The management of the visiting La Liga giants had signed a letter of intent with Chinese Super League leaders Guangzhou Evergrande for an academy that would accommodate more than 10,000 youngsters, state news agency Xinhua said.
"We are working together to establish a football academy in China, which I think is the first step of our cooperation," Xinhua quoted Real Madrid president Florentino Perez as saying.
"We are building a close relationship with Guangzhou Evergrande, we believe we will be closer as time goes by."
The clubs were also exploring the possibility of player exchanges and cross-brand promotions, the report added.
European clubs have been keen to tap the Chinese market and have sent a raft of teams for pre-season friendlies in the world's most populous country.
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