Game researchers Digital Foundry recently found out that there is actually a footage that featured the work of the developers of Shenmue I & II remake that got shelved. This was before they made the remastered version.
Shenmue II & II cancelled remakes revealed
Digital Foundry got some footage that was evidence to the remakes of the classic video games that got cancelled. It included some of the game’s environments and the significant changes that they made. There was so much improvement to the visuals that it was so impressive. It had new lighting, new assets, 3D geometry and many more upgrades. The first title that was shown looked like it was a new game. The second one did not have a lot of upgraded content, but it is most likely that this was the reason it was cancelled by SEGA.
There was no official reason why it was cancelled, but Digital Foundry has its theory. They think that the project was really in development for a while, but it was cancelled due to budget and time issues.