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China Buzz Boosts Caterpillar

The company's shares are up 3% on word it's doing some work in China.
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With word leaking out in recent months that


is a country with a lot of people, nothing piques Wall Street's interest more than a mention of that nation these days.

Economic opportunities are everywhere, we're told. And this isn't just about technology of course. It's also about old-line industries like earthmoving -- and being roughly the size of the U.S., China has a lot of earth to move, mine and otherwise transform. Enter


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The Peoria, Ill., heavy machinery maker saw its shares rise after the company said it signed three nonbinding agreements with an industrial park development company affiliated with Shanghai's municipal government.

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Never mind that in its own words "Caterpillar has a long history in China." Don't be bothered to know that the company sold its first products there in 1975, even opening an office in Beijing in 1978. This is China, version 2005.

Shares of Caterpillar were up $1.70, or 3.2%, to $54.85. The 52-week high is $55.59.

Caterpillar's agreements involve the Shanghai Lingang Economic Development Co., which is currently developing the world's largest industrial park. In a press release Friday, Caterpillar said it and the Lingang group "reaffirmed their commitment to the success of Caterpillar's China Distribution Center in the Lingang Industrial Area and to the establishment of a regulatory system that facilitates trade and investment in the region."

Additionally, Caterpillar Remanufacturing Services will try to use its remanufacturing expertise to establish the Lingang Industrial Area as the top place in China to support Caterpillar customers and dealers in China and the Asia Pacific region.

Also involved is a proposed alliance between Caterpillar Logistics Services and Lingang that would set up a service center to attract investors and clients to the Lingang Industrial Area.

"I have visited China regularly over the last 20 years and have witnessed the nation's extraordinary economic growth and development during that time," Caterpillar Chairman and CEO Jim Owens said in a statement. "Caterpillar has also grown during that time, and these initiatives are tangible examples of our plans for future growth across all lines of Caterpillar's business in China."

In the 1980s, Caterpillar reached technology transfer agreements with Chinese manufacturers who began building Caterpillar-licensed products. Caterpillar's expansion in China continued in the early 1990s with a more aggressive local production strategy. Now Caterpillar operates 10 facilities, both joint ventures and wholly owned businesses, in China.

Earlier this year, Caterpillar acquired a minority stake in Shandong SEM Machinery, with an option to buy the remaining equity in 2007. In addition, Caterpillar is having preliminary talks with other Chinese manufacturers, which could result in added future investments. In China.