Following the failure of an earlier foray with Brilliance China, MG Rover Group and its parent company Phoenix Venture Holdings (PVH) have entered into an "exclusivity arrangement" with Shanghai Automotive Industry Corporation (SAIC) so the companies "can develop a far reaching strategic relationship".

SAIC is the largest passenger car manufacturer in China, producing 600,000 passenger cars in 2003 with major joint venture partners General Motors and Volkswagen.

A statement said the co-operation between the UK and Chinese firms will fund the development of new models and bring new opportunities for the MG and Rover brands in China

The signing of the agreement took place on 16 June, at SAIC headquarters in Shanghai.

PVH CEO Kevin Howe said: "Recently we have had discussions with several companies in China. We are delighted at the prospect of entering into a relationship with such a successful and respected partner, which will see a significant expansion in volumes of current and future products."

Further details will be announced after necessary regulatory approvals have been obtained.