Owned by India's Tata Motors, Jaguar Land Rover plans to develop the site in the east of the country. It is building it in conjunction with Chery Automobile, China's largest domestic carmaker. The 50/50 venture will also set up a research and development centre and construct an engine plant as part of the investment.
"China is now our biggest market," Ralf Speth, chief executive officer of Jaguar Land Rover, said after the groundbreaking ceremony for the factory in Changshu, Jiangsu province.
"The Chinese economy has grown at a phenomenal rate in recent years and by any western standard, and I'm convinced that it is set to continue to grow at an astounding rate," he added.
The government requires overseas carmakers to work with local companies to produce domestically and avoid the nation's 25pc import duty.