Universal Parks and Resorts has signed an investment agreement with Chinese partners to build a theme park in Shanghai - leap-frogging rival operator Disney in the race to open a park in the city.

The deal would see Universal - a subsidiary of French entertainment giant, Vivendi Universal - owning at least 25 per cent of the park. It has not revealed how much its investment is worth, but building the park is expected to cost in the region of $870m.

Universal's Chinese partners in the joint venture are property company, Shanghai Waigaoqiao Group and hotel operator, Shanghai Jinjiang Holdings.

The park will be situated in Pudong, where Shanghai's financial district is situated, as it has sufficient open space to accommodate the proposed 2sq km park. However, the project has yet to receive central government approval.

Work is expected to start early in 2003 and the finished park anticipated to attract 8m visitors in its first year.

If all goes to plan, the park could be open by 2006, the same year as Disney - which was also said to be in negotiations to open a park in Shanghai - aims to open a theme park in Hong Kong, due to begin construction next month.

Universal already has a presence in the Asia Pacific market, having opened a $1bn movie-themed park in Osaka, Japan, in March 2001.

Universal Studios Japan - the company's first park outside Florida and Hollywood in the US - welcomed its 10 millionth visitor less than a year after opening, making it the most successful theme park in history.