British luxury car-maker Jaguar Land Rover will start manufacturing vehicles in China for the first time after agreeing a £1 billion joint venture.

The UK car giant yesterday announced it has struck a “milestone” deal with Chery Automobile Company and will now begin the process of constructing a new plant at Changshu near Shanghai.

Jaguars and Land Rovers will be built at the manufacturing facility as well as new joint venture branded vehicles aimed at the Chinese market, the company said.

It comes after the Chinese Government granted approval and a licence for the new partnership.

A research and development centre and engine production facility will also be built as part of the venture, with the main manufacturing plant expected to be completed during 2014.

A joint statement released by the Chinese and British companies said: “We are delighted to have reached this milestone, achieved thanks to the understanding and foresight of the Chinese authorities and we want to thank them for recognising the potential of our joint venture in the fast-growing Chinese market.