File photo: Volvo CEO Leif Johansson presents the companies financial report Friday Feb. 6, 2009 in Stockholm. [CFP]

The agreement on commercial terms follows Geely's intensified talks with Ford since the firm was named preferred bidder for Volvo in October.

Geely Chairman Li Shufu earlier said he was confident of completing the deal and the bidding for Volvo reflected its intention to enter the global auto market and lift overall competitiveness.

"It's a strategic move for Geely," said independent auto analyst Li Anding.

"It will further strengthen Geely's position in both China and global auto markets."

Ford said in a statement that "the sale will ensure Volvo has the resources, including the capital investment, necessary to further strengthen the business and build its global franchise, while enabling Ford to continue to focus on and implement its core One Ford strategy."