The new rule comes into effect from Monday.

Signalling its resolve to end backroom deals, China's Ministry of Land and Resources had required that all land made available for commercial use must be handled through open bidding from July 1, 2002.

However, land leasing in dilapidated communities for renovation has been exempt from open bidding and the government adopts a consultative procedure to pick "real estate developers of good reputation."

Zhu Jinsong with the Xuhui District housing bureau explained, "It's hard to set the floor price for land in the dilapidated communities as district governments offer different preferential policies such as tax cuts."

"Previously only those companies with prestige or good relations with the government may take part in the urban reconstruction. However, through open bidding, the government may broaden its choice (of companies)," said Mao Mingzhong, an official with Shanghai Forte Land Co Ltd.

Forte is now planning for the largest urban reconstruction project in Xuhui District. The company got the land through the consultative process.

Cai Yutian, director of the city's housing bureau, said the new rule is expected to make the procedure more transparent and guarantee opportunity for developers from out of Shanghai.

Renovation projects in the old residential areas covering 11.65 million square meters will begin this year.

Cai also said that real estate developers should play a bigger role in Shanghai's urban renovation by investing and developing residential projects for the lower end of the housing market.

"The development of low- and mid-end housing residential projects is encouraged to ensure the welfare of the society's majority," Cai stressed.

(eastday.com April 29, 2003)