The move will enable Fincantieri to gain a key role in monitoring the strategic market with high potential.
The joint venture will be responsible for designing and selling cruise ships exclusively intended and specifically customised for the Chinese and Asian market.
Fincantieri CEO Giuseppe Bono said: "This new agreement highlights once again Fincantieri ‘s technical and technological leading position and it places us at the centre of a project without equal in the world, supported directly by Chinese Government in the form of a very ambitious project.
"We are equipped to face the new international scenarios and we are selected today as a shipbuilding partner for the development of the cruise sector of a country, which looks at this industry with great determination."
The Chinese Ministry of Transport (MoT) has noted that the country’s cruise market witnessed a sharp growth in the recent years, touching one million passengers in 2015.
The growth potential of the market is forecast to reach 4.5 million passengers by 2020, with China emerging as the world’s second largest cruise market after the US.
CSSC president Wu Qiang said: "Joining forces will give new vitality to the rapid growth of China’s and the Asian-Pacific cruise market.
"We look forward to working together with Fincantieri , Carnival, CIC (China Investment Corporation) and other strategic partners to strive for building and delivering China’s first domestic large cruise ship."
Fincantieri had recently launched ‘Silver Muse’ at its shipyard in Genoa Sestri Ponente.
Silver Muse is a new ultra-luxury cruise ship being built for the shipowner Silversea Cruises.