Key mainland players that dominated previous tenders are few, weakened by nationwide credit-tightening measures to cool economic overheating. But their foreign competitors are well-financed and appear likely to bid up the plot to near-record levels.

State-owned Lujiazui Finance and Trade Development is inviting bids for the 20,300 square metre parcel dubbed Pudong Plot Z3-2 close to the district's two landmarks - the 420-metre-tall Jinmao Tower and the 508-metre-high Shanghai Global Finance Centre, which is being built by the Mori Group of Japan.

'This is the last major site in Lujiazui and one of the best,' said Cheng Chuan, an Lujiazui Finance official. 'There are fewer than 10 bidders and the winner will decide the mix of commercial and office space.'

The site, now a golf range, will become an office tower more than 300 metres high, giving the winning developer a conspicuous presence on the skyline of Shanghai's 'Wall Street'. The plot ratio will be 9.83.

The site is expected to fetch at least three billion yuan, making it one of the most expensive in the city, and could set off another round of price increases if the government allocates the lot to the highest bidder.

In previous tenders, the city picked the winner not only on price but also by the developer's track record and project design. In the last big tender in December, none of the overseas developers won a site. This time Hong Kong companies have a good chance.

'It is good for Hong Kong developers because this is what they are good at. They can use capital and not connections to get land,' said Stanley Chan, managing director of Stanley & Partners Investment Management.

Mr Cheng declined to name bidders, but agents said they included SHKP, Hutchison and Shui On. All three firms declined comment.

One property agent said that the frontrunners would be Hutchison and SHKP. 'The battle will be fierce,' she said.

A spokesman for Shi Mao Group, Shanghai's biggest private developer, said it would not bid.

'We specialise in residential, hotel and commercial properties. We are not so familiar with this.'

The Lujiazui Finance official said the height of the building would be decided by the Shanghai City Planning Bureau. The results will be announced within three months from the close of the tender.

In approving the bid, the city government has to balance its need to raise revenue against the fact that such a high price will stimulate its property market, despite Beijing's warnings to cool it down.

Figures published yesterday by the State Statistical Bureau showed that average house prices in Shanghai rose 11.6 per cent in the second quarter over the same period last year, the fourth-highest price rise among China's 35 largest cities.

At an auction on June 24, SHKP outbid Hutchison and paid 3.19 billion yuan for a 61,400 sqmetre site in Pudong, where it will build luxury residential units.

Kowloon North?

Hong Kong developers in Shanghai

Sun Hung Kai Properties,

Shanghai Central Plaza

Location: Huai Hai Central Road

Site: 8,000 sq metres

Floor area: 42,000 sq metre office, 12,000 sq metre retail space

Completion: 1999

Notes: Main shopping area. 50-year lease expires in 2044

Arcadia Shanghai (pictured)

Location: 88 Guang Yuan Xi Road

Floor area: 59,500 sq metres of residential space and facilities

Completion: 1999

Notes: 70-year lease expires in 2064

Lujiazui Development

Project

Location: Central Lujiazui

Site: 64,000 sq metres

Floor area: 418,000 sq metres of office, retail and hotel space

Completion: 2011

Hutchison Whampoa Property

The Summit

Location: Xuhui district

Floor area: 63,000 sq metres of residential space

Completion: 2002

Westgate Mall

Location: Nanjing West Road

Site: 12,000 sq metres

Floor area: 60,000 sq metres of retail and office space

Completion: 2004

Gubei Residential Project

Location: Gubei district

Site: 50,000 sq metres

Floor area: 158,000 sq metres of residential space and facilities

Completion: 2006

Shui On Group

Taipingqiao

Location: Luwan district

Site: 52 hectares

Floor area: 1.23 million sq metres of residential, commercial and retail space

Rainbow City

Location: Hongkou district

Site: 40 hectares

Floor area: 1.43 million sq metres of residential space and facilities