The government will impose new controls to cut production overcapacity in its booming auto industry and promote Chinese brands amid a surge in foreign investment, a government newspaper said Wednesday.

Under the new measures, automakers'sales must reach 80 percent of their manufacturing capacity before the companies can build new factories, the China Daily said.

It didn't say when the policy would take effect.

"And all new vehicle companies will be required to produce Chinese brand vehicles," the newspaper said. It cited unidentified sources at China's top economic planning agency, the National Development and Reform Commission.

It wasn't clear how such a policy would fit with China's commitments to the World Trade Organization, which require it to treat foreign and Chinese companies equally in most industries.

China has the world's fastest-growing auto market. It will likely soon surpass Japan to become the world's second largest vehicle market, which has prompted a rush of investment by U.S., European and Asian automakers in new Chinese factories.

The country has manufacturing capacity of 8 million vehicles a year - a figure that is expected to double by 2010 - but just 5.7 million Chinese-made autos were sold last year, the China Daily said. Any new vehicle project must involve at least 2 billion yuan (US$250 million) in investment, with at least 500 million yuan spending on research and development, the paper said.

Editor: Yan