Volvo Car's proposed plant in the north China city of Daqing has been approved "in principle" by China's State Council, according to Daqing's municipal website.

The plant will cost 4.6 billion yuan (US$ 754 million) and initially produce up to 80,000 vehicles a year.

Volvo plans to expand the factory to 300,000 units at a later stage, the website indicated.

The municipal government did not disclose when production at the plant will start.

Chinese rules require international automakers to form joint ventures with local companies if the want to produce vehicles in China. To meet that requirement, Volvo will establish a joint venture with its Chinese parent, Zhejiang Geely Holding Group.

Volvo's plant will build gasoline-powered sedans, SUVs and MPVs. It also will produce electric vehicles at the facility, according to the municipality.

The Daqing factory will become Volvo's main plant in China, while a second Volvo assembly plant in the southwest China city of Chengdu will become its "branch company," the government indicated.

Volvo has said that its Chengdu plant will start production in the second half of this year.

Daqing has been China's major oil boom town since oil was discovered in the region fifty years ago. In 2010, the city pledged funds to help Geely to acquire Volvo from Ford Motor.

In return for Daqing's financial support, Geely pledged to build a Volvo assembly plant in the city.