The government's planning body said the State Council, China's cabinet, had given its approval to the project to build a new magnetic levitation, or maglev, train line between Shanghai and Hangzhou, a thriving commercial and tourist city 200km to its south-west.

However, the National Development and Reform Commission (NDRC), the planning body, said a new high-speed line between Beijing and Shanghai would use conventional wheel technology, in spite of a proposal to build another maglev line between China's two most important cities.

The plans for these high-speed lines, which have been discussed for a number of years, have set off a flurry of lobbying by the German consortium that pioneered the maglev technology, the French makers of TGV trains and Japanese bullet train technology.

The investments are part of an enormous planned expansion in China's rail network, including 5,400km of new high-speed lines in the next four years.

Shanghai already has the only commercially operating maglev train in the world, a 31km line to the city's international airport developed by Transrapid, a consortium that includes Siemens and ThyssenKrupp.

With a maximum speed of 430km an hour, the service has become one of the city's tourist attractions.

However, with the only station far from the city centre and continual questions about the high investment costs, the project has remained controversial.

In a one-line statement on its website, the NDRC said the State Council had approved the new line to Hangzhou but gave no further details on cost, timing or the equipment suppliers.

Over the past week the official Xinhua news agency has quoted officials saying the project would begin construction this year and would cost Rmb35bn ($4.3bn, Euros 3.6bn, £2.5bn).

The new line is likely to cut the current two-hour journey to Hangzhou to as little as 30 minutes and is expected to be ready in time for the 2010 World Expo in Shanghai.

German ministers have said in recent weeks that they believe the Transrapid technology will be used for the new line. However, local papers have suggested the government may opt for a system developed by Chengdu Aircraft Industrial Group, a Chinese company.

Xinhua quoted a member of China's National People's Congress saying that "some German technology" would be used. Transrapid did not return phone calls yesterday.

Separately, the NDRC said a new wheel track should be built between Beijing and Shanghai, cutting the time from 13 hours to five hours, although it gave no details about which technology would be used.