Hitachi Ltd. and Omron Corp. said Monday they will set up a joint venture combining their automated-teller machine businesses, partly in the hope of grabbing a substantial share of the growing Chinese market.

The joint venture will become Japan's largest maker of ATMs, with some 40 percent of the domestic market, according to officials of the two firms.

Globally, the new entity will account for a share of around 8 percent.

The company is scheduled to be established in October. It will aim for 120 billion yen in sales during the year ending March 2008.

Details of the joint venture have yet to be worked out, but Hitachi will take a majority stake, Hitachi and Omron said.

Hitachi President Etsuhiko Shoyama said the two firms hope to survive global competition for ATMs by combining their technological prowess.

He said there is growing demand for ATMs with the so-called recycle system in China and Europe, a favorable trend for Japanese makers that have a comparative edge in the technology.

Unlike cash dispensers, ATMs can allow users to deposit money and make payments. In the recycle system, the ATMs use deposited money when dispensing cash, thus lessening the need for operators to replenish cash stocks.

The market for such ATMs has so far been mostly limited to Japan. But demand is expected to grow rapidly in China and Europe, the officials said, noting that such a system was introduced in Europe only two years ago following deregulation.

The firms particularly hope to leverage their combined technical advantage in penetrating the Chinese market, where the buildup of the financial services infrastructure has been carried out rapidly.

Thanks to replacement demand caused by a release of new Japanese bills scheduled for this fall, ATM makers are expected to have a bumper year. However, they are under pressure to seek overseas markets to secure long-term growth.

Hitachi and Omron said the new company wants overseas sales to make up 30 percent to 45 percent of the total in fiscal 2007, up from the current 20 percent.