SHANGHAI, June 21 (Reuters) - German automaker BMW AG has received preliminary approval for a joint venture with China's largest minibus maker to make luxury cars in the country, the official People's Daily Web site said on Friday.
China had approved the venture between BMW and Brilliance China Automotive Holdings which will manufacture and sell BMW cars, the Web site www.people.com.cn quoted a BMW official in Beijing as saying.
Shares in Brilliance China were suspended from trade early on Friday pending an announcement, but Brilliance spokeswoman Suo Yan said she was not aware the venture had been given initial approval.
"The BMW deal is going smoothly and the project will be very promising," she said. "But so far, we haven't seen any endorsements from the government."
BMW officials declined comment.
Brilliance shares have fallen more than 17 percent over the past month, mainly on worries over a leadership change and concerns about the progress of its long-awaited venture with BMW.
Brilliance said on Thursday that chairman Yang Rong had been replaced by vice chairman Wu Xiaoan.
Several newspapers had reported that Yang, also Brilliance's chief executive officer and president, had been under investigation by Chinese authorities, which the firm denied.
But BMW officials said the management reshuffle would not derail negotiations over the venture.
An initial green light for the BMW deal would pave the way for subsequent government approval for its feasibility study and production, the People's Daily report said.
BMW hoped to hold 50 percent of the joint venture, with Brilliance owning 40 percent and the rest to be taken up by the government, it said.
The company expected to obtain approval for production by the end of this year and aimed to start production in the last quarter of 2003 with an initial output of several thousand of BME's 3-series model, the report said.
The joint venture would have an initial capacity of 20,000 cars a year with plans to raise eventually it to 40,000 cars per year, it said.
The firm hoped to start manufacturing higher-end 5-series models in 2004 with production of 16,000 cars a year, it said.