His firm, Cameron Pace Group and its Chinese partners will develop advanced equipment for 3D filming.
The move comes amid a boom in China's movie industry and a growing demand for 3D films in the country.
Various Hollywood filmmakers have been trying to tap into the Chinese market.
"The future of entertainment is 3D and we believe that the future of 3D is right here in China," Mr Cameron was quoted as saying by the Associated Press news agency.
Earlier this year, Chinese authorities had announced that they will allow an additional 14 foreign films to be shown in the country, if the movies are made in 3D or for the big-screen Imax format.
China's movie industry has seen robust growth in the past few years.
Ticket sales in the world's second-largest economy surged 29% to 13.1bn yuan ($2.1bn; Â£1.3bn) in 2011. They are forecast to rise further, by around 20% in the current year.
The growth in its market has seen various Hollywood filmmakers and studios announcing joint ventures with Chinese firms.
Earlier this week, Dreamworks Animation announced plans to co-produce the next Kung Fu Panda movie with its Chinese partners. The firm said it was also planning to open an entertainment district in the country.
In April, Walt Disney Company, the world's largest entertainment firm, said that it plans to co-produce Iron Man 3 with Beijing-based DMG Entertainment.
Mr Cameron said that the robust growth in the country's market made it attractive destination.
"This is the best place for us to create a kind of a second home," he said.
James Cameron, the creator of the blockbuster film Avatar, has announced a joint venture with two Chinese firms in a bid to capture the country's fast-growing movie market.