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In 2018, Tesla became the first wholly foreign-owned automaker to establish a factory in Shanghai’s Lingang New Area. Five years later, the Lingang plant had achieved a domestic parts sourcing rate exceeding 95 percent, delivering 947,000 vehicles in a single year.
Shanghai’s deeper motive for bringing in Tesla was never simply about investment attraction or adding production capacity. In practice, the company served as a proving ground for China’s entire automotive supply chain.
From power battery components to integrated die-casting processes, auto parts manufacturers across the Yangtze River Delta simultaneously completed upgrades in both technology and production capacity. Those mature supply chain resources then generated powerful spillover effects, directly underpinning the explosive growth of other domestic new-energy vehicle makers that followed.
This operating model resembles that of a government-backed, long-horizon industrial investor. By conceding early-stage advantages in land, taxation, or market access, Shanghai made precisely targeted trades for advanced industrial clusters with exceptionally high barriers to entry. The approach reflects the inherent characteristics of industries like integrated circuits and auto manufacturing: heavy assets, massive capital requirements, long technology ramp-up curves, extended return-on-investment cycles, and sprawling, complex supply chains.
Times have changed. Artificial intelligence, biopharmaceuticals, and other emerging industries have become the defining questions of a new era, and Shanghai has devised fresh strategies to answer them.
Opportunities Beat Subsidies
In the “Shanghai Investment Attraction 15 Measures” issued in 2025, Shanghai introduced a clear concept: scenarios.
The city unveiled 15 district-level specialty tracks for flagship industries and announced a 50-billion-yuan investment to build 40 “phoenix-attracting scenarios” — open invitations issued directly to innovative companies worldwide capable of meeting exacting standards.
The logic behind “scenarios” is straightforward. In industries like integrated circuits and auto manufacturing, market demand is well established; the challenge lies in building capacity, and the path to commercial returns is highly predictable. In emerging sectors such as artificial intelligence and the low-altitude economy, total investment is far smaller than in traditional manufacturing, yet commercial pathways remain unclear. The real problem these industries face is that technological innovation alone cannot sustain itself financially.
The bridge connecting technology to commercialization is a series of real-world scenarios.
For AI startups, for instance, the most acute pain point is rarely uncertainty about the technical roadmap. It is the prohibitive cost of computing power, the heavy upfront investment, and the still-murky outlook for monetization. A technological breakthrough is only the first step; the true life-or-death test is how to cross the chasm from the laboratory to the market.
Accordingly, Shanghai’s policy emphasis has shifted away from simple cash incentives toward a systematic combination of “risk hedging” and “factor supply.”
In July 2025, Shanghai released its “AI 12 Measures,” explicitly committing to the issuance of 600 million yuan in compute vouchers, 300 million yuan in model vouchers, and 100 million yuan in data vouchers. Entities leasing intelligent computing resources receive additional subsidies on top of that. Underpinning all of this is a comprehensive piece of infrastructure — the Shanghai Intelligent Computing Resource Coordination and Dispatch Platform — which lets enterprises call on computing power as effortlessly as drawing electricity from the grid.
Shanghai has begun turning “scenarios” themselves into a policy instrument. Under the traditional investment attraction model, a company brings a project, and the government supports it with land grants, financial incentives, and other policy measures. The new approach flips this: the government opens up real business scenarios, giving companies the opportunity to refine their technologies and validate their business models in live conditions.
Jing’an District’s “Digital Chain Valley” created the nation’s first blockchain-themed scenario marketplace, organizing monthly matchmaking events that have successfully connected 85 percent of technology providers with demand-side partners. Pudong New Area assembled more than 30 AI application scenarios — from security surveillance to waste sorting — on Zhangjiang Artificial Intelligence Island, building a benchmark “testing ground.” Jinshan District, leveraging the East China UAV Base — China’s only civil unmanned aviation test zone built around an island environment — has attracted 41 low-altitude economy supply chain companies spanning manufacturing and materials, with planned total investment exceeding 3.3 billion yuan.
This is no longer a matter of simple policy subsidies. It is a complete virtuous cycle of “R&D feeds application, application feeds back into R&D.”
