After a five-month negotiation, HP (HPQ) has signed a memorandum of understanding with China's Chongqing Municipality to build a computer manufacturing plant — the company's second computer plant in China following the plant in Shanghai.

Wang Hongju, mayor of Chongqing; Xi Guohua, director of the Ministry of Industry and Information Technology; Todd Bradley, HP's executive vice president; and Fu Biaobang, president of HP China attended the signing ceremony held in Beijing.

The new plant, which will reportedly cover an area of about 20,000 square meters, is expected to complete construction at the beginning of 2010, manufacturing desktop and notebook PCs with advanced production lines. On its completion, HP's Chongqing computer plant will satisfy the unique demand of the western areas of China, especially that of the government, SMEs and retail users.

Details about the investment and the production capacity of the Chongqing plant are currently not available. However, unconfirmed news reports in Chinese media say that the production capacity of the plant is expected to reach 5 million to 10 million PCs with an annual output value of CNY30 billion to CNY50 billion. If the rumor is true, the Chongqing plant may become HP's most important plant in the Asia-Pacific area.

The Chongqing plant is HP's second computer plant in China. Previously, the company opened a plant in Shanghai. Focusing on the production of desktop PCs, personal workstations and printers, products in the Shanghai plant are sold to markets such as the Chinese mainland, Hong Kong and South Korea.