Honda Motor on Friday said it has begun building a factory in China to make transmissions as part of its plan to expand vehicle production there.

According to Kyodo News, the automaker said it would invest US$98 million in the new factory in Guangdong province. It will start production in spring 2007 with an annual output of 240,000 units.

Honda intends to expand its automobile production in China to 530,000 vehicles by the second half of this year from the current 320,000 units, the company said.

Kyodo News noted that the new Chinese factory will be the company's fourth automatic transmission factory overseas after two factories in the United States and one in Indonesia.