Web Business ShanghaiSkyline r72Shanghai, open for business

By Pat Welsh

Shanghai literally means “going up to the sea.” It is China’s largest city and home to more than 23 million people. As such, it is now one of China’s four provincial-level municipalities. Contained within this municipality are 16 districts and one county.

Eight of these districts lie within Puxi (Huangpu West), also known as “Shanghai Proper.” To the east lie Pudong (Huangpu East) and seven other suburban and Chongming county that surround “Shanghai Proper.” Shanghai is also the city where Madame Mao (Jiang Qing) began her movie career. It is also where, on July 23, 1921, the Chinese Communist Party was born. And, Shanghai was also where the Gang of Four was headquartered during the disastrous Cultural Revolution of 1966-1976. 

From the early Qing dynasty through the late 1940s, Shanghai was ruled by gangs, especially, the Green Gang Triad, which was led by some of the most colorful characters in modern Chinese history. Digging deeper into their activities reveals a world of intrigue, deception and depravity, which will be covered in a follow-up article next month.

Shanghai’s Pudong district is China’s largest financial center. Under the supervision of the China Securities Regulatory Commission, the Shanghai Stock Exchange has become the world’s sixth largest by market capitalization, exceeding USD$2.3 trillion as of January 2012. Recent changes in the regulations have allowed foreign firms to raise capital in the Shanghai Stock Exchange if certain criteria are met.

In 2005, China’s central bank, the Peoples’ Bank of China, moved its market operational headquarters to Shanghai from Beijing to be closer to the “action,” further strengthening Shanghai’s position as China’s leading financial center. According to the Shanghai Statistical Yearbook 2012, at the end of 2011 there were 1,048 financial institutions, including banks, insurance companies and securities companies, 173 of which were invested by foreign entities such as the Bank of America and Citibank. Shanghai is heavily banked to accommodate the growing number of service and industrial businesses located there.

Located on an estuary of the Yangtze River, Shanghai has become China’s busiest container port with 125 berths and a total quay length of 20 kilometers. It is recognized as the world's busiest, surpassing Singapore, with more than 2000 container ships departing the port each month. The main overseas markets in 2011 were Germany, Hong Kong, Japan, the Netherlands, South Korea and the U.S. Japan is the leading source of imports, followed by Germany, the U.S., Taiwan and South Korea. China’s cabinet recently approved a plan to establish the nation’s first free trade zone on 29 square kilometers (11 square miles) in Shanghai. This zone will have looser rules on matters such as interest rates and business licenses. This is part of Premier Li Keqiang’s drive to sustain China’s growth by shifting the economy more toward services and consumption. 

Shanghai is a major location for foreign direct investment. About 300 of the world’s top 500 enterprises have invested in Shanghai. These include GE, Siemens, Mitsubishi and Hitachi.

Most of the foreign investors in Shanghai originate from Germany, Hong Kong, Japan, Singapore, and the U.S. Shanghai’s cosmopolitan character, sophisticated and affluent consumers, and a highly skilled and educated labor force have made the city very attractive to foreign investors. Another factor attracting investors are Shanghai’s modernized infrastructure that includes two international airports, port facilities, modern highways, and updated sewer, water and electrical utilities.

In 2011, 58 percent of Shanghai’s gross industrial output of USD$305 billion was attributed to service industries. Shanghai plays a key role in China’s heavy industries, which accounted for USD$177billion or 78 percent of the gross industrial output in 2011. China’s largest state-owned steel manufacturer, the Baosteel Group, and the Fosun Group, one of China’s largest private steelmakers, are both located in Shanghai. Auto manufacturing is another important industry and there are four goals for China’s auto industry: to develop China’s own car brands, to cooperate with Japanese and Korean car companies, to accelerate the development of business-use cars and to promote the auto parts and car service industries. Shanghai is also a leading producer of ethylene, plastics, microcomputers and mobile phones. 

Shanghai has been experiencing industrial restructuring over the last decade. Low value-added manufacturing has decreased, particularly in textile and heavy-equipment manufacturing, which have relocated to areas outside the city. Nonetheless, Shanghai has made significant progress in developing its high-tech industries, such as computer, telecommunications equipment and integrated circuit manufacturing. The technology areas with the most output value are electronic computers and office equipment. Six key advanced industries account for about two-thirds of Shanghai’s gross industrial output in 2011: electronic information devices, automobile, petrochemical, fine steel, electrical equipment and biomedicine.

Barring the unforeseen, Shanghai promises to become the world’s largest business center.

Source: Bulletin Report of the Shanghai International Port (Group) Co. Ltd.

About Pat Welsh

Welsh has worked in banking and trade development with Asia Pacific nations for more than a decade. By invitation of the Georgia State Department, he taught Chinese in Georgia high schools from 1986-2007. His deep interest in the Chinese culture and his fluency in Chinese and Japanese have helped him establish strong personal relationships with top Chinese officials. His insight into Chinese cultural and economic affairs is enriched by these personal relationships.

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