Shimao, controlled by China's fifth- richest man, Xu Rongmao, reached a preliminary agreement with Warner Bros International Cinemas to build a so-called film metropolis in Shanghai, the Chinese company said in a statement to the city's stock exchange.

Warner Bros joins Walt Disney and other US media companies seeking growth in the world's most populous nation as China comes under pressure to open its market to more overseas- made movies.

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For Shimao, building cinemas with the studio that produced some of China's best-selling Hollywood films may help it weather government curbs on developing apartments and villas.

China's State Administration of Radio, Film and Television allows only 20 overseas-made movies a year to be shown in the country.

The US government, concerned that the quota fuels sales of pirated DVD copies, has been pressing China to relax the restriction. Warner Bros, which runs eight cinemas in China, is seeking to expand its entertainment business in a market where 2005 movie ticket sales rose 33 percent to 2 billion yuan (HK$1.96 billion).

The US company agreed in 2002 to buy an unspecified stake in Shanghai Paradise, which manages 90 cinemas in the city, the Shanghai Daily newspaper said. The purchase has not progressed. Harry Potter and the Goblet of Fire, produced by Warner Bros, reported the largest box-office takings in China last year, with ticket sales in the first three days of opening exceeding 33 million yuan, Xinhua News Agency said.

Bootleg Hollywood movies, copied from handheld cameras shot in cinemas and made available within 48 hours of their showing in the US, sell for as little as 5 yuan in Beijing. That compares with 70 yuan for a movie ticket at Eastman Kodak cinemas and 60 yuan at the Paradise Warner Cinema City in Shanghai.

China's film regulator restricts the screening of overseas-made movies to help locally made films.

Warner Bros has invested 140 million yuan in China since 2004. The company's ticket sales in China rose 81 percent in the first 11 months of last year to 107 million yuan, Xinhua reported in January.

Shimao was founded in 2001 and trades on the Shanghai Stock Exchange. Two other units have shares traded on the Hong Kong exchange.

The Shanghai-listed firm reported a first-half loss of 12.2 million yuan, as sales plunged 89 percent to 67.2 million yuan after the Chinese government sought to rein in property spending and investments.

Shimao shares fell 5.3 percent to 5.33 yuan when they resumed trading after being suspended Tuesday.

BLOOMBERG