Kung Fu Panda creator Dreamworks Animation SKG, Inc plans to build a production studio in Shanghai with some of China s largest media companies, a landmark deal intended to pry open one of the largest untapped markets for Hollywood.

The U.S.based animation studio behind Shrek has agreed to form a joint venture with China Media Capital, with plans to include Shanghai Media Group and Shanghai Alliance Investment Ltd.

The new family entertainment company will develop and produce Chinese animated and live-action content for distribution within China and around the globe. It also will pursue opportunities in the areas of live entertainment, theme parks, mobile, online, interactive games and consumer products.

It plans to launch business operations in Shanghai later this year. Joint ventures may bring Hollywood closer to China s huge audiences. By producing in China, Dreamworks can bypass restrictions on foreign content.

Only 20 foreign films a year can be screened nationally at cinemas in China, and the films must be shown through a designated state-owned intermediary.