Hyundai has confirmed plans, reported by a newspaper earlier this week, to spend $US740 million (£414 million) to boost production at its Chinese operation.

A BBC report said the move would increase Hyundai's output potential in China more than fourfold, to 600,000 vehicles a year by 2007.

Separately, Hyundai's Kia subsidiary is to spend nearly $US360 million raising its Chinese capacity to 430,000 cars a year, from 130,000 currently, the report added, noting that the investment programme will lift Hyundai's total output potential in China to more than a million vehicles a year.

Both Hyundai and Kia's Chinese operations are run jointly with local manufacturers, the BBC said, adding that Hyundai's China expansion plans come hot on the heels of similar investments from a string of car firms keen to boost their share of what is now the third biggest car market in the world.

Foreign car makers together have pledged to spend a total of $13 billion by the end of the decade, an investment which will triple the country's total car manufacturing capacity though the flood of new investment comes despite fears that the supply of cars may soon outstrip demand, the BBC added.

The Chinese government reportedly has warned that capacity could reach 14 million vehicles a year against demand of just 7 million by 2007.