California-based HyperloopTT is one of several ventures to take Elon Musk's idea for a new type of transport system propelling capsules through vacuum-sealed tunnels and attempt to make it a reality.

It has struck similar agreements with several other countries, with construction of its first capsules -- intended to magnetically levitate in low friction tubes -- underway at its innovation centre in France.

The remote city of Tongren in China's impoverished Guizhou province will host the latest demonstration project, according to the plans.

"China leads the world in the amount of high-speed rail constructed by far, and now they are looking for a more efficient high speed solution in hyperloop," HyperloopTT chairman Bibop Gresta said in a press release.

"We have spent the past few years finding the right partners to work with in China and now, with a strong base network of relationships in place, we are ready to begin work to create the system," he added.

Financing for the project may be hard to come by as Beijing takes aim at local government spending and a growing mountain of debt.

HyperloopTT said financing would come from a public-private partnership, with Tongren directly contributing 50 percent of the funds.

"HyperloopTT will be responsible for providing technology, engineering expertise, and essential equipment," the company said, without providing further details.

Local Chinese media, citing the agreement, said Tongren and HyperloopTT would invest in the new local joint-venture building the demonstration track on a one-to-one basis.

State-owned China Aerospace Science and Industry Corp (CASIC), a major aerospace company, is also looking to pioneer the next generation of high-speed train technology in China, and last year announced a similiar hyperloop project in the city of Wuhan.