The group will build a plant on a greenfield site near the Chinese capital in a joint venture with the Beijing General Corporation for Agriculture, Industry and Commerce.
Cadbury Schweppes will have 75 per cent of the equity and management control of the project, named Cadbury Beijing. The initial investment is pounds 20m.
The group is one of the first UK- based companies to agree to build a manufacturing facility in China.
Production is scheduled to start in 1995. The plant will have an initial capacity of about 5,000 tonnes a year, but will be designed to allow for easy expansion.
In the meantime, the group is to attack the local market with specially formulated and packaged products imported from Australia and the UK. Among the products on offer will be Dairy Milk, Fruit and Nut, Chocolate Eclairs and Cadbury's Drinking Chocolate.
The Chinese project will be managed from Cadbury Schweppes Australia. A spokeswoman said the Australian division had spearheaded the market research and the negotiations with the Chinese authorities for two years.
The Chinese chocolate market is small at an estimated 11,000 tonnes a year. But Cadbury Schweppes said market research showed it was expected to grow substantially. There are 20 local and imported brands in the market.