Dubi Weiss, president of Tel Aviv-based Polar International Real Estate, said it was a unique opportunity for China to open a huge international door and rival cities such as Prague and Barcelona that attracted 20 million tourists a year, eight times that of Shanghai.

'Look at the reconstruction they've done in Warsaw, with 200 years - only a short history,' Mr Weiss said. 'Here we have 5,000 years. We will make the most attractive district in the world, like Epcot.' Epcot is a permanent World Fair, opened by Walt Disney in Florida in 1982.

The project covers 15 hectares over seven blocks in the Tilanqiao area of Hongkou that is home to 15,000 people, nearly all of whom will be relocated.

The master plan shows an area stretching from the Huangpu River, where an international passenger ship terminal has just opened, with a pedestrian corridor running through a commercial and residential district to a restored historic district around the Ohel Moishe synagogue and a proposed Jewish museum, on to a park with a bath house, tea houses and a Buddhist temple.

That central corridor will have low-rise buildings, including a restored Broadway Theatre and hotels, with high-rise offices and apartments on the district's fringes, next to existing high-rise buildings.

'This is a very exciting project,' said Clifford Korman, chief architect of Kirkor Architects and Planners. 'It's driven by history and the spirit. It grew from the Holocaust. We aim to restore the neighbourhood to what it used to be - a thriving commercial, cultural and residential area. Now it is very run down, almost a slum.'

The project faces formidable challenges - first, the relocation of the existing residents, most of whom will not be able to afford to return, and providing for them alternative housing and adequate compensation. Second will be large-scale restoration work, which is time-consuming and largely unprofitable. Third will be the balance between maximising profit and preserving heritage. The fourth is the tight time schedule, to get all the work completed before the Expo.

Mr Weiss said they would sign agreements with up to 10 local developers for each area of the project and use local architects, lawyers and accountants. Last week he met local firms who want to take part in the project and will ask those he selects to present a development blueprint by the end of next month. The city government has approved the master plan.

The project has come a long way since the conversation between Mr Leventhal and Wang Faliang, 86. Born in 1919 in the district, Mr Wang worked as a cashier in a cafe run by a Russian Jew and met many Russian Jews and later, other European Jews who had fled to the city. In the 1940s, he bought a house and furniture from a refugee family that was leaving and has lived there with his family since.

In 1993, Mr Wang, who is fluent in Putonghua, English and Japanese, began working as a guide at a museum in the former Ohel Moishe synagogue. The museum has received thousands of visitors, earning a place in the Lonely Planet guide. Visitors have included state leaders, such as former Israeli prime minister Yitzhak Rabin.

'I had seen pictures and vignettes before,' Mr Leventhal said. 'But Mr Wang told me personal stories of his Jewish friends and neighbours. They come back to visit him. It was a living story. I felt his legacy and historical drama, this great compassionate gesture of world war two. If it were lost, what a tragedy it would be.'

President of Living Bridge Corporation, Mr Leventhal went home to Toronto and started working on a plan to save the area. 'I am not a specialist so I asked others, like architects and planners, to join me,' he said. 'The Hongkou government asked us to come up with a plan, which they liked.'

Mr Leventhal was fortunate in his timing. The redevelopment of Shanghai has been under way for more than 15 years. Areas that were once two- and three-storey red-brick houses are now giant apartment blocks and shopping centres. Districts are looking at ways to distinguish themselves from their neighbours.

Shanghai cherishes its Jewish history. It has set up a Centre of Jewish Studies, headed by an eminent academic.

The Jews have played a major role in the history of Shanghai since it became a treaty port in 1842. The first to arrive was a group of 700 Jews from Baghdad, who came via India, from the second half of the 19th century to the first world war. Russian Jews came next and those from Manchuria escaping the Japanese occupation. By the end of the 1930s, there were more than 4,000 Russian Jews in Shanghai.

The second wave was more than 20,000 people fleeing Nazi persecution who took refuge in Shanghai, one of the few cities requiring no visa or travel document. After the creation of Israel in 1948, most left Shanghai for their new homeland, the US, Australia or other countries.

It was these refugees that settled in the Tilanqiao district, building a thriving community with schools, hospitals, religious institutions, factories, shops and coffee houses. They published books and newspapers, in German and Yiddish, and included an Orthodox Mir Yeshiva community from Poland that was able to continue its studies of the Talmud without interruption throughout the war, in the Beth Aharon synagogue. There was no hostility from the resident population.

In July 1942, Colonel Josef Meisinger, chief representative of the Gestapo in Japan, proposed to the Japanese the establishment of three concentration camps on Chongming Island in the Yangtze estuary, where the Jews would be killed.

The Japanese, who respected the Jews for their education, science and financial power, refused but set up a 'designated area' in Tilanqiao where stateless refugees who arrived after 1937 - but not Jews who had been resident in Shanghai before - had to live.

It was unlike the ghettoes of eastern Europe in that it contained a large local population as well as Jews and those inside were able to leave, provided they had the necessary passes, issued by a Japanese official named Goya, whose nickname was 'King of the Jews'.

Between 1942 and 1944, as conditions deteriorated, about 1,000 Jews died in Shanghai, mostly the old and children, of illness or old age, but none at the hands of the Japanese. The Japanese banned the remittance of money from the US, so the American Jewish Joint Distribution Committee, with an office in Hongkou, could no longer help the refugees. On July 14, 1945, US aircraft aiming for a Japanese munitions site nearby, accidentally bombed the ghetto, killing 31 refugees and injuring 250.

Among the wartime residents was Saul Eisenberg, who was born in Germany and later became one of Israel's most successful entrepreneurs, with business interests worldwide. He was one of the principal movers behind the establishment of the Shanghai Diamond Exchange, which opened in 2000 in Jinmao Tower, the city's tallest building.

But Shanghai's friendship with the Jews does not extend to the return of the two remaining synagogues, despite discreet lobbying by the community, probably because the central government fears setting a precedent and doing a favour to a religious group that is not one of China's five recognised religions.

If the dream of Mr Wang and Mr Leventhal is realised, it would display, for all the world to see, a rare story of mercy and compassion during the second world war.

SHANGHAI'S RISING STAR

The Tilanqiao renewal project

Artists' impressions: Kirkor Architects and Planners