Titanic II is due to be completed by 2016. She will then be sailed to the UK and prepared for
her maiden voyage from Southampton to New York - a repeat of the 1912 journey which ended in disaster.
The Jinling Shipyard in Nanjing has already signed an initial agreement to build the ship with billionaire mining tycoon Clive Palmer.
Design work for the vessel, which it is claimed will precisely resemble the original Titanic, is being carried out by a consortium of companies including Norway's Deltamarin.
"It's difficult to replicate a luxury liner, but Jinling Shipyard has a history of 60 years of building various kinds of vessels with high quality," the shipyard's director, Ge Biao, told China's Xinhua news agency.
The ship will be 270 metres long and 53 metres high with nine floors and 840 rooms. It will accommodate 2,400 passengers and 900 crew members.
"The liner will be equipped with advanced technologies, including the latest life-saving and communications systems to meet the requirements of modern navigation," Jinling Shipyards spokesman Li Wenbao told the China Daily newspaper.
Representatives of Mr Palmer said on Saturday that his company had received inquiries from potential passengers around the world, with some offering up to $1m (£640,000) for a chance to be on the maiden voyage in 2016.
The original and 'unsinkable' Titanic set sail from Southampton on April 15, 1912, bound for New York City. She hit an iceberg in the Atlantic and sank, killing 1,523 passengers and crew.
The history of the voyage is well known in China because of the popularity of the 1997 film staring Leonardo DiCaprio and Kate Winslet. It was one of the first western films to be authorised for general release in China and it remains one of the top three most popular films.
Celine Dion, who sang the film's title song, became the first foreigner to perform at this year's traditional Chinese New Year Gala which is televised across the country. She chose to sing the song from the film, My Heart Will Go On.
The decision by Mr Palmer to choose a Chinese company has prompted scepticism from some about how achievable the project is and how safe the end product will be.
The issue has even been raised in Chinese government-backed newspapers.
"Frequent scandals involving shoddy products domestically and internationally have turned the term 'Made in China' into a synonym for cheap and low value-added products," an editorial in the Global Times said.
However, the newspaper argued that the Titanic II project should be a chance to prove that the 'Made in China' brand does work.
"It is indeed a challenge for China to fulfil a flawless construction mission as the world watches," the editorial said.