Japan's second-biggest automaker, Nissan Motor Co, is in talks with China's Dongfeng Automotive Group on a joint venture to produce subcompact cars, but the companies declined on Wednesday to give details.
Nissan already has a presence in China, but a joint venture would enable it to take its technological edge into the world's most populous nation.
It would also boost its ability to compete with rivals, including Volkswagen AG, General Motors, Ford Motor Co, Toyota Motor Corp and Honda Motor Co that already have joint ventures in China.
Dongfeng Automotive Group Co confirmed a Japanese newspaper report that it was in talks on setting up a joint venture with Nissan. Dongfeng Automotive, in central Hubei province, is the parent of Shanghai-listed Dongfeng Auto
"We are negotiating with Nissan on a joint venture but no agreement has been reached," said a spokesman for Dongfeng, one of China's top three automakers.
"But at this stage, we cannot reveal any details," he said, declining further comment.
The car would be built based on the chassis of Nissan's March subcompact car, Japan's Asahi Shimbun newspaper said. The car is known as the Micra in Europe.
"We cannot comment on whether Nissan is now in talks with Dongfeng. But we want to strengthen current relations with Dongfeng," a Nissan spokeswoman said.
Nissan President Carlos "Le Cost-Killer" Ghosn said in May the company was in negotiations with a major Chinese car manufacturer but declined to identify potential partners.
Ghosn was visiting China from Wednesday, but the trip had no special goal, the Nissan spokeswoman said.
China has identified Dongfeng Automotive as one of two or three major car groups that would receive support including loans and priority in setting up joint ventures with foreign firms as part of a five-year shake-up of the industry.
Nissan-designed Bluebird passenger cars are now produced by Fengshen Automobile Co Ltd's plants in southern Guangdong province and in Hubei with Nissan technical assistance. Fengshen produced 5,000 Bluebirds in 2000, the spokeswoman said.
Fengshen is owned 45 percent by Dongfeng Automotive, 30 percent by Guangzhou JA Yunbao Automobile Co Ltd and 25 percent by Taiwan's Yulon Motor Co Ltd Nissan owns 25 percent of Yulon.
Zhengzhou Nissan Automobile Co Ltd, in central Henan province, owned five percent by Nissan, produces Nissan-design about 5,000 pickup trucks a year.