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VW To Build New $224M Factory In China's Far West

China is the biggest market by sales for the Volkswagen Group, whose other brands include Audi, Bentley and Skoda.

BERLIN (AP) — Automaker Volkswagen AG signed an agreement to build a new factory in China's far west during a visit to its headquarters on Monday by Chinese Premier Wen Jiabao.

Volkswagen said the agreement with China's SAIC Motor Corp. foresees total investment of about euro170 million ($224 million). It said the plant in Urumqi, the capital of the Xinjiang region, will produce up to 50,000 vehicles a year starting in 2015.

The German company said it also plans to help other auto industry suppliers settle nearby and will set up a training center.

"Going forward, we expect strong growth in China's rural regions," Volkswagen Group China CEO Karl-Thomas Neumann said. "The west of the country plays a special role in this context."

Volkswagen said it also signed a memorandum of understanding with its other Chinese joint-venture partner, China First Automobile Group, to extend their cooperation by 25 years.

Their FAW-Volkswagen joint venture was set up in 1991 and now has vehicle and component plants in Changchun, Chengdu and Dalian.

Volkswagen overtook Toyota last year to become the world's second-biggest automaker by deliveries behind General Motors Corp., selling nearly 8.3 million vehicles.

China is the biggest market by sales for the Volkswagen Group, whose other brands include Audi, Bentley and Skoda. It sold 2.26 million vehicles there last year; in the first quarter of 2012, it sold more than 633,000, a year-on-year increase of 15.6 percent.

Wen visited Volkswagen's Wolfsburg headquarters with German Chancellor Angela Merkel. Earlier Monday, they toured a trade fair in nearby Hannover together.

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