The corporation's main commercial arm sells BBC content across the world. It will work with SMG subsidiaries including Internet TV Service, BestTV, DocuChina, Dragon TV, Wings Media and Toonmax Media.
Key areas of collaboration will be the extension of the CBeebies brand in China to include consumer products, e-commerce and marketing, co-production opportunities in documentaries, factual entertainment and drama, and format production with Dragon TV, focusing on the production of BBC formats for the channel.
Paul Dempsey, the president of global markets at BBC Worldwide, said: "We are delighted to be cementing our relationship with SMG by announcing this exciting new phase of our long term alliance and look forward to working together towards the exchange of expertise and creation of new business models across media spaces in both China and globally."
In 2013/14, BBC Worldwide generated headline profits of £157.4 million and headline sales of £1 billion. It returned £173.8 million to the BBC, whose income is dependent on the television licence fee.
Wang Jiannjun, the director president at Shanghai Media Group, added: "SMG and BBC Worldwide have enjoyed extensive content distribution collaboration over the years.
"I’m delighted that our collaboration will expand to new territories in the future. We look forward to deepening our relationship with BBC Worldwide to greatly enhance SMG’s original production capacity."