Clifford Chance is advising Chinese state-owned carmaker Dongfeng Motor Group Co. on a proposed $1.1 billion investment in France’s PSA Peugeot Citroën Group.

As part of the agreement approved by Peugeot’s board Tuesday, Dongfeng and the French government will each inject $1.1 billion into family-owned Peugeot, in an effort to turn around the troubled automaker. Peugeot posted a net loss of about $3.16 billion in 2013, following a record $6.88 billion loss in 2012. In addition to the $2.2 billion investment, Peugeot will raise a further $1.4 billion by issuing warrants to existing shareholders.

The deal still requires regulatory and shareholder approvals.

Dongfeng and Peugeot have been partners in a joint venture in China—Dongfeng Peugeot-Citroën Automobile Ltd.—since 1992. They have three production plants in Hubei province where they manufacture models including the Citroën C5, Peugeot 307 and Peugeot 207. DPCA also imports and sells models including Citroën C4 Picasso and Citroën C4 Coupé. Dongfeng is also the Chinese joint venture partner for other international makes including Honda, Nissan and Kia.

In announcing Dongfeng’s investment in Peugeot, the companies said they will increase production in China and aim to sell 1.5 million vehicles a year there by 2020. They will also establish a second research and development center in China and will consider setting up a new sales company responsible for the Asia-Pacific region, especially Southeast Asia.

Most Chinese carmakers have been eager to acquire or invest in weakened foreign manufacturers by the prospect of gaining access to technology, and analysts say that was the key motivation for Dongfeng as well. But it is unclear how much access the Chinese company will have—even Chinese companies that have purchased companies outright have been stymied by restrictions on transfer of the technology, which is often owned by other companies.

Beijing partner Tim Wang, Shanghai partner Kelly Gregory are leading a team at Clifford Chance advising Dongfeng that also includes Paris partners Thierry Schoen and Emmanuel Durand. Commerce & Finance Law Offices is acting as Chinese counsel to Dongfeng.

French firm Bredin Prat is representing Peugeot, with Jun He Law Offices advising on Chinese law.

Email: azhang@alm.com.