Nanjing Automobile Corporation has set up a £120 million holding company to oversee the development of its own-brand cars based on MG Rover technology.
Nanjing Auto will hold 22.22 per cent of the subsidiary - set to roll out its first self-developed car by March - with six other local firms sharing the remainder.
The companies include Jiangsu Province Government Property Management, Jiang Ing, and Nanjing New Technology and Economic Development.
But despite the apparent dilution, sources said NAC would remain in the driving seat.
A source said: "This group has been put together to ensure NAC can raise the money it needs to relaunch MG. It gives the enterprise a bigger scale. But NAC will control the board and management."
Nanjing (NAC) took over Rover last year when it paid £53 million to outbid larger domestic rival Shanghai Automotive Industry Corporation (SAIC).
It stunned the industry again in July, announcing plans to build China's first plant in the United States - a facility in Oklahoma offering MG sports cars and other models, including the TF roadster and new TF Coupe.
The firm will assemble vehicles at Rover's now-closed Longbridge plant and at its home base in China.
Meanwhile SAIC has committed £114 million to develop its own-brand cars based on the acquired Rover 25 and 75 platforms, with an eye on developed markets, including Europe.
But industry executives and analysts are sceptical of their capability to revive a failed brand.
Shares in SAIC surged seven per cent yesterday after parent, SAIC Motor Corpora-tion, China's biggest car maker, won shareholder approval to sell key assets to the subsidiary.
SAIC Motor would transfer assets including stakes in ventures with General Motors and Volkswagen in a deal worth £1.27 billion, the subsidiary said.
Its 30 per cent share in a joint venture with General Motors, 50 per cent of a joint venture with Volkswagen and 48.92 per cent equity in South Korea's Ssangyong Motor will all be transferred.
SAIC Motor will hold an 83.83 per cent stake in SAIC after the deal.
The transfer is expected to provide a boost to SAIC, which will gain a larger earnings base, as well as to SAIC Motor, which aims to use its unit's stock market listing to raise
funds for global expansion. SAIC's net profit in the first half rose just 14 per cent from a year earlier to £35.8 million, lagging the market's expectations and earnings growth at Chinese automakers, as price cuts squeezed margins.
The company did not say when it would complete the deal, but executives hope to finish a deal by the end of the year.
The firm will book a net profit of £95.7 million for the year, up 31 per cent from 2005, if the deal is finished by September 30, it said.
After the transfers, turnover would soar to £2.32 billion in 2006 from £424 million.