Together, Honda and Nissan would also pose more of a threat to Toyota Motor Corp., which is the world’s biggest automaker followed by Volkswagen AG.

The merger talks between Honda and Nissan are the latest example of companies trying to respond to the competitive threat from China.

Honda and Nissan plan to merge as the two Japanese firms seek to fight back against competition from the Chinese car industry. The integration would create one of the world's biggest car producers alongside Toyota,