Although Volvo is Chinese-owned, it is still regarded as a foreign company, Li told reporters last week at a press briefing on Hainan island in southern China. The joint venture would be equally owned by Volvo and Geely, Li said.

Under China's investment rules, a foreign automaker that wants to produce vehicles in China must establish a joint venture with a Chinese automaker. Further, the foreign automaker's stake in the venture is limited to 50 percent. Further details about the new venture will be released in about two months, Li said.

Volvo also will abide by China's requirements that foreign automakers help their Chinese partners create new brands and develop electric cars, he added.

Geely acquired the Swedish car brand Volvo in 2010 from Ford Motor Co. Following the acquisition, Volvo announced plans to build two assembly plants in Chengdu of southwest China's Sichuan province and in Daqing of northeast China's Heilongjiang province. It also plans to build an r&d center in Shanghai.

Ford's China joint venture, Changan Ford Mazda Automobile Co., still builds the Volvo S40 and the stretched Volvo S80 under a contract it signed with Volvo.

Last year, Volvo sold 40,873 locally produced and imported vehicles in China, up 35 percent from a year earlier, according to LMC Automotive.