United States candy giant Hershey Co Ltd reached agreement with South Korea's Lotte Confectionery Co Ltd to set up a venture in China for making its chocolate, aiming to return to China's sweets sector after a suspension of almost a year.

America's biggest candy manufacturer will team up with Lotte to create an US$80 million joint venture, with the South Korean firm holding 51 percent.

"Working with Lotte, we'll be able to produce affordable products in the right flavors and formats for the local Chinese market, as well as regional Asian markets," Hershey Senior Vice President, J.P. Bilbrey said in a statement.

The venture is scheduled to start production in June in one of Lotte's Shanghai factories and began sales in August. It will take charge of the distribution of Hershey's products throughout the Chinese mainland, South Korea and Japan.

The move is the latest effort by the Pennsylvania-based company to return to China's chocolate market after a restructuring program. The company's mainstream chocolate products were no longer stocked at most stores at the end of 2004 after reports that Hershey planned to quit the market because of operational problems.

Sun Chao, marketing director of Hershey China, said earlier that the company has no intention to give up on the Chinese market, and the retooled operation was based on its strong confidence in the country's huge sales potential.

Hershey is eager to localize its operation to boost sales in the rapidly expanding Chinese chocolate market. China's impressive economy growth is expected to boost the market from US$571 million in 2004 to US$837 million by 2008 with an annual growth of about 10 percent. With the influx of foreign chocolate brands, the high-end chocolate market has become the new battleground for makers from home and abroad due to higher profit.