Olofsson is in China with a high level Swedish delegation including senior business leaders and King Carl XVI Gustaf, and met the influential National Development and Reform Commission (NDRC) in Beijing to speak about the Volvo-Geely deal.

“They think that Geely should make major investments in Sweden and there is nothing to suggest that they are going to move everything to China, nothing – in fact they underlined that the brand is strong due to its links to Sweden,” Olofsson told news agency TT in Beijing.

Olofsson underlined the Swedish government’s position to the NDRC that it is expected that research and production would remain in Sweden even after Geely’s purchase of Volvo is completed in the autumn. She underlined that she had informed Geely about Swedish law and the role of the trade unions.

“I have been given the impression that they are very conscious that this is going to be a positive deal and that Geely acts in a decent way in Sweden,” Olofsson said.

China is the world’s largest car market with 10.9 million cars sold in the country in 2009, up 53 percent on the previous year.

The Chinese car market is expected to expand by 15-17 percent in 2010. Volvo already manufactures its S40 and extended version of the S80 in China but in order to penetrate the market further, production in China needs to increase. According to recent reports Geely plans to build a new Volvo factory in Chongqing, near Beijing – or in western China.

Olofsson explained that she was unable to comment on the proposed plans.

“This is something that the firm has to answer. But I have said all along that if we are to reach out to the Chinese market then cars also need to be produced in China,” she said.