A scene from DreamWorks Animation's "Kung Fu Panda 2."… (DreamWorks Animation )
DreamWorks Animation SKG Inc.announced plans to build a studio in Shanghai in what the Glendale company billed as a landmark agreement with two state-owned Chinese media companies.
The creator of the "Shrek" movies said Friday that it was forming Oriental DreamWorks, a joint venture with China Media Capital and Shanghai Media Group, in concert with Shanghai Alliance Investment — an investment arm of the Shanghai municipal government — to establish a family entertainment company in China.
With an initial investment of $330 million, the Shanghai studio will develop original Chinese animated and live-action movies, TV shows and other entertainment catering to the China market. The deal was among several business ventures announced in downtown Los Angeles during an economic forum attended by visiting Chinese Vice President Xi Jinping, who is widely expected to be the country's next leader.
"We share the same vision with DreamWorks Animation to build a world-class family entertainment company," Ruigang Li, chairman of China Media Capital and chief executive of the new Oriental DreamWorks, said in a statement.
The new studio, which has been recruiting some staff in Hollywood, plans to begin operations this year and could eventually surpass the size of DreamWorks' headquarters, which employs more than 2,000 people, CEO Jeffrey Katzenberg said in an interview.
"Our objective is to build an animation studio that is competitive with what we're doing here," Katzenberg said. "We already have people working on over a half-dozen projects."
The studio eventually hopes to produce one animated feature film a year, with its first release set for 2016. Additional animators will be hired locally to accommodate the new China facility, Katzenberg added.
The joint venture is the latest push by Hollywood to mine profits from the world's largest country. Last year DreamWorks signed a deal with online video site Youku.com to distribute the studio's popular"Kung Fu Panda"movies in China. Beverly Hills-based RealD Inc. also has partnered with Beijing SAGA Luxury Cinema Management Co. to equip the Chinese theater chain with 3-D technology.
"When you look out five to seven years from now, China will be the No. 1 media market in the world," Katzenberg said. "It's a huge opportunity for us."
Major Hollywood studios have been frustrated, however, by rampant intellectual-property piracy in China, as well as restrictions the government places on the number of foreign films it allows into the country, and how much revenue foreign studios can share.
Talks between U.S. and Chinese officials to ease those restrictions have heated up this week, raising the possibility that an agreement could be reached during Xi's U.S. visit.