Shanghai Automotive Industry Corp. (SAIC), the biggest saloon car producer in China, signed contract with creditors of South Korean Ssangyong Motor Co. Thursday to buy shares of the company.

The Chinese automaker will acquire a 48.9 percent stake in Ssangyong Motor, a specialist in sports utility vehicles, for 500 million US dollars.

The final contract comes three months after SAIC was selected as the preferred bidder for the South Korean automaker, which had been up for sale since the creditors bailed it out following the 1997-1998 Asian financial crisis.

"The acquisition of Ssangyong Motor is the first step in Shanghai Automotive's global operations," Hu Maoyuan, president of the Chinese carmaker, told reporters here before signing a formal contract for the deal.

"Following a win-win strategy, we will take aggressive steps to contribute to Ssangyong Motor's development," Hu said, stressing: "It is a complementary, win-win and unprecedented cooperation."

Hu said the SAIC will keep all the company's workers, maintain the Ssangyong brand and guarantee independent management, accepting most of the demands by Ssangyong Motor's unionized workers.

The takeover of Ssangyong Motor by China's largest automaker is expected to pave the way for the South Korean company's foray into the world's fastest-growing auto market, analysts said.

Backed by SAIC's large capital and wide sales network in China, Ssangyong Motor plans to increase the share of exports in its total sales from the current 20 percent to 50 percent by 2007.

The South Korean firm plans to double its annual production capacity to 400,000 units by then.

SAIC has already promised a huge investment package worth more than 1 billion dollars over the next few years for expansion of production facilities.