The world's largest carmaker Toyota Motor Corp is planning to strengthen its research and development capabilities in China to provide better services and cash in on the booming local demand.

Japan's Nikkei business daily reported yesterday that the company plans to spend 30 to 40 billion yen ($330 to 440 million) to establish a research and development center in China as early as next year.

The newspaper also said that the center, with a full-scale test course, would be set up in Shanghai.

Toyota China's spokesman Niu Yu told China Daily that the company is focusing on enhancing its R&D capabilities in the country.

"But we still don't have a set timetable and place, or a solid project," said Niu.

It has only a 6-percent market share in China, which is set to top the US as the world's biggest auto market, including vehicles produced at its joint ventures with Chinese firms, according to Nikkei.

"The establishment of a local R&D center is necessary for Toyota, who wants to grab more market share in the domestic market," said Li Chunbo, an auto analyst with CITIC Securities. "The R&D center is an important part of a company's localization strategy."

Other global automakers, like Volkswagen AG, General Motors and Hyundai Corp, have set up R&D centers in China, and tailored their car models closer to local demand. Japan's Nissan and Honda also have R&D facilities under their Chinese joint ventures.

The Pan Asia Technical Automotive Center, GM's automotive engineering and design joint venture with SAIC Group, is China's biggest R&D facility in automobile industry since its establishment in 1997.