The source of story in the English-speaking world seems to be a painfully short, two sentence "editorial summary" on Asian business site Pacific Epoch. Besides containing scant details or supporting information on Shanda's policy, the summary contains the eyebrow-raising assertion that players with female avatars would have to "prove their biological sex with a webcam." While this isn't impossible, we find it hard to believe that a publicly traded company would start encouraging its customers to send in pictures of their naughty bits for any reason. Besides being ineffective (what's to stop a player from sending in a picture of someone else?) the system seems overly complicated when a National ID card number could easily provide proof of gender (much as it already does for age confirmation in other MMOs).
Pacific Epoch cites popular Chinese MMO web site 17173 as the source of its information, and while we couldn't find the original article on their site, we did find a story about some obviously fake Halo 3 branded condoms, which 17173 presented as fact. Combine the questionable editorial judgment with the translation problems inherent in citing information from a Chinese site and you have a perfect recipe for an erroneous story to spread across the internet.
We've put in a call to Shanda's U.S. PR arm to try and get a final confirmation on this, but until we do, you can probably rest assured that male Chinese gamers can still play as women if they so choose.