Japan's top car maker, Toyota Motor, is close to an alliance with China's FAW Group to build luxury cars for the local market, according to media reports.

The Nihon Keizai Shimbun, a respected Japanese newspaper, reported that the two firms planned to set up a car plant in Tianjin, by 2005.

The plant could make a mix of Toyotas and FAW's upmarket Hong Qi vehicles, the newspaper said.

Toyota refused to confirm the report, saying merely that nothing had yet been decided.

Big is beautiful

The venture aims to target the top end of the Chinese market, a segment seen as having more promise than the high-volume but low-margin mass market.

Toyota's Land Cruiser four-wheel-drive vehicle is highly popular among China's new rich.

Toyota and FAW have already begun platform selection, the newspaper reported.

The annual output target is set at an initial 50,000-60,000 vehicles, eventually reaching 200,000, it said.

After production at the Tianjin plant gets on track, the partners may set up another venture in Changchun to produce a different range of luxury cars.

Toyota is only the latest in a string of multinational car firms to be eyeing the Chinese market.

Recent confirmed entrants include Italian Fiat and Britain's MG, and a host of others have been in reported talks.