"We have agreed in a Memorandum of Understanding that we will discuss the potential for (British automaker) MG to be distributed in the UK," Kevin Wale, president and managing director for GM's China operations, said at the Reuters China Investment Summit.

However, Wale said no discussions have been held on sharing GM's dealer network in North America.

The GM-SAIC partnership has long been hailed as the most successful in the Chinese auto industry. The Detroit automaker sold more than 2 million vehicles in China, its largest market, in the first 11 months this year, exceeding its full-year target.

GM's Buick, Chevrolet and Cadillac models, made at its flagship car venture with SAIC, also helped bolster the Chinese automaker's bottom line, making it a domestic champion.

The UK dealer network deal, if it is completed, would mark another milestone in their 13-year relationship and would make SAIC the only Chinese automaker to secure access to a partner's overseas dealer network.

SAIC became the owner of MG Rover's 10,000-unit Longbridge plant in Birmingham, England, after a merger with Nanjing Automobile Group, in late 2007.

The top Chinese automaker plans to start making MG series sedans in the UK by the end of this year and sell them across the European Union, its Chairman Hu Maoyuan told Reuters in January.

Access to GM's network there would be a big help for SAIC, which has little exposure to the European market so far, industry observers say.

SAIC had in November bought a nearly 1 percent stake in GM when the top Detroit automaker returned to the stock market with a more than $20 billion initial public offering.

Beijing unveiled tax incentives in 2009 for cars with engine sizes of 1.6 liters or smaller, a move that helped China surpass the United States as the world's largest auto market that year.

Selected fuel-efficient models, including GM's hot-selling Chevrolet New Sail, are also eligible for a 3,000 yuan ($471) rebate.

As such, car sales in the country increased 35 percent in the first 11 months, after a 53 percent gain in 2009, according to official data.

The government has made no announcement so far on whether to renew the policies next year.

Wale said he expects China will keep the 3,000-yuan rebates for energy-saving models intact but to scrap the tax incentives.

Still, he expects the Chinese market to continue to grow next year, albeit at a more typical pattern, thanks to robust underlying demand in the world's most populous nation.

"I expect the market to continue to grow next year. Ten to 15 percent sounds reasonable to me," said Wale, who has been at the helm of GM's China operations since May 2005.

"We always like to outpace it (the market) a little bit, so we (hope to) sell an excess of 2.5 million units next year."