Harbin city, in northeastern Heilongjiang province, is negotiating with Japanese car-maker Mitsubishi on investing in a joint venture for car engines, municipal officials say.
The city's Foreign Investment Administration Bureau chief, Yang Yidian, said discussions had been held between Mitsubishi Motor Corp and Harbin Aircraft Plant for some time.
The parties were planning to manufacture 50,000 car engines a year.
This could expand to 100,000 units if market demand was strong.
The project had received central government support, but the main obstacle to a contract was the sales of the engines made by the joint venture, he said.
Beijing has set a tight control on the set-up of new car plants, whether state-owned or joint ventures, due to an oversupply of cars in the market.
The newly elected member of the Standing Committee of the Politburo and head of the Central Disciplinary Inspection Committee, Wei Jianxing, was mayor of Harbin before he moved to Beijing.