Rome  - Italian carmaker Fiat signed Monday a joint venture agreement with China's Guangzhou Automobile Group (GAC Group) for the production of cars and engines for the Chinese market.

The deal includes plans to for a 400-million-euro (559-million- dollar) plant located in Changsha, the capital of China's Hunan province, Fiat said in a statement.

Production at the plant is scheduled to begin in the second half of 2011, with an initial capacity of 140,000 cars and 220,000 engines per year.

This could subsequently be increased to a maximum of 250,000 cars and 300,000 engines per year, the company said.

Monday's agreement was signed in Rome by GAC Chairman Zhang Fangyou and Fiat CEO Sergio Marchionne.

Also present at the inking ceremony were Italian Prime Minister Silvio Berlusconi and Chinese President Hu Jintao, who on Monday met Italian leaders ahead of a Group of Eight summit in L'Aquila later this week.

Fiat said models produced at the Changsha will be equipped with engine and transmission technology in line with the Chinese government's requirement to develop fuel-efficient, low emission vehicles.

The first model to be launched will be the C-segment Linea sedan. The first engines will be the Fire 1.4l 120hp and 150hp T-Jet engine.

The deal marks the latest international expansion move by Turin-based Fiat which also makes Alfa Romeo and Lancia brand cars.

In June, the Italian company acquired a controlling stake of bankrupt US carmaker Chrysler.(dpa)