The Maitreya project in the northern Indian province of Bihar is expected to be completed in 2005.
Jiuhua is one of the four major Buddhist shrines in China.
"It will be the largest statue of a Bodhisattva in the world when completed," Xinhua reported.
The announcement is likely to dismay Indian and British planners, who have begun work on a project to build a 500ft Maitreya Buddha, originally reported to be in the running for the title of the world's largest statue.
The Maitreya project in the northern Indian province of Bihar is expected to be completed in 2005.
So far it seems, however, that the Indian Buddha is fated to cross the finishing line in second place.
The Chinese appear to be planning to outdo their Indian competitors by over a year, with a projected finish date of 2004.
Wang Jiaxiang, deputy head of the Jiuhua construction project, said building work will begin in September and take three years to complete.
The Chinese statue will consist of 1,100 pieces of copper cast and will weigh around 1,000 tonnes, the agency said.
The entire project is estimated to cost around $55m, with $18m being spent on the statue itself.
Xinhua said inspiration for the Bodhisattva statue has been taken from an ancient Korean prince-turned-monk who resided on Jiuhua Mountain.
Kim Kiao-kak, from the Korean Peninsula's Silla kingdom, is recorded as having retired to the mountain to become a monk in 719AD and spent 75 years there until his death at the age of 99.
According to Buddhist tradition, Bodhisattvas, having attained enlightenment, renounce nirvana in order to help humanity on its pilgrimage.
The plans for the statues have been announced in the wake of the blowing up of the Bamiyan Buddhas by Afghanistan's Taleban movement.
China had condemned the destruction of Afghanistan's Buddhist heritage.
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