Under the plan, 42 factories, most built in the 1950s, apartment blocks and shops in the area will be demolished to make a district like central Manhattan or Central in Hong Kong.
The plan is for 50 per cent office buildings, 25 per cent hotels, shops and cultural facilities and 25 per cent up-market apartments. The idea was first proposed in 1993 and became government policy last year, with the approach of China's entry into the World Trade Organisation and projections that the city would have to find office space for 90,000 employees of foreign companies each year.
At the beginning of this month, a delegation from the city government, led by Mayor Liu Qi, presented its proposals for the central business district at a seminar in Hong Kong. Of the 41 contracts signed there, seven were for projects in the district.
The biggest involved investment of US$300 million to build the third phase of China World Trade Centre (CWTC), next to its two existing towers, the premier office space in the city with rents of US$60 to US$70 per square metre. CWTC is a 50:50 joint venture between Xin Guang Property and Kerry Group owner of this newspaper. Its design, for 70 storeys and 330 metres in height, would make it one of the tallest buildings in Beijing and it would require special approval from the government.
'China's entry into the WTO will be a great spur to foreign investment,' said Sun Guowei, director of CWTC's general office.
'The Sino-US agreement last November on WTO entry had an immediate impact on our China World Tower 2, which opened in October 1999. We had expected to fill it only by 2002 but it is more than 90 per cent rented now.
'The business district will be a window for foreign investors. I expect them to be the main customers, with domestic companies moving in as they grow and need proximity to the foreign firms.'
HKI Group, a Hong Kong-based property company, agreed to invest HK$6 billion to redevelop a sprawling site next to the third ring-road that has for the past 50 years been the People's Liberation Army 3501 factory making uniforms and boots.
At its peak, the factory employed 5,000 workers but, with a drop in demand, it has been laying off staff, leaving only several hundred now and a small number in a shop that sells its boots, socks, uniforms and tents.
It has leased out most of its space, to restaurants, nightclubs, barber shops, saunas and trading companies.
The site feels like a film set of the 1950s. Workers in uniform wander past the company garden holding steel bowls with their factory lunch.
At the entrance is a red signboard with calligraphy by Chairman Mao, 'Serve the People', and panels with photographs of 34 model workers and how they learn from Lei Feng, a Communist Party hero soldier and worker now regarded by most people as a figure of ridicule.
'It will all be demolished as part of the redevelopment,' said a security man at the gate in a matter-of-fact way, with no sense of regret at the passing of this old world.
Also to go is a large furniture supermarket on the factory site where dozens of companies sell beds, tables, chairs and lamps at factory prices.
Those who put their money into the business district are betting China's economy will continue to grow at a stable pace and that WTO entry will improve investment conditions sufficiently to attract foreign companies. The risk is another Asian crisis, a downturn in the global economy or domestic turmoil, like the military crackdown on the student-led protest in June 1989, which led to a flight of foreign firms for 30 months.
Another risk is oversupply in the property market and a repeat of the business cycle of the 1990s. When the CWTC opened at the end of 1989, it was struggling to find customers.
By 1992, the market had turned upside down and rents at CWTC rose to a record US$115 per square metre in 1994, before falling more than 50 per cent to between US$40 and US$50 in 1998. They have since recovered to about US$70.
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