Caterpillar to build engines in China

Caterpillar Inc. plans to build small and medium diesel engines in Wuxi, China, to expand manufacturing capacity in the world's fastest growing economy.

Caterpillar is seeking to boost international sales with a greater presence in China, where economic growth accelerated to a 12-year high of 11.9 percent in the second quarter. The company projects China sales of $4 billion by 2010, up from about $1 billion last year, and it doubled the number of employees there to 5,000 in the past three years.

"It's one of our broadest manufacturing investments in recent history," said Jim Dugan, a Beijing-based spokesman for Caterpillar. "We've got a tremendous number of customers here and the potential for a tremendous amount more."

"This is a big step," said Eli Lustgarten, an analyst with Longbow Securities in Independence, Ohio. "They're not in the forefront of Chinese manufacturing and they're playing catch up."

Caterpillar lags behind Tokyo-based Komatsu Ltd. in mining and construction equipment sales in China, he said.