"PSA … having for its part straightened out its cash flow, is proposing to repay the state loan in advance for an amount of 1 billion euros (AUD$1.42 billion)" said PSA's CEO, Phillippe Varin.
The loan was granted to PSA last year as it struggled through the global financial crisis. The French government allowed PSA until 2014 to repay the debt.
The news comes as PSA prepares to announce details of a new joint venture with China's Changan Group, which also owns Ford's Chinese JV partner.
"We’re in advanced discussions, and we’ll announce something as soon as we can," said Mr Varin.
In China, foreign car manufacturers cannot operate without a domestic joint partner, the rules do however allow for up to two partners at any given time.
Changan and PSA will investigate the use of a Shenzhen-based factory that was previously occupied by Harbin Hafei Automobile Industry Group. Harbin Hafei was acquired by Changan in 2009.
PSA will also continue its partnership with China's Dongfeng Motors, which builds Citroen C5, Peugeot 308 and Peugeot 408 models for domestic (Chinese) consumption.
Dongfeng and PSA will soon open a new plant of its own which will boost local output from 350,000 to 450,000 units.