A month later, Chief Executive Donald Tsang Yam-kuen sought to ease concerns that development of Qianhai - with financial services to be one of the pillar industries - would pose a threat to Hong Kong by saying: 'Even the Qianhai reclamation work has not been completed yet.'

A year on, the reclamation and site formation are done. Workers are busy on projects such as the Qianhai metro station with a property development above it. The extension of Shenzhen's first metro line, with a stop in Qianhai, is expected to start operation next month.

According to its blueprint, the municipal government will invest 40 billion yuan (HK$46.5 billion) in the next three years to develop service industries such as finance, logistics, professional services, communications and the media as well as hi-tech industry. Its confidence in the development of Qianhai, one of the last plots of undeveloped land in the special economic zone, is built on the status granted to the area by the central government.

Shenzhen Mayor Xu Qin has said the gross domestic product of Qianhai will reach 150 billion yuan in 2020, more than a third of the present figure for the entire city.

The National Development and Reform Commission issued a circular two weeks ago saying Qianhai would have the same power to manage its economy as cities 'specially designated in the state plan', meaning it will have the economic autonomy of a province. Currently there are five such mainland cities - Dalian , Qingdao , Shenzhen, Ningbo and Xiamen .

Dr Fang Zhou, assistant chief research officer at the One Country Two Systems Research Institute in Hong Kong, said Qianhai's special status would put Shenzhen in a better position to seek preferential treatment for it in areas such as approval for foreign investment and fiscal policies. 'Shenzhen authorities' strategy is to team up with Hong Kong to fight for favours for Qianhai,' he said.

The State Council has also designated Qianhai as a 'Hong Kong-Shenzhen modern service industries co-operation zone'.

The governments of Hong Kong and Shenzhen are discussing how to capitalise on Hong Kong's strength in financial services, trade and logistics to pave the way for development of service industries in the zone.

Beneath the hype lies the fact that Qianhai will be used as a testing ground for initiatives that have not been tried in other mainland cities.

Options being considered by Shenzhen officials and academics for Qianhai include allowing Hong Kong's offshore financial institutions and arbitration institutions to set up branches in Qianhai, a pilot scheme for free convertibility of the yuan, and introduction of salaries and profits taxes much lower than elsewhere on the mainland.

Fang, who has exchanged views with Shenzhen officials on development of Qianhai, said Shenzhen authorities were seeking consent from central government departments to cut profits tax for companies investing in Qianhai to about 20 cent, compared to 25 per cent for firms elsewhere on the mainland. Hong Kong's profits tax is 16.5 per cent.

'The Shenzhen government also hopes to cut the rate of salaries tax to about 20 per cent to raise its appeal to talent from Hong Kong and overseas,' he said. The standard rate of salary tax in Hong Kong is 15 per cent.

Fang said Shenzhen's expectation of the development of Qianhai went beyond providing support services, such as data centres for financial institutions, for Hong Kong's service industries. 'Instead, Shenzhen wants to woo top talent in service industries from Hong Kong to develop high-end service industries in Qianhai. In this sense, Qianhai will compete with Hong Kong in the development of service industries,' he said.

The planned 50-kilometre, 20-minute rail link between Hong Kong and Shenzhen airports will have a stop in Qianhai. The Hong Kong International Arbitration Centre said it would be interested in expanding services to the mainland.

An official with Shenzhen's Urban Planning, Land and Resources Commission, which oversees development of Qianhai, said it was pressing ahead with preparatory work. Guo Wanda, vice-president of the Shenzhen-based China Development Institute, said there was 'plenty of room for imagination' for the development of Qianhai.

'I believe Qianhai will enjoy greater flexibility in areas such as the tax system and flow of currency,' he said.

The Qianhai Management Authority, established in April, was modelled on statutory bodies in Hong Kong that enjoyed great flexibility and autonomy, Guo said. 'It would be a good idea to invite Hong Kong officials or professionals to serve as members,' he said.

Tsang said in his policy address his government would work with Shenzhen to encourage the local trades to seize opportunities arising from Qianhai's development.

A spokesman for the Constitutional and Mainland Affairs Bureau said the Shenzhen authorities were responsible for the development and management of Qianhai, while Hong Kong would serve as an adviser.

National People's Congress Hong Kong deputy Priscilla Lau Pui-king said Qianhai had a long way to go to become a mature financial centre. Fang agreed: 'Given Hong Kong's advantage in the rule of law and free flow of capital, it is difficult for Qianhai to emulate Hong Kong in the development of service industries.'