German carmaker Volkswagen is withdrawing from its controversial involvement in a factory in China's Xinjiang province, which has attracted criticism over alleged human-rights abuses of the Uighur minority.

Volkswagen sold the plant in the city of Urumqi, which was jointly operated with the Chinese state-owned company SAIC Motor Corporation as a partner, the Volkswagen Group announced on Wednesday.

The buyer is the Chinese state-owned company SMVIC, which is active in the used car business.

VW investigated the allegations of abuse, but the company cited economic reasons for the sale of the plant. The future of the plant had been negotiated for months.

VW has not built cars in Xinjiang since 2019. At its peak between 2015 and 2019, the plant employed around 650 people, according to VW.

In recent years, the plant has handled technical adjustments and tests on vehicles.

The plant opened in 2013, and the initial contract between VW and SAIC was due to run until 2029. According to VW, SAIC held the controlling stake at the site, where vehicles were once assembled for sales in western China.

However, the project failed in the weaker than expected market.

At the same time, the German carmaker announced that it had extended a cooperation agreement with SAIC on Tuesday for a further 10 years. The deal will now run until 2040.

However, Volkswagen said there is no connection between the withdrawal from the Xinjiang plant, which was sealed a few days ago, and the contract extension.