Reuters reports that General Motors will next week sign a deal to invest in a fourth car plant in China, becoming the latest global carmaker to ramp up production capacity in the world's fastest growing car market.

General Motors, whose flagship car plant in Shanghai is running at near full capacity, will join with its longstanding China partner Shanghai Automotive Industry (Group) Corporation (SAIC) to take over a 900 million yuan ($US109 million) greenfield car plant, sources close to the deal told Reuters.

According to Reuters, Yantai Bodyworks was formed by the Shandong government in 2001 to assemble cars using technology, engines and components from South Korea's Daewoo Motors but the project was halted after Daewoo went bankrupt and was not part of GM's and SAIC's joint buyout of Daewoo assets announced in October.

GM and SAIC will effectively each control half of the state-owned Yantai Bodyshop Corp, which can boost GM's car production capacity in China by about 50%, the sources told Reuters.

Reuters said SAIC and GM's first joint venture, the $1.5 billion Shanghai GM, is China's third largest car producer with an 8.6% market share, behind the two plants of market leader Volkswagen which sell 40% of all cars in China.

Reuters said both firms reported stunning sales growth this year, with Shanghai GM expecting car sales to more than double to 110,000 as steady domestic economic growth lines the pockets of buyers.

Analysts told Reuters that Volkswagen and General Motors need to raise output in China to stay competitive with relative latecomers Toyota and Nissan snapping at their heels and boasting of aggressive new China strategies this year.

"To build on an existing plant costs much less than setting up a new one from scratch," analyst Angela Gu of Automotive Resources Asia told Reuters, adding: "This investment makes sense."

Sources close to the deal told Reuters GM will buy 25% of Yantai Bodyshop, partner SAIC will acquire 25% and Shanghai GM will take the remainder and that the plant would be ready to roll out its first car next week.

Reuters said that, according to local newspapers, the new plant, in the eastern coastal city of Yantai in Shandong province, has a first-phase annual capacity of 50,000 cars, equivalent to half of Shanghai GM's installed capacity of about 100,000.

Industry sources told Reuters that General Motors planned to shift production of its hot-selling Opel Corsa-based Sail compacts to Yantai, to free room in Shanghai for a new car to be introduced on December 26 and expected to be aimed at the mid-tier market.

The sources told Reuters the untested Yantai plant would go for the lower-end market, for example economy cars priced at less than 150,000 yuan ($18,123), while Shanghai GM would focus on the more expensive Buick brand.

GM also has a plant in northeastern China which makes SUVs and has invested in a mini-vehicle manufacturer in the south, Reuters noted.