The city has obtained approval for the plan from the central government and an official announcement is expected in the next few weeks, the sources said Tuesday.

Money for the fund will be raised mostly from the city's Treasury, big mainland insurance companies and state-owned enterprises headquartered in Shanghai, they added.

The city government would hire an external, professional institution to manage the fund, they said.

"Some of the money will be invested in the city's big infrastructure projects such as construction of bridges and tunnels for the World Expo 2010," said one of the sources.

"The fund is also expected to team up with other investors to jointly fund the expansion of the city's ports and airports," he said.

Shanghai is the second mainland city to get approval for a yuan-denominated government-backed industrial fund. The Tianjin city government won approval for the 20 billion yuan Bohai Industrial Investment Fund at the end of last year.

Such city-issued funds are a recent phenomenon in China, but more are expected in the future to diversify risks and provide a source of low-cost funds for specific projects.

Beijing wants Shanghai to lead economic reform and development in the surrounding Yangtze River Delta region, which includes two of the country's richest provinces, Zhejiang and Jiangsu. "Besides investments related to the World Expo 2010, the fund will also invest in projects related to the development of Shanghai's Pudong New Area," said the source.

Pudong, China's skyscraper-studded financial hub, was built up from marshland after paramount leader Deng Xiaoping gave his blessing in April 1990 to developing the area, which faces Shanghai's historic waterfront.

The source added that the fund would seek opportunities to invest in innovative high-tech and financial services projects in Pudong, a key center for those two sectors in China. REUTERS