The co-operation some industry observers predicted the government would force on rival Chinese car makers SAIC and Nanjing Automobile appears likely to happen voluntarily.

An Associated Press (AP) report from Shanghai on Thursday cited SAIC chairman Hu Maoyan as saying he hoped his company would cooperate with Nanjing, owner of the MG brand and much of the former UK factory tooling, in developing their own-brand cars.

AP noted that SAIC, a local partner of General Motors and Volkswagen, lost out to Nanjing Automobile in bidding for bankrupt MG Rover Group in 2005 and instead bought technology for two Rover models, the 25 and the 75.

SAIC has since launched its own-brand version of the 75, called the Roewe 750, while Nanjing Auto recently rolled out its version of the MG TF sports car, hoping to revive the historic brand.

"I can declare we are looking forward to cooperation with Nanjing Autos," Hu told the Associated Press ahead of the Shanghai motor show, which opens on Sunday.

Hu reportedly said that, since both companies were state-owned, it would make sense for them to cooperate.

"We need to use state assets more efficiently and effectively," Hu was quoted as saying. "We believe the leaders of Nanjing Auto are smart enough to understand this principle."

"I believe the government would be glad to see such cooperation," Hu told AP, without elaborating. He added that "SAIC's door is always open. Cooperation is our principle."

According to the Associated Press, Chinese state media have reported that Nanjing Auto is facing difficulties in financing the overseas expansion based on its acquisition of MG, which included its Longbridge factory in central England. The company, which is based in the eastern city of Nanjing, also recently has appeared to be pulling back from a project to build a car plant in Ardmore, Oklahoma.

Some reports have suggested Nanjing Auto or its joint venture with Fiat, Nanjing Fiat, might be a target for a takeover by Chery Automobile, China's biggest independent automaker, or some other company, the AP report added.

The news agency said SAIC is China's biggest publicly traded car company and, cash-rich from surging sales at its joint ventures with VW and GM, it has strong government backing as an industry leader.

SAIC plans to introduce a full range of own-brand models, including a Roewe W2 concept car that will begin production by year's end, the company told the news agency.

The Associated Press noted that the Chinese government has long encouraged consolidation in the automotive sector to nurture a handful of manufacturers able to compete in global markets and a tie-up between SAIC and Nanjing Auto would suit that policy.

Exports are a "long-term strategy," SAIC president Chen Hong was quoted as saying. "Our top priority is the domestic market because we expect the market to continue to grow. We need to seize this opportunity."