Chery Automobile and Fiat have postponed plans to begin building cars for the Chinese market this year because of the global economic downturn, a Chery spokesman said on Thursday.

"It definitely won't happen this year," Jin Yibo told Dow Jones Newswires. No new schedule has been set for the start of production but the two companies are continuing talks, he added.

The pair had signed an agreement for a 50-50 joint venture in August 2007 and had intended to build 175,000 Fiat, Alfa Romeo and Chery cars a year.

Fiat has relatively few foreign assembly outposts though its cars are built in South America, South Africa and India. Alfas have also been assembled recently (by GM) in Thailand and a planned tie-up with Chrysler could eventually see the Italian automaker's models built in the US for North American sale.

"The global situation is totally different from before," Jin said in China today. "We have had to adjust our strategy accordingly."

Dow Jones noted that the decision was the latest blow to Chery's ambition to use an association with a more established foreign automaker to boost its technical capability and make inroads into the key US and western European export markets.

Last year, it was forced to end a joint project with Chrysler to make small cars in China for sale around the world.

Fiat has, in turn, had difficulty making inroads into China. It used to produce passenger cars in partnership with Nanjing Auto, but left that loss-making joint venture after Nanjing was merged with SAIC Motor. Fiat no longer produces passenger cars in China, though it has component and truck operations with Chinese partners, Dow Jones said.

Fiat also won't exhibit at next month's Shanghai motor show for the first time since the 1990s, company spokeswoman Zheng Xiaoli told the news agency. The decision was an effort to control costs amid the global financial crisis, she added.