Bott put cost at under $940m

Chinese and Transrapid officials declined to disclose the price of the project, but Hans-Dieter Bott, the vice president of consortium partner Siemens Transportation Systems, said it would cost less than $940m.

The German Government is reportedly helping finance the construction with grants and loans.

The Transrapid Consortium - a partnership between the German Government and industrial giants Siemens and Thyssen Krupp - has struggled to win contracts because of the high cost.

The Shanghai deal follows months of talks which began last summer when the Chinese Prime Minister, Zhu Rongji, rode the train on its test track in Germany.

Spiralling costs

The Transrapid rail link is based on the Maglev system, which uses powerful magnets to hold a train above the track, and propel it with little noise and vibration.

Germany has poured billions of dollars into developing the technology.

From Shanghai airport to city centre in a few minutes

Last year it scrapped a plan to build a rail link between Berlin and Hamburg because of spiralling costs, and it was feared the consortium might be dissolved.

Berlin is said to be considering other shorter stretches for the high-speed train.

Transrapid said it hoped the Shanghai deal would boost other projects in the US as well as China.

The consortium now has its eye on a much bigger prize, a possible high speed line between Shanghai and Beijing, 1,300km long.