Loss-making MG Rover has already received millions of pounds from Shanghai Automotive Industry Corporation, the Chinese carmaker with which it is negotiating a strategic alliance.

Rover's parent company Phoenix Venture Holdings said yesterday that negotiations had progressed quickly since they began in June and detailed agreements had already been signed. "This has resulted in an initial tranche of funds being received by MG Rover and [sister company] Powertrain," PVH said in a report to shareholders.

PVH, which bought the MG Rover group from BMW in 2000, is understood to have received around £50m. MG Rover and Powertrain have already signed binding agreements to hand over technology and know-how to the Chinese company, but the link-up still needs regulatory clearance from the Chinese authorities.

A deal with SAIC is crucial to the UK group which yesterday reported losses of £77m last year, down from £95m in 2002.

The group needs money to invest in a new range, particularly in the medium segment of the car market. Worldwide sales fell 2.4% in 2003 and latest figures from the Society of Motor Manufacturers and Traders show that UK sales of both MG and Rover marques have fallen steeply so far this year.

Last night Peter Beale, PVH's deputy chairman, said that the deal with SAIC was "more important than us buying the company in 2000. This [deal] gives the company the life blood it needs".

The two companies would use SAIC's resources and MG Rover and Powertrain expertise to develop replacements for the MG Rover range and extra models as well. MG Rover and SAIC are still looking at the "commercial opportunities" of the former Daewoo plant in Poland but Rover has ended talks with Malaysia's Proton.

The report showed that contributions to a trust fund for directors fell from almost £13m to £3.58m while the salary of the highest paid director, whose identity was not disclosed, was £1.55m in 2003 compared with £3.24m the previous year.