Officials say more than 20,000 people had been hired to work on the project, which will feature 300,000 entries at about 1,000 words each.
Unlike Wikipedia, it will be created by selected scholars from state-run universities rather than being openly editable by volunteers.
Wikipedia is available in China, but some of its content it blocked.
Yang Muzhi, editor-in-chief of the project, described the Encyclopedia of China as a Great Wall of culture.
Reports say the idea for an online version was approved in 2011, but work on it began only recently.
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