Paris - The Paris-based Pompidou centre, which is Europe's biggest contemporary art museum, said it could confirm that "discussions were very advanced on setting up in Shanghai".
"China is destined to become a major player on the world artistic scene," the centre said in a communique.
It added that it was "vital for the Pompidou centre to have its finger on the pulse of this movement".
Two French newspapers have reported that a protocol agreement has already been concluded with the Chinese authorities.
One of the papers, the Journal des Arts, said the accord was due for ratification during a visit to China by French President Jacques Chirac planned for the last week of October.
According to a well-informed source, the Chinese Pompidou exhibition site will be in the Luwan district of Shanghai.
It will involve the renovation of an existing building dating from 1908 to open by the end of next year, as well as the construction of a contemporary site for 2009, the source said.
The architect for the latter site will be chosen with the Chinese authorities.
Art from the 20th and 21st centuries is due to be exhibited at the Chinese branch of the Pompidou centre with works from the Paris museum as well as other exhibits which are more specific to China, the source added.
The plan sees 4 500m² of the 10 000m² site given over to displays while the rest will be occupied by a children's gallery, library, a design shop, cafe and restaurant.
The Pompidou Centre already had its sights on Asia last year when it took part in a project in partnership with the Solomon Guggenheim Foundation in New York to set up a museum in Hong Kong, although the plans did not come to fruitition.