The Hong Kong film company Emperor Motion Pictures is to set up a strategic partnership with UA Cinemas to invest in and operate cinemas on the mainland.
The first Emperor UA Cinema is scheduled to open in Foshan, a city of more than three million people near Guangzhou, early next year.
The first "five-star" luxury cinema in the city, it will have 1,500 seats and 12 screens in an area of 6,000 square metres.
After that project, Emperor UA Cinemas will continue seeking suitable sites in Foshan and other cities, including Shenzhen and Dongguan in Guangdong, Wuhan in Hubei, Chongqing and Shanghai, the company said.
"These are places in the plan, but our future development is not limited to them," spokeswoman Alice Chek said.
Chek said EMP would be involved in the operation of the cinemas, rather than merely providing content made or distributed by the company.
UA Cinemas ventured onto the mainland in the 1990s and operates cinemas in major cities including Shanghai. Most recently, it opened cinemas in Shenzhen and Guangzhou.
Box office receipts on the mainland have grown at a compound annual rate of nearly 40 per cent in the past decade, making it the second-largest cinema market globally, with box office takings of 17 billion yuan (HK$21.2 billion) last year, according to the State Administration of Radio, Film and Television.
Lured by that growth, money has flooded into film making and cinema construction. The official figures show that 3,832 new screens were added on the mainland last year, an average of 10.5 a day.
The competition in first-tier cities is white-hot, as the market is saturated, and investors are increasingly shifting their attention instead to second and third-tier cities.
Xiao Ke, a white-collar office worker in Shenzhen, said: "There are four cinemas near my place, and they all offer big discounts on tickets to woo the audience."
Huang Qunfei, general manager of the Beijing-based New Film Association, which operates 97 cinemas across the mainland, told domestic media that according to his knowledge, nearly 80 per cent of the cinemas opened in the past couple of years were losing money.