Chairman of Zhejiang Geely Holding Group Li Shufu hugs Ford's Chief Financial Officer Lewis Booth after signing the agreement on Sunday. [Xinhua]

"Today represents a milestone in the history of Geely," Geely Chairman Li Shufu told a news conference, adding that Volvo will remain a separate company with its own management team based in Sweden.

The agreement was signed between the two automakers in Goteborg, Sweden.

The deal is China's biggest overseas auto purchase and represents the most ambitious move by a homegrown auto brand, said analysts.

Ford has been trying to sell Volvo since late 2008 to focus its resources on managing its core Ford, Lincoln and Mercury brands. The sale deal is expected to free up cash for the No 2 US automaker.

Geely, an independent automaker that has struggled to raise its profile in overseas markets, has long coveted a stronger foothold in Europe.

It was chosen by Ford as the preferred bidder for its loss-making Swedish unit in October 2009.