When real demand scenarios are discovered, opened up, and connected through the right tools, technology can take root and flourish in genuine soil. Agibot and Fourier Intelligence — embodied intelligence companies that rose from Shanghai’s own ecosystem — each found their path to commercialization through relentless iteration within these very scenarios.
And in the inaugural year of the 15th Five-Year Plan, Shanghai has identified its next keyword: openness.
The Eastern Hub Connects the World
In 2025, the Eastern Hub passed a joint national-level inspection led by the General Administration of Customs and involving ten central government ministries. This international business cooperation zone, adjacent to Pudong International Airport, is defined along three dimensions:
- A new platform for facilitating international business exchange;
- A new vehicle for aggregating service resources and production factors;
- A new node for advancing Yangtze River Delta integration.
The Eastern Hub’s open positioning extends far beyond its geographic context. Its most groundbreaking innovation is extending the “open at the first line, controlled at the second line” customs regime from goods to natural persons. Foreign nationals, for example, can enter and exit simply by presenting a registered invitation credential, with no Chinese visa required.
At the same time, innovations in offshore trade, services trade, and digital trade will be piloted within the cooperation zone, accelerating the development of priority industries including biopharmaceuticals, integrated circuits, and artificial intelligence.
To complement this, Shanghai has established targeted government services and professional services windows within the zone, offering world-class support to help both domestic and foreign enterprises “bring in” high-quality investment and “go out” at a high level. It is for this reason that the 2026 Shanghai Global Investment Promotion Conference was also held here.
For multinational giants, the zone represents an ideal location for establishing offshore R&D centers or Asia-Pacific headquarters hubs, leveraging policy flexibility to pilot offshore trade and services trade. For Shanghai, the investment attraction playbook has evolved from one-off policy incentives toward structural institutional innovation.
This systemic thinking — one that looks beyond short-term returns on individual projects to build complex industrial ecosystems — is the true moat that allows Shanghai to maintain its core regional competitiveness through macroeconomic cycles.
An Era in Lockstep
In 2016, Shanghai launched its first three-year action plan for the Industrial Internet. Other provinces soon followed with their own Industrial Internet initiatives, and industrial connectivity became a major innovation wave on par with Industry 4.0.
“What if Shanghai loses the internet?” was once a fashionable topic in urban industry debates. In reality, as China’s commercial and industrial powerhouse, Shanghai has never lagged in positioning itself at the frontier.
In 1998, Shanghai proposed “planning a 22-square-kilometer Zhangjiang Microelectronics Development Zone in Pudong — three times the size of Taiwan’s Hsinchu Science Park.” In the years that followed, a series of top-level policy designs for integrated circuits were rolled out in succession, and a large cohort of companies set up operations in Zhangjiang.
After 2000, as Zhangjiang cemented its status as the core hub for wafer foundry and chip design, demand for packaging, testing, and supporting materials surged. Cities like Wuxi and Suzhou in Jiangsu Province, with their relatively abundant land and established manufacturing bases, quickly absorbed these downstream segments.
Throughout 2025, Shanghai landed a cumulative 4,463 major projects representing total investment exceeding 1.26 trillion yuan. Among them were marquee initiatives such as the Toyota Lexus Shanghai plant, Phase II of the C919 large aircraft program, and China Fusion Energy.
Industrial planning is not about digging a pit and waiting for a meteorite to fall into it. It is about achieving breakthroughs at critical nodes that trigger organic clustering. Shanghai no longer relies on blunt financial stimulus alone. Instead, it builds high-caliber industrial clusters, opens up core scenarios, and pursues continuous institutional innovation — creating an environment where companies can not only survive but lead in shaping global rules.
Across decades of industrial transformation, Shanghai’s competitive edge has always rested on decisive bets on the direction of industrial development, constantly converting industrial competitiveness into magnetic appeal for top talent.
Shanghai’s innovation and vitality are not concentrated in any single technology, any single product, or any single company. They are the sum of an open and inclusive posture, a soil that nurtures innovation, and a vision anchored in the global stage.
This is the portrait of an era surging through a city.
