Hopes are rising that the proposed life-saving link-up between MG Rover and Chinese carmaker Shanghai Automotive Industries Corporation will soon be completed.

Chancellor Gordon Brown is spelling out the Government's support for the joint venture, which is regarded as crucial to the survival of the Longbridge company, during a three-day official visit to China.

And despite claims that the Chinese Government, which controls Shanghai Automotive (Saic), the country's biggest car company, is split on the merits of the MG Rover deal, all the signs yesterday were that the complex legal and technical negotiations will be completed soon.

A Saic spokesman was quoted recently in a Beijing newspaper as saying the negotiations were were in the final stages. He went on to say: "We have made big progress, though we cannot give details yet. The result will be to both sides' satisfaction.

"The joint venture has the support of both the Chinese and the British governments."

A London spokesman for the group said: "The Chinese are saying the same thing as us, which is that the negotiations are on track."

Mr Brown yesterday raised the joint venture with his opposite number in Beijing, Jin Renqing.

He later told reporters: "Joint venture are very much the way forward. There is the Rover company and the Shanghai Automotive company, of course, and I hope it will be brought to a conclusion soon to the benefit of the British motor industry."

Mr Brown is in Shanghai itself today but is not scheduled to meet Saic officials.

For the deal to proceed, Saic needs approval from the Shanghai city government, its owner, and from the National Development and Reform Commission.

The Chinese are known to have been irked by what they saw as MG Rover's premature announcement last autumn that a deal with Saic was imminent.

Under the terms of the deal, the Chinese are expected to pump £1 billion or more into a joint venture to manufacture a new generation of cars to be built both in Shanghai and and at Longbridge.

In exchange, MG Rover will supply the R&D and automotive technology that Saic lacks.

Saic will have a controlling stake in the joint venture but MG Rover again yesterday had to scotch news reports that the Saic was poised to take over

the firm. "It is not a takeover, it is a partnership," spokesman Daniel Ward said.

MG Rover is in urgent need of new models to replace its ageing line up and revive its flagging fortunes. The company made a pre-tax loss of £64 million in 2003 and it has admitted that the deficit for 2004 will be even greater.

Some redundancies are expected among the 6,500 employees at MG Rover and its sister company Powertrain, the engine manufacturer, this year as production is cut back to match sales.

Industry sources told the The Birmingham Post yesterday they were puzzled by claims emanating from China that the authorities there were cool on the deal because they felt MG Rover did not have advanced enough technology.

"Saic makes cars under licence from General Motors and Volkswagen for China, but has no intellectual property rights in either," one said.

"It has tried to make cars in its own right but has failed because it simply doesn't have the technological know-how." n MG Rover has signed a tenyear agreement to meet its long-term compliance with the new UK End of Life Vehicle Producer Responsibility Regulations 2005.

In partnership with Cartakeback.com, it will provide owners with access to a network of facilities that will ensure environmentally acceptable treatment of old cars.

As an incentive, all owners of complete MG Rovers will qualify for free take-back from January 1, 2007.