Volkswagen’s joint venture in China plans to set up an assembly plant in Xinjiang Uygur autonomous region this year to explore the markets of northwest China and Central Asia, local commerce officials have said.

The news, reported by China Daily, came a day after Volkswagen’s supervisory board approved plans to build a new factory in western China.

Details of the plan would be published when the contracts are signed on Monday, the carmaker told Reuters.

Two officials had earlier told the news agency VW would will agree terms to build another factory in China during Chinese Premier Wen Jiabao’s visit to Germany on 23 April.

Li Yi, an official with the trade and investment bureau of Urumqi’s development zone, told China Daily the plant, located in the regional capital Urumqi, was expected to become operational in 2013 and produce 50,000 small sedans annually.

Martin Winterkorn, chairman of the Volkswagen Group, was in Urumqi last week to inspect preparations for the new plant, the report said.

Zhang Chunxian, Xinjiang’s top official, told Winterkorn that Xinjiang’s auto market was growing rapidly thanks to the improved transport network in the region as well as the network connecting it to neighbouring provinces and Central Asian countries.

He said the Urumqi plant would help Volkswagen “gain a strategic advantage” in the northwest China and Central Asia markets.

Dongfeng Motor and Shaanxi Automobile, known for its heavy trucks, are also building assembly plants in Urumqi. The combined output of these plants, which will focus on trucks and commercial vehicles, will be about 76,000 units a year, Li said.

Xinjiang covers 1.66m sq km of land and borders eight countries, including Russia, Kazakhstan and Pakistan.