BMW and its Chinese partner Brilliance Auto Group have decided to build a new plant with an investment of at least 5 billion yuan (735 million U.S. dollars) in China to expand production capacity in the world's largest auto market.

The German carmaker signed an agreement with Brilliance Auto Group on Thursday, agreeing to raise the annual output of their joint-venture, BMW Brilliance Automotive, based in Shenyang, northeastern Liaoning Province, from 30,000 to 75,000 units by the end of 2010.

The joint venture will start building the new plant in the Shenyang Economy and Technology Development Zone in 2010, eyeing an annual production capacity of 100,000 units before 2017.

As China has become BMW's fourth largest market, the new investment underscores BMW's long-term commitment to the cooperation, said Friedrich Eichiner, a board member of the BMW Group.

China has huge potential in the global luxury auto market as it accounts for only five percent of the total, comparing with 13 percent for the United States and 30 percent for Germany, said Christoph Stark, CEO of BMW's Greater China Region.

The joint venture, with each side owning 50 percent of the shares, was set up in 2003. Investment to the current production facility under the joint venture totaled 4.5 billion yuan. It churns out BMW 3-series and 5-series in the northeastern city of Shenyang.

China overtook the United States to become the world's biggest auto market in the first six months this year, as government offered tax incentives and subsidies to spur sales.

Domestic sales rose for eight months in a row by the end of October.