French auto maker PSA Peugeot Citroen's fourth plant in China has been approved for the southwestern city of Chengdu by local authorities, the official Xinhua news agency said Tuesday.

The economic planning agency of Sichuan province, of which Chengdu is the capital, approved the 12.3 billion yuan ($2.0 billion) plant on Monday, it said.

Peugeot and its Chinese partner Dongfeng Motor Corp. said last month they had chosen Chengdu for the plant, with construction scheduled to begin in the second half of this year and production set for 2016.

Dongfeng, China's second biggest car maker, took a 14 percent stake in Peugeot earlier this year, as the French firm sought a solution to its financial troubles.

The two partners already operate three factories in the central Chinese city of Wuhan, with combined annual capacity of 750,000 vehicles.

Xinhua said the new plant would be able to produce 320,000 vehicles a year.

Peugeot has said the Chengdu facility will focus on making crossover vehicles -- between a car and a sport utility vehicle -- and also four-wheel-drives using the Peugeot and Citroen brands, as well as under Dongfeng's Fengshen label.

The companies could not be immediately reached for comment.

Struggling Peugeot is counting on the Chinese car market -- the world's biggest -- to propel it to a leading position in Asia.

China has become critically important to foreign carmakers, given the size of the market and weak sales elsewhere in the world.

Chinese auto sales reached 21.98 million vehicles last year, when a recovery in Japanese brands offset the impact of slowing economic growth.