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UPDATE 1-PSA Peugeot signs JV deal with China's Donfeng

(Adds background, details)

BEIJING, Oct 25 (Reuters) - PSA Peugeot signed a joint venture deal with Chinese partner Dongfeng Motor Corp on Friday and said it will invest 625 million yuan ($75.5 million) in a partnership aimed at tapping the fast growing China market.

The deal formalises an agreement reached last November, details of which have taken almost a year to work out. The venture would eventually sell 300,000 cars per year, company executives told a news conference.

Dongfeng, one of China's top three car makers, will invest another 375 million yuan in the joint venture, they said but gave no timeframe for the investment.

Under the agreement, PSA Peugeot and Dongfeng will each hold 32 percent of the joint venture with the rest held by unidentified Chinese and French banks.

By the end of 2003 Peugeot and Dongfeng will be the sole shareholders, each with 50 percent, the companies said in a statement without giving details.

The joint venture will produce Citroen and Peugeot model vehicles from a plant in the central Chinese city of Wuhan, the companies said.

The French car-maker and Dongfeng currently make three models of cars in China. Peugeot already has a plan to produce up to 150,000 cars in China by 2004.

The Peugeot and Dongfeng venture currently produces three Citroen models and plans to sell the first Peugeot branded model, which will be tailored for the Chinese market, in 2004.

In September, Dongfeng entered a planned $1 billion 50-50 joint venture with Japan's Nissan Motor Co Ltd , aiming to roll out 550,000 vehicles by 2006 and have a production capacity of 900,000 vehicles within 10 years.

($1 = 8.28 yuan)