Ballard has been developing fuel cells for several years, but like other firms in the alternative energy field it has struggled to get the cells on the market as a profitable product.

Interim chief executive officer John Sheridan said on Tuesday that the firm was in negotiations with Chinese companies, and auto makers were one possibility for cooperation.

"We think it would make sense to have one research-type partner, a university ... as well as a commercial partner. Whether that becomes two or one we are not yet sure," he told reporters in the Chinese capital Beijing.

Asked whether Ballard could be setting up a China office within a year, Sheridan said it was a possibility if negotiations went well, but declined to give further details on which companies the Canadian firm was talking to.

Chinese President Hu Jintao visited Ballard's research and manufacturing centers during a recent visit to Canada, and the company said then it was working with the country's Science and Technology Ministry to look at co-operation opportunities.

"To us this is the most logical market for fuel cells in the world, when you look at the growth, at the energy issues, at the greenhouse gas emissions," Sheridan said in Beijing.

Replacing gasoline and diesel in a country where per capital gross domestic product is below $1,500 and clean air is seen as a luxury by many, could be tough, but Sheridan said improved technology would make Ballard competitive.

"By 2010 we feel we'll have competitive products, competitive, realistic alternatives," he said.

Sheridan was in Beijing for the delivery of three DaimlerChrysler (DCXGn.DE: Quote, Profile, Research) buses powered by its fuel cells, that are part of a worldwide trial of the vehicles.

DaimlerChrysler and Ford Motor Co. (F.N: Quote, Profile, Research) both have ownership stakes in the Vancouver-based company.