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PPG sees China above 1/3 of Asia sales in 5 yrs

* Sees China share of Asia sales above one-third in 5 years

* Sees its China sales growing faster than China’s GDP

* Expects “a good quarter” in Q3 despite raw material costs

* Plans to build a new plant in China in 1 to 2 years

* Sees acquisition opportunities in Asia over next five years

By Fang Yan

WUHU, China, Aug 7 (Reuters) - PPG Industries Inc PPG.N, the world's second-largest paint and coatings maker, expects China to generate more than one-third of its Asia Pacific sales in five years, up from 25 percent currently, as it continues to outpace the country's GDP growth rate, its chief executive said.

The Pittsburgh-based firm, which posted better-than-expected earnings in the second quarter, is also confident it will see “a good quarter” in the third quarter as it moves to improve efficiency and pass on rising raw material costs to customers, Charles Bunch told Reuters in an interview late on Wednesday.

He did not give detailed earnings guidance for the third quarter or elaborate on price hike plans.

While strengthening its position in mature markets, PPG is increasingly focusing on Asia, and China in particular, where its annual sales growth has been exceeding 10 percent for five straight years, compared with a low- to mid-single-digit rate of growth in North America in the same period.

China has become PPG’s growth engine in Asia -- where it also counts Australia and South Korea as key markets -- largely on booming industrial activity and automotive sales, said Bunch, who joined the firm in 1979.

“The growth in China probably will moderate a little bit but we are still very optimistic that it will still be the fastest growing large economy in the world.” said Bunch.

ASIA CATCHING UP

Bunch was in China to unveil a 70 million yuan ($10 million) automotive coatings plant in eastern China’s Anhui province, home to Chery Automobile, the country’s fourth-biggest car maker.

“That’s why we feel optimistic that China, Asia will be a bigger part of PPG than they are today.”

Asia Pacific made up 15 percent of PPG’s global sales of $11.2 billion in 2007, while North America accounted for roughly 45 percent and Europe for 33 percent.

Bunch said he expected Asia to catch up quickly with the other regions and to reach a similar level of importance to his firm within 10 years.

PPG, which competes with the industry's number one player Akzo Nobel AKZO.AS and others globally, operates 14 wholly owned manufacturing facilities in China, where it first invested in the 1980s.

Bunch, also PPG’s chairman, said he would continue to add capacity in the country via expansion of existing plants and by building at least one new plant, most likely on the coatings side, in the next one or two years.

“With this kind of growth we think it’s important to stay a little bit ahead,” said the executive, who holds an MBA degree from Harvard University.

PPG, whose clients include General Motors Corp GM.N, Boeing Co BA.N and Coca-Cola Co KO.N, acquired coatings maker SigmaKalon Group from Bain Capital for $3.1 billion in January this year as part of its strategy to focus on its core paints and optical operations.

Bunch said he would continue to look for acquisition targets, primarily in the coatings sector.

“We would expect during the next five years to make acquisitions here in Asia and hopefully in China as well,” he said, without naming potential targets.

($1=6.848 Yuan)

(Reporting by Fang Yan; Editing by Edmund Klamann)

((yan.fang@reuters.com; Reuters Messaging: yan.fang.reuters.com@reuters.net; +86 21 6104 1793)) Keywords: PPG/CHINA

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