Chery's search to find a partner who will enable it to extend its product offering could be lengthened after reports its latest proposal is being red-flagged by the Chinese government.

After having tried to form a partnership with automakers such as Fiat and Chrysler, Chery agreed to a venture with Subaru.

The Chinese automaker signed an agreement with Subaru's parent Fuji Heavy Industries (FHI) in June, with both companies agreeing to pump in JPY30bn (US$4.7bn) into the venture.

The venture was expected to initially produce 50,000 vehicles in the initial phase, eventually producing 150,000 vehicles.

However, the plans seem to have come to a halt after the National Development and Reform Commission reportedly rejected the proposal saying it went against national Policy on development of the automotive industry.

While the companies are yet to comment on the rejection, they are currently seeking to contact government authorities to discuss the issue, reported citing sources.