German auto manufacture Volkswagen will build a plant in the city of Changsha in central China.
A Beijing-based spokesman for VW told AFP that the plant is expected to start production in early 2016 and have an annual output capacity of 300,000 vehicles.
"We are quite close to an official announcement. I think it will come this week," the spokesman said.
VW is currently vying with US rival General Motors to be the top foreign automaker in China, the world's biggest car market.
Last year GM sold 2.84 million vehicles, compared to VW’s 2.81 million vehicles.
However, there have been fears that supply may go beyond capacity. Environmental concerns and traffic problems have caused some cities to limit car numbers. As such, China's annual auto sales rose only 4.3 per cent year-on-year to 19.31 million units in 2012.
GM said this month it would build a $US1.3 billion Cadillac plant in Shanghai after the Chinese government approved the project.
"The production expansion of foreign carmakers shows they see growth opportunities in China's car market," Jia Xinguang, managing director of industry group the China Automobile Dealers Association, told AFP.
VW currently has 12 vehicle and component plants in China, and the Changsha plant is a joint venture with Shanghai-based SAIC Motor, one of its existing Chinese partners.
Apart from this new investment in China, the company is currently spending up big on new ventures.
"The location of Changsha may be a result of Volkswagen's strategy to move production inland to central and western China and its consideration of local policies, which might offer tax incentives to support the investment," Jia said.