China's state-owned Dongfeng Motor is considering selling its stake in PSA Group as both companies continued to struggle in the world's largest vehicle market, according to Bloomberg.

Bloomberg cited unnamed sources as saying that Dongfeng was exploring options to sell all or part of its 12.2% stake in the French automaker which it is understood to have acquired for EUR800m (US$892m) five years ago.

The stake makes Dongfeng one of PSA Group's largest shareholders and is estimated to be worth EUR2.2bn at the current share price.

According to the reports, Dongfeng discussed with advisors a straight sale of its shareholding and also explored the option of issuing exchangeable bonds backed by the PSA shares.

Dongfeng is said to be looking to offload the shareholding following a poor performance by Peugeot in China in the last few years.

The French automaker's joint venture with Dongfeng Motor saw its sales fall by 33% to 253,000 vehicles last year, according to industry sources, and volume fell further to 63,000 units in the first half of 2019 – equivalent to just 27% of its full-year target.

Dongfeng is also struggling with high debt and negative cash flow, according to separate reports, with revenue dropping by 10.4% to CNY9.96bn (US$1.41bn) in the first half of 2019 and net earnings plunging by over 67% to CNY95.7bn (US$13.6m).

Its first half 2019 vehicle sales fell by 10.8% to 149,000 units.