SHANGHAI -- Outside a little convenience store, Shen Zaijie tells a tale of woe. According to a raging local rumor, a section of Shanghai will soon become the site of Walt Disney Co.'s long-anticipated theme park in mainland China. Mr. Shen tells passersby that the park might force him out of a two-year lease he just signed to operate a printing business.

Nobody buys the line. "Liar!" interjects a man listening to the story, as others join in to denounce the claim. Shifting in his brown flip-flops, Mr. Shen admits he doesn't have any employees or printing orders to go with his business license.

The whole thing is a ruse -- meant to win relocation compensation if Disney comes to town.

Disney fever is sweeping Shanghai, and it has little to do with giddy anticipation of Mickey Mouse and company. It's about cash. Homeowners and businesses in the Shanghai village of Jinjia, where the rumors are focused, expect their properties will be bought up to make way for a Shanghai Disneyland. Residents expect that compensation will be proportional to the size of their houses, and even the number of trees on their property.

So, in a country with a well-known weakness for gambling, people are putting up new homes or adding extra rooms -- sometimes in defiance of local development laws -- for the shot at a payday.

Kang Liqing had never even heard of Disney until a few weeks ago. But upon learning that plans were afoot to develop an amusement park, he rented land and built a small aluminum shed, where he now lives with his wife and two children. He plans to provide temporary housing for construction workers.

"The rumor goes so fast," Mr. Kang says. "We only know it's a big foreign park."

Right now, Disney isn't talking, and so no one knows anything for certain about the plans for a new Magic Kingdom in the Middle Kingdom.

The rumors do have a basis in truth: Disney has participated in talks about a Shanghai park for nearly a decade. An early effort was derailed in 1999 by Disney's move to build its first Chinese park in Hong Kong, which opened in 2005. Talks about two years ago were torpedoed when big projects were frozen amid a Shanghai government corruption scandal.

Quiet Negotiations

In recent months, however, Disney and Shanghai quietly resumed negotiations in hopes that a deal for a targeted 2012 opening can be agreed on. Any deal will ultimately need the blessing of senior leaders in Beijing. Neither China nor Disney has confirmed the Shanghai site, a section of mostly rural land that covers Jinjia and other small villages near the city's international airport.

Disney spokeswoman Leslie Goodman said there is "no agreement and no deal" for a Disney park in Shanghai, and declined to elaborate.

However, two people involved in the process say one plan that has been discussed calls for Disney to hold a minority share in partnership with at least three companies owned by Shanghai's government. Among those companies, according to one person, is Shanghai Media Group, which had no comment. Unresolved questions include Disney's right to hold a nightly fireworks show, dredge a big lake and gain access to Shanghai's 268-mile-per-hour Maglev train, this person says.

In crowded China, such megaprojects entail a costly and thorny process of enticing residents to leave. Forced eviction remains common in China. But compensation is required, and the mere rumor of a development scheme can spark opportunism. When Beijing said in late 2002 it would pay 5,000 residents to move out of an area designated for next month's Summer Olympics, new residents moved in and cheap houses went up almost overnight.

Disney, meanwhile, has battled speculators for decades. Walt Disney himself famously surveyed central Florida in a plane rented under an assumed name, to quietly assemble nearly 30,000 acres of cheap land that became the Walt Disney World Resort in Orlando.

In Anaheim, Calif., the company was long tripped up by a local farmer who planted his 56-acre strawberry patch next to Disneyland in 1954, the year before the flagship Disney park opened. Disney finally acquired the land in 1998, at which time local developers estimated its value at $90 million.

Though Disney has an actual interest in Shanghai, the company is constantly dogged by rumors of theme parks in places where it has no plans at all. Vietnam, Dubai, India, Korea, Texas and Branson, Mo., all have been mentioned by bloggers, local developers, passionate Disney fans and the press as possible sites.

A densely wooded village of canals, Jinjia has more frogs than cars, and is one of the few sections of otherwise booming Shanghai with unspoiled countryside. The Shanghai municipal government banned most new construction in Jinjia a few years ago, and newcomers can't register as legal residents. Officials won't say whether the rules relate to Disney specifically, but the effect would minimize relocation and redevelopment costs.

"Strictly Obey Land Legislation," reads a red banner at a gateway into town.

But the message isn't getting through, and in Jinjia, residents figure that a bigger house or business will result in a bigger relocation payment.

Jutting from the back of Jinjia native Chen Xinglong's three-story home is a freshly painted white room with a bright blue roof. Mr. Chen recently took delivery of cement and hundreds of orange bricks that now block his driveway. Yet while he acknowledges that he has been hearing Disney rumors for years -- and "this time, I believe it" -- he claims: "These bricks aren't for a new home, they are for my garden. For a garden I need bricks."

Not everyone is building with the hope of being evicted. In May, another Jinjia resident cleared the small plot she had farmed since 1975. The woman, who gives her surname as Ms. Zhou, says she spent $24,000 erecting a simple 12-room hotel. "I don't want Disney to build here. I want it to build over there," stresses the would-be innkeeper, pointing her finger across a small waterway. Neighbors have hastily constructed garages, fish farms and nurseries.

"We've counted how many trees belong to us," notes one resident. People expect the government will have to pay extra for every tree on redeveloped land, including the hundreds of thousands of camphor and other trees planted in recent years, say people familiar with the project planning.

Market Standout

A whiff of Disney fever has lifted the shares of Shanghai Jielong Industry Group Corp. by more than 90% since late June, making it a standout in an anemic market. The company got its start in 1973 printing food-ration tickets and now makes boxes for Disney toys, but investors are focused on its prime land in the Jinjia area.

Disney talk also explains the $1.4 million asking price for houses in Opal Villa, a neighborhood located adjacent to Jinjia. Sales brochures feature Mickey Mouse-style ears floating above what looks like Disney's Cinderella Castle. Its slogan: "Fairyland in My Dream, Castle of My Wealth."

"It's 10 minutes from the airport and Disney will be right here," says sales representative Zhu Zhijun, motioning to a district map in the sales office. A Mickey Mouse penholder sits on his dark wood desk.

Only 12 Opal Villa houses remain available of the 106 constructed, and the asking price has nearly doubled since January. Selling them, says Mr. Zhu, will be "no problem."

--Bai Lin contributed to this article.

Write to James T. Areddy at james.areddy@wsj.com and Peter Sanders at peter.sanders@wsj.com

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