The French state will match Dongfeng's stake in PSA, making up for the reduced share now held by the Peugeot family, which had controlled the company since founding it in 1810.
Peugeot and Dongfeng have set targets to sell 1.5 million vehicles per year from 2020, mainly in China and Asia. A new joint research and development centre will be built in China to focus on developing new technologies for emerging markets as part of the deal. Among that technology is believed to be a new small-car platform.
The company also revealed a new capital tie-up with Dongfeng worth €3 billion (£2.5 billion), which will be used to buy time for PSA to recover following another round of poor financial results in 2013.
PSA's financial results, released today, show that group revenues dropped by 2.4 per cent in 2012 to €54.1 billion (£44.6 billion), while revenue from the automotive division fell by almost five per cent. As a group, PSA held debt of over €4 billion (£3.3 billion) at the end of last year. The company warned it may not halt losses until 2016.