China's biggest car maker, Shanghai Automotive Industry Corp (SAIC), and Nanjing Automobile (Group) Corp are expected to wind up talks on a planned merger and sign a final agreement around the end of the year, the Beijing Times reported.

Citing sources, the newspaper said that the two parties are planning a share swap, with Nanjing Auto's vehicle assets to be injected in SAIC's listed arm - SAIC Motor Corp.

Nanjing Auto is expected to own 5-10 pct of SAIC Motor Corp, the report said.

SAIC and Nanjing Auto signed a letter of intent on July 27 to discuss 'comprehensive cooperation', which could result in the largest merger in China's auto industry.

The government has been encouraging restructuring and consolidation in the auto industry to create a few giants strong enough to compete with global rivals.

Chinese media reports said authorities were also concerned about competition between the two groups, which share the same technology, derived from the former British car maker MG Rover.

Nanjing Auto and SAIC were not immediately available for comment.