LEGO is 'making a strong play' for the Chinese market following the construction of a new factory in Zhejiang.
The South China Morning Post reports that the firm believes the new factory will 'pit the company against challenges from locally made knockoff products'.
The plant will be the company's third-largest worldwide, employing 1,500 workers when it is fully operational by 2017.
"We are now significantly putting the flag on the Chinese market and in the society," said LEGO chief executive Jorgen Vig Knudstorp.
"We want to be part of the modernisaton of China."
The site will cover an area of 315,000 square metres with the establishment of moulding, decoration and packaging facilities, and LEGO believes there is room for further expansion.
Lego is investing more than €100 million into the new factory and the company will also set up a distribution centre in Shanghai for the Asia markets.
"Chinese parents are concerned about their children's competitiveness to survive in society," added Knudstorp.
"Their focus is on the children's learning. There is an opportunity for us because our products offer children something to learn when they play."
Chinese shoppers are the world's largest consumers of luxury goods, accounting for close to 30 per cent of the global luxury market, according to Bain & Co.