China attaches great prestige to its ambitious space program, seeing it as a way to validate its claims to being one of the world's leading scientific nations. The country has sent astronauts into space twice in the past four years and launched its moon probe about a month after rival Japan.
The space station would be "a small-scale, 20-ton space workshop," Long Lehao, a leading designer of the Long March 3A rocket that carried the Chang'e 1 lunar probe into space, was quoted as saying by the China Daily newspaper.
Chinese space officials have said previously they wanted to build a space station in the next 10 or 15 years, but the target date of 2020 was the first time a schedule has been made public, Long told China Daily.
The report did not say how many people the station would be able to hold. But its weight is about one-tenth that of the International Space Station, which currently has six people on board.
Long said he was optimistic about the plan because China was developing rockets that can carry heavier loads, including space stations. Engines for the yet-to-be-built Long March 5 rocket have undergone significant ignition testing, he said.
Meanwhile, the Chang'e 1 lunar probe underwent final adjustments at the end of a two-week journey and entered a final working orbit on Wednesday, the official Xinhua News Agency said.
The satellite - named after a mythical Chinese goddess who flew to the moon - will orbit 200 kilometers (125 miles) above the moon's surface, Xinhua said, citing Wang Yejun, chief engineer of the Beijing Aerospace Control Center.
Chang'e 1 will analyze the chemical and mineral composition of the lunar surface for about a year and is expected to transmit its first photo back to China late this month.
The probe's launch raised the prospect of a space rivalry between China and Japan, with India possibly joining in if it carries through on a plan to send its own lunar probe into space in April.
But Chinese officials have played down talk of a space race, saying Beijing wanted to use its program to work with other countries.
China has also said it is keen to be part of the International Space station, joining the 16 countries involved. It has not participated in the project in part because of U.S. unease about allowing a Communist dictatorship a place aboard.
In 2003, China became only the third country in the world after the United States and Russia to send a human into orbit.