BEIJING -- China's top economic planning department has approved a joint venture between the China Changan Automobile Group (CCAG) and French automaker PSA Peugeot Citroen, the CCAG said Monday.

The National Development and Reform Commission (NDRC) approved the venture that will manufacture and distribute passenger and light commercial vehicles in China, the company said in a statement on its website.

The new entity will initially focus on introducing the Citroen DS line in China, it said.

PSA and Changan signed a contract for a 50-50 manufacturing joint venture in July 2010, with an initial investment of 8.4 billion yuan ($1.3 billion).

The joint venture, based in the city of Shenzhen in south China's Guangdong Province, will have an initial annual production capacity of 200,000 vehicles and 200,000 engines, the company said.

The joint venture's first vehicle is scheduled to come off production lines in the second half of 2012, it said.

CCAG is the fourth largest auto maker in China by annual output. In 2011 the company produced and sold 2.38 million vehicles.