Chinese e-commerce giant Alibaba Group Holding Ltd inked a deal with Shenzhen municipal government on Friday, joining hands in developing smart manufacturing, a production-on-demand model billionaire Jack Ma believes is the future of retail.

Under the agreement, Alibaba will make future investments in Shenzhen and drive the development of "internet plus applications" in the city. The ultimate goal is to upgrade the entire manufacturing industry in Guangdong province where Shenzhen is located into a smart manufacturing zone and produce goods based on individuals' demands.

The deal comes with the launch of a new Alibaba center in Shenzhen, making the innovation hub in South China the third city where the e-commerce heavyweight owns a property.

Alibaba also owns properties in Hangzhou of Zhejiang province and Beijing, the capital of China. Jack Ma, executive chairman of Alibaba Group, said in a statement that the company sees Guangdong province, which used to be the manufacturing center of made-in-China products, as the top priority to develop new manufacturing.

"In Shenzhen, we hope to lay a solid foundation to develop smart manufacturing," he said.