Treasury Holdings, the Dublin-based property group, has received outline planning permission from the Chinese authorities for the development of a 4.22 million sq m "eco-city" on an island 26 miles off the coast of Shanghai.

The planning permission, granted in the last week, represents a big step forward for the development of the Dontang eco-city, an environment-friendly project on Chonming Island.

At the same time, the Shanghai authorities are building a sub-sea tunnel and sea-bridge link with the island to connect it to the city.

"This is the equivalent of an outline planning permission. It sets out all the core principles of the development, the basic layout. It's the equivalent of one of the planning schemes in the [ Dublin] docklands," said Treasury's deputy managing director Robert Ticknell.

The Dontang plan embraces the construction of some 18,000 housing units, three commercial town centres, an international golf resort with two 18-hole courses and an Olympics-grade equestrian centre.

The Irish group is co-developing the project, billed as the world's first eco-city, in a 50-50 partnership with a Chinese state-controlled business called Shanghai Industrial Investment Company, which owns the property.

Treasury is funding its move into the market through its publicly-quoted vehicle China Real Estate Opportunities, which has a current market capitalisation of £160 million sterling (€231.44 million).

The group's co-owner, Richard Barrett declined to put a value on the investment required to set up the project. "The last time I checked it was a quite a lot," he said at a briefing for nominees for the 2006 Ernst & Young Entrepreneur of the Year Award.

Treasury Holdings itself ranks among the 24 award finalists, who are attending a "ceo retreat" here to explore the Chinese market and meet possible business contacts.

Mr Barrett said that the target for December 2007 was a market capitalisation of €3 billion. He also said that about one-third of Treasury Holdings will be in the Chinese market within three or four years.

As well as the Dontang initiative, the group is pursuing a number of unspecified commercial property opportunities in Beijing, Shanghai and in the regional cities of Tianjin, Nanjing, Hangzhou and Qingdao.

The Chinese property market is booming at the moment, with yields running at some 10 per cent, thanks to speedy economic growth and rapid urbanisation.

Given the smog that frequently engulfs Shanghai, the objective of the Dontang initiative is to create a sustainable development that presents a clear view of the sky for residents. The next phase of the process is to secure detailed planning permission for individual aspects of the plan.

The development will occupy some 7.8 sq km of a 12.5 sq km site, catering for up to 80,000 residents. Treasury says the commercial parts of the project have the potential to create some 51,000 jobs when complete.

The planning scheme embraces wind energy provision, carbon-free energy supply, and 14 per cent surface water. The plan also includes 28 sq m of open space per person. This is in contrast to Shanghai, where open space per person is limited to 10 sq m.

"The overall aim is to try and create the best place to live in Shanghai," said Mr Ticknell.

Mr Barrett is now based in Shanghai. "It's not possible to do deals if you're not here," he said.