Walt Disney Co. (DIS) plans to expand a partnership with state-owned Shanghai Media Group to include co-production of movies along with development, distribution and marketing of television shows.

The alliance will boost local content creation for international markets and create new business models in digital and conventional media, Li Ruigang, Shanghai Media chairman, said today in a joint statement with Disney.

The companies extended their 15-year relationship in March to develop Disney-branded movies together for China, according to the statement. Disney is boosting its business in the country to challenge rivals including Time Warner Inc. and DreamWorks Animation SKG Inc. (DWA) as growing incomes and consumer spending spur demand for movies and television.

Box office receipts surged 27 percent to $3.6 billion last year in China, according to data from the Motion Picture Association of America. The country is the world’s largest movie market after the U.S.

The Burbank, California-based maker of “Frozen” and “Guardians of the Galaxy,” is also close to registering a Chinese joint venture to expand families’ and kids’ digital choices, the company said today.

Box office may rise 33 percent this year to $4.8 billion, according to Bloomberg Industries analysts Geetha Ranganathan and Paul Sweeney, based on forecasts by China Culture Daily.

Disney is also developing cartoon content for the Chinese market with Tencent Holdings Ltd. (700) and state-run China Animation Group.

Disney, also the world’s largest theme park operator, is on track to open a new resort in Shanghai next year with a consortium of companies in the city.

(Source: Bloomberg)