Nissan Motor Co (7201.T) said on Thursday it expects its Chinese vehicle sales to climb 18 percent above its initial target of 570,000 units this year, helped by the government's tax incentives on smaller cars.

Japan's third-biggest automaker now expects to sell about 670,000 vehicles in China in 2009, a spokesman said.

China is now the world's biggest auto market, with passenger car sales in August soaring 90 percent from a year earlier, paving the way for record sales for the full year.

Nissan has fared especially well in China, with more than half of its cars with engines smaller than 1.6 liters, qualifying them for lower taxes.

In July, Nissan said its main local joint venture, with Dongfeng Motor Group (0489.HK), would spend 5 billion yuan ($733 million) to expand a new car factory in the southern city of Guangzhou.

(Reporting by Chang-Ran Kim; Editing by Chris Gallagher)

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