The group plans to close down the Guangzhou San Miguel Brewery in Guangdong province, which failed to make a profit in 2005, a source told the Philippine Daily Inquirer.
The operating loss of HK$66 million is being attributed to the company's shift to lower priced brands and higher marketing costs to support the strategy shift.
Sources told the paper that the firm would take a one-time "impairment" charge of about $35 million for the plant closure, expected to be completed in June.
San Miguel spokespeople were not available to confirm the report at the time of going to press.
A second brewery owned by the firm in the same province - San Miguel (Guangdong) Brewery - will remain open however as it has shown healthy growth following a marketing boost for the Dragon Beer brand.
The report also said that San Miguel will streamline production capacities in southern China, and focus on reinforcing its brand and sales and distribution networks.
"With the single exception of Guangzhou San Miguel Brewery, our beer operations in North and South China, including Hong Kong have done reasonably well," the source told the paper.
San Miguel reported a 14 per cent rise in revenue from international beer activities in the first two months of the year, helped by its China operations.
Sales in northern China were up 37 per cent, driven mainly by San Miguel's "Blue Star" brand. Sales in Guangzhou recovered in February through an "under-the-crown" promo and a new sales structure.
In Hong Kong, sales were up from last year although these were skewed toward economy brands and export segments.