The move helps Lithium Americas cut its debt, up more than eight times in the past year, and reduce its exposure to recession-hit Argentina as it develops another lithium project in Nevada.
It also helps Ganfeng, which counts BMW, Tesla Inc and LG Chem Ltd as customers, expand its dominance over the EV supply chain.
Lithium Americas had said last spring that it had no interest in selling more than 50 percent of its stake in the Cauchari-Olaroz project in Argentina's far north.
Last fall, Argentina elected Alberto Fernandez, a Peronist who favours government economic intervention, as president. Lithium prices have also dropped, unnerving investors.
"We don't know what could happen in Argentina long term," Jon Evans, Lithium Americas' chief executive, told Reuters. "We see Nevada as a better place to put our money."
Ganfeng will pay $16 million to increase its stake in the Argentina project by 1 percentage point to 51 percent. Lithium Americas will retain a 49 percent stake and also get $40 million cash. The deal is set to close before August.
Ganfeng approached Vancouver-based Lithium Americas with the proposal a few weeks ago and its board finalised the agreement early on Friday after the Lithium Americas board approved it.
Evans said he could envision a time when Ganfeng controls the entirety of the Cauchari-Olaroz project.
Argentina has been struggling with a steep recession and inflation above 50%. The government is trying to restructure $100 billion in sovereign debt. Those woes do not seem to unnerve Ganfeng, based in eastern China.
"We remain firmly committed to investing in Argentina," said Xiaoshen Wang, Ganfeng's vice chairman. Ganfeng is the largest Lithium Americas shareholder, though Evans and other board members are also major holders.
Lithium Americas plans to start building its $400 million Thacker Pass lithium project in Nevada next year. U.S. regulators last month moved a step closer towards approving the project and could issue permits as soon as next January.
Shares of Lithium Americas rose in morning trading after the deal was announced, but closed down with the broader markets to end Friday at C4.15, down 2.5 percent. Shares of Ganfeng were unchanged overnight on Shanghai exchanges.
By Ernest Scheyder