China Petroleum and Chemical Corp (Sinopec) , Asia's largest refiner, and German chemicals giant BASF said on Tuesday that they are looking at setting up a second chemicals joint venture in China to tap the country's growing market for plastics.

Under a memorandum of understanding signed in the southern Chinese city of Shenzhen, the companies will explore building an iso-nonanol (INA) plant in Guangdong, the companies said in a joint statement.

INA is used as feedstock for making plastics used in automotive, flooring and construction industries, and in wires and cables. Plastics demand in China has been increasing, with consumption expected to grow 7% this year on the back of the country's annual economic growth of 7.5%.

A final investment decision on the 50/50 joint venture would be made at the end of this year, after the companies completed their feasibility study, the statement said.

Investment in the project would be substantial, said BASF official Frances Luk, declining to give a figure.

She added that the amount invested in the project would be determined by the results of the feasibility study.

State-controlled Sinopec and BASF already have a 50/50 petrochemical joint venture in the eastern Chinese city of Nanjing. Total investment in the venture has reached $4.5 billion, Luk said.