Honda said it will ramp up its annual automobile production capacity in China 36% by 2012 to meet sharp demand growth in the country, according to Japan’s Nikkei business daily.

This would increase Honda’s capacity in China to 830,000 units from 610,000 and the Nikkei added that an announcement is expected next week.

The carmaker will expand its joint venture plant, Guangqi Honda Automobile , adding a new assembly line at an estimated cost of slightly more than JPY10bn (US$108.6m), the daily said.

This will double the factory’s production capacity to 240,000 units. It will assemble the Accord and a new brand to be launched with the joint venture partner, the Nikkei added.

China’s auto market, which overtook the United States as the world’s largest last year, thanks to a raft of policy incentives, has continued to grow despite the global industry downturn.

Sales of new cars continue to grow rapidly in the country. The number of vehicles sold there in the January-March quarter is equivalent to Japan’s projected demand for all of fiscal 2010. Chinese sales in April surged 34% on the year to 1.55m.