Although the way the medicines work is not fully understood, they have proved effective fighting a range of infectious diseases as well as combating cancers.
The MOU, formalised two weeks ago, comes after years of joint work between Otago and Jinan University developing drugs to fight tuberculosis.
The agreement meant the universities would give each other access to their areas of expertise, Otago microbiologist Gregory Cook said.
''They don't have really strong expertise in laboratories, in biological testing,'' Prof Cook said.
''Ultimately what happens is we gain access to critical infrastructure they have and vice-versa.''
Scientists had not looked closely at the natural Chinese medicines - of which Jinan had more than 50,000 compounds - to see what antimicrobial properties they had.
While the medicines appeared to work like ''witchcraft'', there was ''obviously a lot of science behind it'', Prof Cook said.
The MOU may also lead to the addition of a physical laboratory at Jinan where Otago University would have researchers stationed.
''It is in the early stages, but one of the visions is that we would actually have a footprint in Jinan University.
''We would try to have student exchanges and research exchanges.''
Prof Cook said if the joint lab went ahead, experiments Otago researchers did in China would be funded entirely by China.
He was appointed to the Joint Laboratory of Traditional Chinese Medicine and Innovative Drug Research, funded by the Chinese Ministry of Education, last year, which was the catalyst for the idea.
Jinan University, founded in 1906, is based in Guangzhou and has more than 30,000 students.
Otago researchers had been working developing Tb drugs with researchers from the university since 2015.
They were now hoping to find a partner to work with, to bring the drugs to the first phases of a clinical trial.
