The deal, which may be announced as early as Friday in the United States, will value Faraday at around $2.7 billion, the people said.

Significant Chinese involvement could be an early policy test for U.S. President Joe Biden's new administration, given escalating concerns in Washington over the national security implications of China's technological ascendance.

Faraday has agreed to a merger with Property Solutions Acquisition Corp, a special purpose acquisition company or SPAC. Geely is helping bankroll a $775 million financing package for the deal in the form of private investment in public equity (PIPE), one of the sources said.

Geely declined to comment, while Faraday Future and Property Solutions did not immediately respond to requests for comment. Bloomberg News reported earlier this month that Property Solutions was in deal talks with Faraday Future.

SPACs, shell companies that raise funds in an initial public offering with the aim of buying a private company, emerged last year as one of the most popular investment vehicles on Wall Street. For the company being acquired, the merger is an alternative way to go public over a traditional IPO.

Faraday Future was founded in 2014 by Chinese businessman Jia Yueting, who was touted by Chinese media as China's answer to Tesla Inc's Elon Musk.

The Los Angeles-based firm first announced plans in 2017 to build the FF 91, a fully electric vehicle. It aimed for a 2019 launch but has delayed production plans multiple times due to a series of financing issues.

Jia, who also founded entertainment company Leshi Internet, stepped down as CEO of Faraday Future in 2019 and finalised his personal bankruptcy filing in June.

Faraday Future plans to set up a new base in China and enlist Geely for contract manufacturing services, sources told Reuters on Monday. The company already has a plant in Hanford, California.

Chinese state-owned companies, Zhuhai Gree Group and Zhuhai Huafa Group, will also invest in the SPAC deal, Chinese local press reported.

(Reporting by Rebecca Spalding in New York; additional reporting by Yilei Sun in Beijing; editing by Richard Pullin)

By Rebecca Spalding