MG Rover Group Limited (MG Rover) and China Brilliance Industrial Holdings (CBIH) have entered into a long-term strategic alliance and co-operation agreement to finance, develop, manufacture and market cars for the mutual benefit of both partners.

A new joint venture company will be created. Ownership of the company will be shared 50/50 between MG Rover and CBIH. Three directors from MG Rover and CBIH will form the board. They will oversee the collaboration and manage alliance objectives. There will be no exchange of equity between MG Rover and CBIH, however both parties will invest substantial resources into ensuring the success of the alliance.

The alliance provides the potential for MG Rover derived cars to be manufactured in China, including those that will be jointly developed. This will include the new medium-sized car, for which the styling direction was previewed at the Geneva Motor Show.

Plans have also been put into place for the joint development of a new small car and consideration will be given to the development of additional new models. Equally the opportunity also exists for MG Rover to manufacture and market CBIH derived vehicles.

The companies will co-operate on the supply and manufacture of engines and development of a new range of engines.

MG Rover will provide technical support and assistance in order to establish the necessary manufacturing processes and systems in China. This will extend to the establishment of a joint Research and Development centre in China.

MG Rover says that the alliance will seek significant cost benefit from larger manufacturing volumes, going forward. A joint component sourcing strategy committee will be established in order to maximise the economic benefit of the companies' combined purchasing.

Kevin Howe, MG Rover, Chief Executive said in a statement: "This is a wide-ranging global alliance that spans the full breadth of both company's activities, and presents many opportunities. I am delighted that we have so much in common. Brilliance has achieved quite outstanding results in a very short space of time and demonstrates world class standards in everything it does. It is clearly the leading automotive manufacturer, in the world's fastest growing car market.

"China will be one of the most important markets for the alliance. It is the world's fastest growing market for cars. The alliance can move quickly into a position where it can fully exploit this market's potential."