The airlines say it is the first joint venture agreement between a Chinese and North American airline.
The joint venture is expected to be phased in over the next six months.
China has been a growing market for Air Canada.
The airlines expanded a code-share agreement in May and implemented an expanded reciprocal lounge agreement for customers in December last year.
Air Canada has increased its capacity on routes between Canada and China on average by 12.5 per year over the last five years.
© 2018 The Canadian Press