One of China's largest building equipment makers will invest up to $250 million on a manufacturing base in India, in a bid to address the problems of a bloated sector plagued by overcapacity.

XCMG Construction Machinery Co. Ltd., a unit of Jiangsu-based China Xuzhou Construction Machinery Group Co. Ltd. (XCMG), plans to build the 200,000-square-meter production base in Chennai, a city on India's eastern coast off the Bay of Bengal, the company said during filing to the Shenzhen Stock Exchange on June 13.

The investment is part of China's "One Belt, One Road" initiative, which aims to redirect the country’s domestic overcapacity and capital for regional infrastructure development to improve trade and relations with ASEAN, as well as with Central Asian and European countries.

The company, still awaiting Chinese and Indian government approval for the project, predicted that India's demand for construction equipment will increase in line with its rapid economic growth, which will create opportunities for foreign machinery companies, according to the statement.

Set up in 1989, XCMG, formerly known as Xugong Group Construction Machinery, is the world's fifth biggest construction machinery maker.