South Korea's Hyundai Motor has dramatically increased its investment in China to target the country's booming car market.

South Korea's largest car maker said the Chinese government had given it the go-ahead for a project that could produce 500,000 vehicles a year in China by 2010.

The company's joint venture with Beijing Automotive Industry Holding will start making Hyundai's EF Sonata and Elantra XD passenger cars near the Chinese capital from the end of this year.

By entering China, Hyundai joins a long and growing roster of foreign car makers in the world's fastest-growing major market.

In recent years, global manufacturers - including Volkswagen, General Motors, Nissan, Fiat and PSA Peugeot Citroen - have set up production facilities, and Japan's Toyota unveiled its first Chinese-made car last week.

Growing market

The Chinese market is one of the few sources of serious growth in an industry that is facing stagnant demand throughout much of the world.

The country's car market is expected to grow 40% to one million passenger cars this year, with obvious room for much more growth - especially as China has just joined the World Trade Organisation (WTO).

Under its commitments to the WTO, China is to end its current restrictions on joint ventures between local and foreign firms within the next two years.

The Hyundai deal comes at a time of increasing commercial activity between China and Korea.

Over the weekend, China's third-largest car firm, Shanghai Automotive, said it would invest $60m (�38.4m) in a venture to take over three plants belonging to South Korea's bankrupt Daewoo Motor.

Experienced

Hyundai said it would initially invest $100m in the joint venture and raise its investment to $1.1bn by 2010.

The company feels that its experience in the market for small budget cars will be crucial in the Chinese market, where the growth is expected to come from the relatively impoverished majority.

The firm, 10% owned by DaimlerChrysler, already has some knowledge of the market.

It already operates five Chinese auto ventures making vehicles ranging from four-wheel-drives to commercial vehicles.