At a brief ceremony on Tuesday, Shanghai officials turned over management ofsome of that investment seed money to a company under the Stock ExchangeExecutive Council, a securities advisory body based in Beijing.

"The purpose is to create a Silicon Valley of Shanghai,"said Wang Boming,the council's executive vice president.

"The Internet will be a major investment target - Internet content providersand E-commerce," he said.

Interest in Internet investment has increased sharply since China and theUnited States reached an agreement last week, paving the way for Beijing'sentry into the World Trade Organisation.

As part of that deal, China has agreed to reverse its ban on foreigninvestment in the Internet.

Shanghai is playing catch up not only with the real Silicon Valley inCalifornia but also with Beijing and Shenzhen, which are ahead in the raceto develop computer hardware and software and have created investment fundsto foster growth.

Shanghai is a major industrial centre but it is dominated by big - and oftenless nimble - state enterprises.

The east China city, recognising it is lagging in the high technology field,has set up the Shanghai Venture Capital Corp, contributing 600 million yuanto its investment war chest.

The firm under the Stock Exchange Executive Council will manage a total of400 million yuan, and has contributed half of that amount on its own.Shanghai Industrial, a Shanghai investment company with a Hong Kong-listedarm, has also contributed 200 million yuan and is one of several other fundmanagers.

City officials told Internet company executives and investment bankers atthe ceremony they would be looking to raise additional funds to build up thehigh technology sector in Shanghai. "We have to experiment and strive tocreate in order to develop," said vice mayor Zuo Huancheng.

"And we are relying on professional management," she added.