This will add to factories P&G has in Beijing, Shanghai, Tianjin, Guangzhou, Chengdu, Nanping and Dongguan, mostly in coastal China.

"I think opening the factory in inland China is a strong signal that these foreign giants are putting more focus on the markets there," Luo says.

"Opening plants in Xinjiang can, on the one hand, reduce costs, and on the other hand, help cover consumers in nearby areas."

Mitch Barns, president of Nielsen's Chinese division, says: "Third- and fourth-tier cities are twice as big as the first- and second-tier ones in terms of population, and the growth rate twice as fast. So that's where the big opportunity is."

Both Unilever and P&G have not been accepting media interviews recently, citing "sensitive timing".

They are under the media spotlight as they, as well as local giants, were asked by the Chinese government not to increase the prices of their products.

Analysts say the expansion of international giants' into rural areas will speed up in tandem with foreign retailers' big forays into the areas.

Foreign retailers such as Carrefour and Walmart are ambitious to reach China's rural areas, and their long-term brands such as P&G and Unilever will certainly "ride on the crest of that tide", Luo says.

Compared with local players, the advantage for international giants lies mostly in their brand value.

"Brand is something you can't ignore if you want to grow big in the consumer market of China, or anywhere," says Xi Jinghan, head of research at consultancy firm Zhengdian International.

About 75 percent of personal care and household care products sold in China are branded.

Chinese consumers tend to be more willing to spend on foreign products. A consumer behavior research study in 2008 by theBostonConsulting Group showed that in Beijing and Shanghai, 38 percent of the most affluent consumers and 37 percent of middle-class shoppers prefer foreign brands.

Half of the Chinese consumers in the survey say that they would purchase a product because of its brand name.

Other than the value of their brands, the advantage of international giants also lies in numbers.

Unilever and P&G have developed a full range of sub-brands, such as Omo, Comfort, Tide, Safeguard and Bilang.

Moreover, during their massive brand shopping campaign in China in the 1980s and 1990s, they have acquired a number of strong household names from Chinese competitors targeting consumers in small cities and rural areas.

For instance, in 1996, Dynamic 28, a Hubei-based home care company, the first Chinese company able to sell more than 50,000 tons of washing powder a year, was acquired by British company Reckitt Benckiser.

"These brands, some of which have been frozen after being acquired, can play a big part in foreign giants' upcoming rural expansion," Luo says.

Analysts, however, believe it will be easier for local firms to expand into first-tier cities than for international giants to develop rural markets.

"Generally speaking, rural markets are patchy and less regulated, demanding more resources at the initial stage," Luo says. For example, a seller will need to negotiate with more than a dozen retailers, which requires a lot of patience and guanxi, or connections, to get its products to cover a town of 1 million.

By comparison, market rules in big cities are rather clear and what Chinese producers need to do is to knock open the door with cash and promotions.

"What these local companies need is capital. If they want to win in big cities, they must have strong financial brawn," Luo says.

Both Liby Group and Nice Group say they plan to go public to raise funds to build the war chest for their future expansion.

But local players will find it difficult to compete in high-end products such as personal care products.

"At this stage, the Chinese still compete with price and their familiarity with the local market, instead of branding and innovation. This is how the game is played, as always," Xi says.

That is a shortcoming Liby acknowledges.

"There is no doubt that we are still a low-end product producer," Xu says. "There is a distance between us and international giants in terms of research and development in high-end products and marketing."

Chang Yizhi, an analyst at Shenzhen-based CIConsulting company, says innovation comes above all in high-end markets.

"To sell in big cities, you have to be creative; you need to create concepts; you must add a sense of luxury to your products; and you must make yours different," Chang says. "That is the only way to compete with foreign brands which have been well established."

But Xi believes local players have gradually shown their potential to transform from producers to creators.

For example, she says, Blue Moon created hand-washing lotion and Shanghai Jahwa adds traditional Chinese medicine to its bath lotion. The creativity helps both beat foreign brands in their respective niches, she says.