Reuters reports that Honda has received approval from the Chinese government to set up the first Sino-foreign joint venture to make cars solely for export.

According to Reuters, Honda will own 65% of the venture, marking the first time China has allowed a foreign company to own a controlling stake in a car-making tie-up.

Guangzhou Auto Group will own 25 percent and Dongfeng Motor will own 10 percent, Reuters said, citing a Honda statement, and adding that the three companies will together put $US193 million into the project.

Reuters said that, as announced in July, Honda aims to build small cars with engine size of 1.0-1.5 litres, with plans initially to build 50,000 cars a year from the second half of 2004, to be exported to Asia and Europe.

Honda also has a 50-50 venture with Guangzhou Auto, which has been making Accord sedans and Odyssey minivans since 1998, Reuters noted.