Chinese companies Nanjing Automobile and Shanghai Automotive Industry Corporation completed their £143.8 million merger yesterday in an attempt to create the country's first "world class" automotive company.

SAIC is already China's biggest car company and builds a revamped version of the Rover 75 in Shanghai, while Nanjing owns the rights to MG and plans to start low volume production of sports cars at the old MG Rover factory at Longbridge early next year.

The deal is aimed at building the combined group into a world-class producer with unprecedented scale in China, SAIC said in a statement yesterday.

As part of the merger, Italian car group Fiat will sell its 50 per cent share of a joint venture with Nanjing, it was announced. Fiat is known to be unhappy with Nanjing's acquisition of the MG assets as well as with its link up with SAIC.

The two companies will, however, continue to collaborate on building commercial vehicles and production of components.

Welcoming the merger, Birmingham City Council leader Mike Whitby said: "I look forward to the biggest car producer in China playing a significant role in investing in Birmingham ... and providing a real boost for car production at Longbridge. It's great timing with the Longbridge Action Plan, our vision for Longbridge as an eco-town creating 10,000 jobs."