Director James Cameron told Reuters that he is giving "very serious" thought to the possibility of a co-production with Chinese studios.
He said: "The question is, what's required of us? In terms of configuring the market for the Chinese marketplace, and what economic benefit do we get in return.
"If it works - and I want to definitely stress if - it seems to me it could be very advantageous to the Chinese film community, because for us to do a film like Avatar which is an entirely studio shoot, we wouldn't be here for the scenery.
"We'd be bringing in infrastructure to do virtual production, to do 3D photography and so on, which I would think would be a positive technology exchange into this filmmaking community."
Avatar producer Jon Landau previously confirmed that special effects work has already begun on the sequel, but hinted that it is unlikely to be ready for release until 2015 at the earliest.
Cameron has said that fans can expect the Avatar sequel to be based around the oceans of Pandora.
> Sam Worthington: 'Avatar 2 plot is monumental'
Watch Avatar actor Sam Worthington discuss the sequel with Digital Spy below: