BEIJING, July 30 (AP) -- Two of China's biggest domestic car companies have formed a partnership to develop new models amid Chinese efforts to create producers able to compete with global automakers.

Shanghai Automotive Industries Corp. and Nanjing Automobile Corp. agreed to "comprehensive cooperation" on design, production and sales, Nanjing Auto said in a statement issued over the weekend. A woman who answered the phone Monday at Nanjing Auto's publicity department refused to give other details and calls to SAIC were not answered.

The communist Beijing government has been encouraging such tie-ups in its fragmented auto industry, hoping Chinese producers will pool resources to create competitive models.

China is the world's second-largest and fastest-growing vehicle market but sales are dominated by General Motors Corp., Volkswagen AG and other foreign producers. The country has about 150 automakers, most small and financially weak.

Passenger car sales to newly prosperous Chinese drivers rose 37 percent last year to 3.8 million units, according to the country's auto industry association. Total vehicle sales, including trucks and buses, rose 25.1 percent to 7.2 million units.

Nanjing Auto and SAIC, both government-owned, said earlier they were looking at cooperating to make better use of limited resources.

The weekend announcement said they were looking at an asset swap but made no mention of whether they were discussing an outright merger.

Nanjing Auto, China's oldest domestic automaker, is the local partner of Italy's Fiat SpA. The company, based in the eastern city of Nanjing, struck out on its own last year, relaunching the MG sports car after buying the brand from its defunct British owner, MG Rover Group.

SAIC is the local partner of GM and Volkswagen but has begun selling cars under its own Roewe brand. The Roewe is based on the Rover 25 and 75, which SAIC bought from the British producer.

China's biggest domestic automaker is Chery Automobile Co., with 8.3 percent of sales last year, but most Chinese producers have less than 1 percent, according to research firm J.D. Power & Associates. Volkswagen was the country's biggest seller, with a 17 percent market share, while GM had 9.7 percent.