Kerry Group, the food and ingredients company, announced yesterday it was to buy a Chinese company, Hangzhou Lanli Food Industry Company Ltd, and will build a new factory in an investment worth €20 million.
The deal will boost Kerry Group's workforce in China to about 500 by the end of 2006. It is the largest single contract to be signed on the Government's trade mission to China.
The acquisition of Hangzhou Lanli will significantly expand Kerry Group's operations in China, which supply flavourings and ingredients to both Chinese and multinational food companies.
The new factory, which is located about three hours' drive from Shanghai in the city of Hangzhou, will be built in stages and should reach a total size of between 100,000 and 150,000 square metres, according to Mr Hugh Friel, chief executive of the Kerry Group.
"If we have some luck in China then it has to be a very important market for us going forward," he said. "What the Chinese are doing here is really quite impressive."
Kerry Group began exporting to China in 1988 following an acquisition it made in the US. Its new factory will enable it to supply multinational customers in China such as Danone, Unilever and Nestlé.
Its acquisition of Hangzhou Lanli will also enable it to capture a growing number of Chinese customers.
Mr Friel said operations of the type that Kerry Group was setting up in China were not particularly labour-intensive and low wage rates in China were not a factor in the decision to set up the new operation.
The company also said it would build a new factory in Malaysia, which could cost up to €5 million. About 6 per cent of Kerry Group's €4 billion sales are in Asian Pacific markets.
Meanwhile, the Minister for Enterprise, Mr Martin, said yesterday the Government should not adopt any "knee-jerk" response to recent job losses in the manufacturing sector in the Republic.
He also said he was not in favour of the introduction of protective tariffs across the EU to support the textile sector.
In a response to accusations from the Irish Congress of Trade Unions (ICTU) that the Government had to "get real" about protecting manufacturing jobs, Mr Martin said its arguments were "not sustainable".
There needed to be a better realisation that some lower-skilled manufacturing jobs would almost inevitably move to low-cost economies such as China's.
It was the Government's stated objective to retrain workers so as to enable them to obtain alternative employment and create new jobs.
"The nature of Irish employment is changing and people have to accept that," said Mr Martin, who added that certain types of high-end manufacturing would continue to be based in the Republic.
He did not agree with calls by trade unions representing textile workers for the reintroduction of EU-wide tariffs or new quotas to be placed on textile imports from China.
On January 1st quotas on textile imports from China were removed by the World Trade Organisation to promote free trade.
Mr Martin's comments follow the loss of more than 600 jobs in the Republic and the North this week, most of which were in the manufacturing sector.