GM said SAIC-GM-Wuling Automobile would be able to make up to 70,000 cars and trucks a year at the plant on the eastern coast north of Shanghai.
It intends to begin production at the facility by the second half of 2005.
GM also announced yesterday that it is to spend $387m (£213m) building a new engine plant in China.
The engine facility is being constructed at GM's main Chinese base at Liuzhou, in the Guangxi region in the southwest of the country.
When it opens in 2007, it will be able to make 300,000 engines a year.
"Mini-vehicles account for more than 25% of all vehicles sold in China and remain one of the fastest-growing market segments," says Kevin Wale, president and managing director of the GM China Group.
"The expansion was vital for meeting demand."