updated 6/20/2006 9:45:30 AM ET 2006-06-20T13:45:30

McDonald's Corp. and China Petroleum and Chemical Corp. announced an alliance Tuesday to build drive-through McDonald's outlets, hoping to combine forces to profit from soaring Chinese car ownership.

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Under the agreement, McDonald's and the Chinese partner, known as Sinopec, will turn an unspecified number of the 30,000 gasoline service stations Sinopec operates nationwide into drive-throughs, the companies said.

Sinopec "will bring their knowledge of real estate. We'll bring our knowledge of restaurateuring," McDonald's vice president Gary Rosen said in an interview.

The companies declined to estimate the value of the deal, and Jeffrey Schwartz, chief executive for McDonald's China, said there was no numerical target for the number of outlets to be built.

The alliance is aimed at capitalizing on two Chinese consumer trends embraced by an emerging middle class: the popularity of Western fast-food and a new car culture. China is now the fastest growing market for McDonald's and market leader Yum Brands Inc.'s KFC and Pizza Hut. Meanwhile, auto sales grew 30 percent last year, to 5.7 million vehicles, slightly lower than in Japan.

In a sign of expectations for growth in China, Rosen said that in the United States, McDonald's biggest market, more than 60 percent of the company's business is at drive-throughs.

"The business potential is enormous," said Rosen.

McDonald's, which already has 760 restaurants in China, has said it foresees turning half the more than 240 outlets it plans to open by 2008 into drive-throughs. It opened its first drive-through in China in the southern manufacturing center of Dongguan in December and followed with two more, in the cities of Foshan and Shanghai, in January.

For Sinopec, which is adding 500 service stations a year to its retail network, the alliance with McDonald's is a chance to differentiate its brand, the company said in a statement. Sinopec faces competition from China's other behemoth oil products company, China National Petroleum Corp.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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