BREWER Scottish and Newcastle has its sights set on the fast-growing Chinese beer market.

S&N wants to build a relationship with Chongqing Breweries, although the company has not confirmed reports that it will pay about £36m for a 19.5 per cent stake in the country's third biggest brewer.

Chongqing already has a ten-year-old agreement to brew and supply McEwan's lager to the Chinese market on behalf of S&N.

The group, based in Edinburgh, said it was planning to deepen this relationship and "strengthen further" the Chongqing business.

It added: "These discussions consist of several elements, including the possible injection of new assets and S&N making a minority equity investment.

"Negotiations are still ongoing and no definitive agreement has been concluded."

An investment in China would mirror the company's drive into other emerging beer markets, including Russia and India. It already has market-leading positions in 13 European countries.

The Chinese beer market is growing at a rate of about six per cent a year.

In October, S&N offloaded its pubs division for £2.5bn in order to focus on its international brewing operation.