French auto group PSA Peugeot Citroen yesterday said it has chosen to build its fourth factory in China with its new shareholder Dongfeng in Chengdu, capital of west China's Sichuan Province.

The partners already own three factories in Wuhan, capital of Hubei Province, with capacity to produce 750,000 cars per year.

Construction of the new plant will begin in the second half of this year and will take the group¡¯s Chinese capacity to 1 million vehicles in 2016, PSA said in a statement.

The new facility will make crossover vehicles -a cross between a car and a sport-utility vehicle -and four-wheel-drive vehicles under the Peugeot and Citroen brands, and also under the Fengshen brand owned by Dongfeng.

China¡¯s central government is encouraging car manufacturers to build new factories in the west of the country so as to boost development there.

PSA and Dongfeng plan to sell more than 650,000 vehicles this year in China, the world's biggest car market.

This is set to rise to 1.5 million by 2020 as a result of increased cooperation which recently involved Dongfeng becoming a shareholder in PSA. At the same time the French state also became a shareholder, as the holding of the Peugeot family was diluted.

The group is struggling out of severe financial difficulties, and is increasingly focusing on China as it seeks to diversify away from the mature European market.

PSA also has a joint venture with Chinese group Changan in Shenzhen.