Jaguar Land Rover (JLR) and Chery Automobile Company have agreed a significant joint venture in China that will see the two groups create luxury vehicles in the country's ever-expanding car market - the world's largest.

JLR, owned by India's Tata Motors and the UK's biggest manufacturer of luxury vehicles, would team up with China's Chery to not only manufacture and sell luxury cars in the far east industrial powerhouse, but also set up a new research and development facility to develop new models.

The deal is thought to be worth 17.5bn Chinese yuan (£1.75bn) and is awaiting approval by regulators, who could give the green light in a matter of weeks.

"Working together on this proposed joint venture is an exciting prospect for both JLR and Chery," Dr Ralf Speth, JLR chief executive, and Mr Yin Tongyao, chairman and chief executive of Chery, said in a joint statement.

"Demand for Jaguar and Land Rover vehicles continues to increase significantly in China and we believe that JLR and Chery can jointly realise the potential of these iconic brands in the world's largest car market.

"Our ambition is to leverage the respective strengths of our two businesses in research and development, technological innovation, manufacturing excellence and local consumer knowledge to offer Chinese customers the most advanced, highly efficient products featuring the very latest technologies."

JLR's sales in China. its thrid-largest market, have boomed alongside the growth of the country's wealthy middle class, with annual sales increasing by 60 percent in 2011, according to company figures.

"This is an important step for JLR and Tata Motors," Vineet Hetamasaria, auto analyst at PINC Research in Mumbai, told Reuters.

"Though this is only an agreement, and it will be some time before we see the results."

Latest Move Reflects Remarkable JLR Turnaround

During the financial crisis that started in 2008, JLR came close to going bust as demand for its luxury products dropped.

The company, which has its headquarters in Coventry, has since turned itself around, helped along by increasing demand for its premium vehicles in emerging markets.

In 2011 it announced a £355m investment in a new factory in Wolverhampton to build low-emission engines that created around 1,000 new jobs.

With the latest announcement of its intention to tap further into the Chinese market, JLR's position as a global car manufacturer is ever-strengthening after its dark days in the credit crunch.

Manufacturing Wanes in China

Despite the JLR-Chery intentions to increase their manufacturing in China, manufacturing in the country as a whole appears to be waning amid the world's economic woes.

The preliminary HSBC Purchasing Manager's Index for Chinese manufacturing fell from 49.6 in February to 48.1 - its fifth monthly drop.

This is ahead of the index's finalised results due out on 1 April.

"Growth momentum could slow down further amid a combination of sluggish export new orders and softening domestic demand. This calls for further easing steps," Qu Hongbin, HSBC's chief economist for China, said.