French auto group PSA Peugeot Citroen has chosen to build its fourth factory in China with its new shareholder Dongfeng at Chendgu, a town in the west of China, the group said on Wednesday.

The two partners already own three factories in the country, at Wuhan in the centre with capacity to make 750,000 cars per year.

Construction of the fourth plant is to begin in the second half of this year and will increase the group's total Chinese capacity to one million vehicles in 2016, PSA Peugeot Citroen said in a statement.

The new facility will focus on making crossover vehicles -- a cross between a car and a sport utility vehicle -- and also four-wheel-drive vehicles under the Peugeot and Citroen brands, and also under the name Fengshen which is a brand owned by Dongfeng.

The Chinese government is encouraging car manufacturers to build new factories in the west of the country so as to boost development of backward regions.

PSA and Dongfeng are aiming to sell more than 650,000 vehicles this year in China, already the biggest auto market in the world with growth still growing rapidly.

This would rise to 1.5 million by 2020 as a result of their increased cooperation which recently involved Dongfeng becoming a shareholder in PSA.

At the same time the French state also became a shareholder, and the holding of the Peugeot family was diluted.

The group is struggling out of severe financial difficulties, and is increasingly focusing on China as it seeks to diversify away from the mature European market.

PSA has another joint venture with the Chinese group Changan at Shenzhen in the southeast of the country which makes the up-market Citroen DS cars.