The 32 year-old centre back, who has been a rock for Perth Glory over the past three and a half seasons, is expected to join Liaoning Whowin - which finished mid-table last season - in the coming days.
Though contracted with Glory until May, CEO Peter Filopoulos confirmed over the weekend Thwaite has a release clause, which has now been activated.
"There are some conversations and some correspondence with a couple of Chinese clubs through various agents, but we haven't finalised anything as yet," Filopoulos said.
"I'm sure over the course of this week there will be some developments on that front. Michael's got some ambitions and we've known that for several months.
"He did have an agreement with the club that if something did come his way during the course of his remaining contract which ends in May, that we wouldn't stand in his way."
It is understood that once Thwaite let his feelings known on the club's salary cap drama last year, his days were numbered.
He has been sidelined the last two weeks and it appeared only a matter of time before he moved on.
Thwaite, who has 13 Socceroos caps, returned to the A-League from Europe in 2008 where he played with Melbourne Victory and the now defunct Gold Coast United before heading west.
His clubs in Europe include National Bucharest and SK Brann.
Thwaite is believed to have been on the lookout for a switch since Glory's salary cap dramas last season, and joins fellow defender Anthony Golec in exiting the club during the January transfer window.
