SHANGHAI—General Motors Co. said its Shanghai GM joint venture received permission from Chinese authorities to build an eight billion yuan ($1.3 billion) factory to manufacture its Cadillac brand, boosting the auto maker's ambition of becoming a larger player in China's booming luxury-car market.

"We've decided that the luxury market is going to grow and we want a bigger share," said Dayna Hart, a spokeswoman for GM in China.

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