By Francis Markus BBC correspondent in Shanghai

Chinese officials have a soft spot for GM cars

That will make 1.3m vehicles a year, against Volkswagen's expansion target of 1.6m.

China is the fastest-growing vehicle market in the world.

However, in the short term at least, there is uncertainty over how China's attempts to cool the overheating economy will affect the car industry.

Uncertain picture

Virtually the whole of Shanghai's taxi fleet is made up of locally-built Volkswagen saloons.

Volkswagen is China's market leader

But GM - the top manufacturer worldwide but behind VW in China - holds a conspicuous place in the market too.

Its much bulkier locally-made Buicks are favoured by officials and executives.

GM's China head Phil Murtaugh, says he believes there's still tremendous room for growth in the Chinese market.

Many foreign car makers seem to agree, piling billions of dollars in.

But in the short term at least, the picture is more uncertain.

China's April car production and sales figures have slackened, partly because of government curbs on credit.

Beijing is pulling at all the levers it can to rein in overheated sectors of the economy.