Chang'an Automobile Group and PSA Peugeot Citroen SA may sign a preliminary cooperation agreement in Shenzhen this month, a source from Chang'an Auto said.
The source said that Chang'an will soon host a major event in Shenzhen.
The cooperation may involve the establishment of a joint venture in the city to meet rising demand.
In June 2007, Peugeot and Chinese sport-utility vehicle producer Haifei Auto Co Ltd, which was merged into Changan Auto last year, signed a memorandum of understanding on a feasibility study for an equally-owned JV.
Peugeot has been searching for a second Chinese partner since 2004. Peugeot owns a 50% stake in Dongfeng Peugeot Citroen Automobiles, its JV with Dongfeng Motors.
