by 37 percent to 25 billion yuan in the first five months of this year, according to the National Bureau of Statistics. The rates are lower than last year, but still strong.

In the meantime, investment is still flowing into the auto parts and components industry.

State-owned Dongfeng Motor Group Co. plans to build a large-scale production base for recycling parts. The company is putting in 200 million yuan and hopes to start production in three years. The base is expected to annually recycle 50,000 used vehicles, reprocess 100,000 metric tons of materials, and manufacture 100,000 sets of parts and components using recycled materials.

China's Huaxia Times reported that more than 3 million vehicles end up in junk yards every year. Chinese authorities expect the auto industry to recycle 90 percent of all automobiles and at least 80 percent of the materials by 2012. The effort will help protect the environment and better use resources, industry insiders said in the report. But obviously, recycling will also be an effective way to reduce costs or at least offset rising production expenses in China.

Another expansion plan came from Taiwan Lian Chen Metal Manufacturing Works Co. Ltd., which is investing US$25 million to move its automotive mold center from its headquarters to Qingdao, a coastal city in Northern China. Having been in business for 55 years, Lian Chen is believed to be a major supplier to Ford. According to The Peninsula News, the project will be completed by 2009 and is expected to achieve 1.2 billion yuan in sales in the first year. The company said that the center will mainly supply five clients, including Beijing Benz-DaimlerChrysler Automotive Co. Ltd. and BMW's joint venture in Shenyang.

While Dongfeng's project illustrates the importance of recycling and cost-reduction in China, Lian Chen's plan unveils great potential of higher-end auto parts in China.