The China-made Peugeot 206 will be equipped with steering systems from China Automotive Systems.
Production of the car by Dongfeng Peugeot Citroen Automobiles, PSA/Peugeot-Citroen's Wuhan-based joint venture with Dongfeng Motor Corp., is set to start late this year.
China Automotive Systems also will supply steering systems for other PSA models including the ZX and Elysee from Citroen.
PSA strives to source parts locally, a spokesman for the French group said. China also has imposed a tax to penalize carmakers that build their cars mostly with imported components.
In a release, China Automotive said it expects annual sales to Dongfeng Peugeot Citroen to reach 100,000 units and be worth about $7.8 million (about E6.5 million). The release didn't say when those figures would be reached.