This past August, the Cameron/Pace Group announced that CPG China would be providing camera systems and other 3D services in Tianjin. While some work will be done in China, James Cameron still plans to shoot all of the performance capture in Los Angeles, and the live action scenes in Wellington, New Zealand as he did on the first film. But he feels that having part of the production shot in China is good for business. He also believes that there should be Chinese Na'vi visible throughout the film.
Here's what he had to say on the matter.
We are running the numbers to see if that makes sense. For Avatar, we can certainly use Chinese actors as performance capture actors because any accent issues will hide within the Na'vi accent.
So we can have Chinese Na'vi; [and in the live-action sequences] we can also have Chinese actors who speak English in the film. We are projecting a future in Avatar, and if you project that future out, it is logical that there would be a number of Chinese amongst the contingent on Pandora."
Marvel Studios is also siding on this trend, announcing their Iron Man 3 as a Chinese co-production that will utilize the country's locations and talent.