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The THAAD, or Terminal High Altitude Area Defense, system is designed to shoot down short, medium and intermediate-range ballistic missiles, such as those North Korea claims to own.
The deal between international conglomerate Lotte and the South Korean government will allow the THAAD system to be deployed on the military's preferred site.
The contract will officially be signed on Tuesday, the official told CNN. The US and the South Korean governments are planning to deploy the system by the end of 2017.
But speaking at a news conference Monday, Foreign Ministry Spokesman Geng Shuang said it would "severely disrupt regional strategic balance."
"The Chinese side has stressed repeatedly that we understand the legitimate concerns of relevant parties in safeguarding their security, however one country's security cannot be pursued at the expense of (anothers)," he said.
North Korea, China opposed
Both North Korea and China have repeatedly stated they are strongly against the deployment of THAAD.
In a statement, the rogue state alleged the THAAD system was part of an offensive strategy "for a preemptive attack on the North."
But Mattis said Pyongyang's aggressive behavior is why THAAD was necessary.
Meanwhile China has consistently opposed the missile system's deployment, saying it could jeopardize their "legitimate national security interests," according to Foreign Minister Wang Yi.
John Delury, associate professor of international studies at Yonsei University in Seoul, previously told CNN that Beijing was doing "everything in its power to prevent the deployment of the defense system."
Yoonjung Seo contributed to this report.