The Peoria, Ill. company said the factory on China's east coast will develop a new model of wheel loader for use in China and other developing countries. Caterpillar didn't say how much it would spend on the new factory or an accompanying research and development facility.

Wheel loaders use wide buckets to scoop up gravel, sand or other materials and move them from one place to another, usually a dump truck or open trench. .

Caterpillar currently operates 16 other manufacturing facilities in China. Its new facility is expected to begin operating in the fourth quarter of 2012. The research and development facility will be operational in the third quarter of 2012.

Shares fell 88 cents, or 1.1 percent, to $82.10 in premarket trading.