The planned 101-story Shanghai World Financial Centre is to rise 492 meters, 20 meters higher than Taipei 101 in Taiwan, named just last week as the world's tallest skyscraper.
Malaysia's Petronas twin towers, at 452 meters, was the world's tallest skyscraper.
The China State Construction Engineering Corp and Shanghai Construction Group have been awarded bids to serve as general contractors for the job, the Shanghai-based Oriental Morning Post reported.
The paper cited unidentified sources with the State Council, China's cabinet, which has final say over major construction projects.
Launched in 1997, construction work was suspended for five years by the building's Japanese backers, the Mori Building Company, due to a massive drop in demand for office space amid the Asian financial crisis of the late 1990s.
The company announced in the spring of 2003 that it was resuming work at the building's site in the Pudong financial district.
The glassy building is to be built just 40 meters from the 88-story Jinmao Tower, China's tallest building and the third tallest in the world.
The building is designed to taper to a wedge shape at its peak with a massive round hole through its upper floors to relieve wind pressure. It will house offices, a hotel, exhibition center, shops and an observation deck, with construction scheduled for completion in 2007.
The building of the Shanghai tower is forecast to cost $625 million.
