First, the cost of doing business in the city is getting higher compared to neighboring cities.

Secondly, with limited land and resources to offer it has stopped appealing for all kinds of foreign investments and focused on inviting multinationals to set up their headquarters.

After several years' effort, by the end of November, over 223 multinationals had set up regional headquarters in Shanghai.

The city now has the most headquarters for foreign enterprises on the Chinese mainland. Some companies even set up their global headquarters in Shanghai, among them Intel Channel Products Group and Honeywell Electronic Materials. And a lot of capital came with the large projects. From January to November 2008, the municipal government approved 216 projects with a contract value of US$10 million or more.

The strategy has worked well, and has helped the city to attract other investments. The headquarters of multinationals have brought higher demands for professional services. Therefore many foreign invested service companies have entered the city with these multinationals. And that has also enhanced the development of information services, financial services, exhibitions and logistics in the city.

The rent paid by the foreign headquarters has increased the tax income of local government. In areas with the most headquarters, such as Lujiazui and Nanjing West Road, the tax income that the government gets from renting some office buildings is as high as more than 1 billion yuan annually.

It has also changed the structure of FDI in the city. The "third industry", or service industry as it is better known, now take up 73.6 percent of the overall FDI to the city, according to the local commerce authority.

From January to November 2008, the contract value of foreign capital in the financial sector to the city reached US$406 million, up by 38.02 percent year-on-year.

Foreign capital in transportation and warehousing industry rose by 4.52 percent to US$820 million. Information transmission, computer service and software industry attracted US$888 million in foreign capital, up by 32.3 percent than the previous year.

(China Daily January 5, 2009)