A shipping official in Beijing said: ''The setting up of free ports is Beijing's policy. Many ports, such as Xiaman, would like to have this privilege. But I will say Yantian has a very good chance.'' Details of the project are being drawn up, but it is understood that the government will minimise export and import restrictions and eliminating most tariffs and product controls.

It will also establish a free-trade zone in the area.

Hutchison Whampoa is one of the key players in the project. It will build and operate phrase two of the container terminal facilities at the port.

Hutchison chairman Mr Li Ka-shing and Wharf chairman Mr Peter Woo Kwong-ching competed fiercely for the port deal.

Initially, the Shenzhen government agreed to both companies jointly develop the project.

However, Wharf Holdings is believed to have recently pulled out and Hutchison has gained operating rights for the terminals.

Hutchison is likely to hold a 70 per cent share of the 2.5-billion yuan (HK$3.39 billion) phase two of the project, with port developer, Dongpong Holdings, a Shenzhen-owned company, holding the rest.

But a formal agreement has yet to be signed.

The deepwater port at Yantian will have the capacity to accommodate ships as large as 50,000 tonnes.

Mr Russell Green, deputy editor of Cargonews Asia, said that Yantian port would not be a threat to Hongkong.

''The industry people in Hongkong believe that there is a need to have extra ports and all ports in southern China, including Yantian, will play a complementary role to Hongkong,'' he said.

Dongpong began construction of the port in 1985. Progress was slow because, initially, Beijing did not support the project.

But after tough lobbying, the central government eventually gave its official approval for the development of the port in 1990.

''Promoting Yantian as the free port in China has always been our plan, we have fought for the project since 1985,'' said a senior official in Shenzhen.

''But Beijing said we had to wait until terminal facilities in Yantian were established before they would give us the green light to open it up as an international free port.

''And now, basic infrastructure has been completed,'' he added.

Yantian port is located on Mirs Bay, close to Starling Inlet. The depth of the water ranges between 15 and 20 metres.

Shenzhen officials believe that Yantian will be regarded as an extension of port facilities in Hongkong after 1997.

Last November, Beijing gave approval for the opening of Yantian to international shipping. But only Hongkong has regular shipping routes to the port and that is only two ships a month.

The amount of money being poured into the project makes it one of the major developments in China.

The harbour and accompanying land is being developed in three phases. Eventual total investment in the huge project is estimated at 25 billion yuan.

Kumagai Gumi has already rented 100,000 square metres of land for warehousing.

Seven deep-water berths for container terminals and six berths for general cargo terminals will be built.

The first phase will be completed by the end of the year. By then, there will be six berths for ships ranging between 1,000 tonnes and 50,000 tonnes.

Four berths in the first phase are already in operation.

A 72-kilometre highway linking Yantian and Huiyang will also be built, along with a 24-km railway linking the port and Pinghu.

The highway will cost 620 million yuan and the railway, 120 million yuan.

In the second phase of the construction, three deep-water berths for container terminals will be built by 1995.

The third phase will include two deep-water berths for container terminals, and two general cargo terminals.

It will be completed in 1997.

And Dongpong plans to carry on with construction of the port between 1997 and 2006.

It will build another 10 deep-water berths for container terminals, four berths for general cargo terminals and other terminal facilities. The port's handling capacity will be increased to 80 million tonnes.

Another senior official from Shenzhen Ports and Harbour Administration Bureau said: ''None of the international ports will be as free as Yantian.

''They all bear different extents of restrictions, but Yantian will be completely open.''