Shanghai stands at the epicentre of China’s extraordinary economic development. China has experienced double figure growth over the last decade: the Chinese economy has quadrupled since 1978 and is set to become the world’s largest economy by 2020. Shanghai has consistently outperformed this growth rate, standing at 19% in 2003.

As China’s commercial hub, Shanghai exerts a magnetic attraction on foreign investment. International firms have attracted a pool of skilled ex-patriot workers, creating a demand for high quality property and serviced apartments. At the same time, the economic success has poured money into Shanghai and the local market for property has changed to reflect this greater wealth.

In 2004, the Shanghai government invested 20 billion Yuan in the improvement of road and subway systems, which will influence the development of the price and functional configuration of real estate in the future.

Shanghai will host events from the Olympic games in 2008, and the World Expo in 2010. Such events continue to raise the city’s profile and draw further investment. All of which further contributes to future growth and demand for property.

As China becomes and ever greater international powerhouse, Shanghai will continue to grow in importance as a global financial centre. This means that the local economy and real estate market have many years of growth driven by strong economic fundamentals ahead.

Since 1998, and the Asian Financial crisis, the Yuan has been pegged to the dollar, trading in a narrow band at around 8.3 Yuan to the dollar. The falling dollar has left the Yuan seriously undervalued – which has kept Chinese exports artificially cheap: the Yuan is now undervalued by between 15 and 40 per cent.

This undervaluation is perceived by the US and EU governments to be giving China an unfair trading advantage. Pressure from China’s international trading partners means that a revaluation, in some guise, is inevitable

Afraid of inflation, Beijing also acknowledges a strong internal impetus to revalue the Yuan. According to economic forecasts by leading investment banks, there is an 85% chance that the Yuan will increase in value to a significant degree by the end of the year.

For foreign investors, the undervalued Yuan creates a window of opportunity. On revaluation, the value of property will increase overnight, without any decrease in demand (demand is primarily driven locally rather than by international speculators). The undervalued Yuan therefore gives international investors a unique opportunity to enter this market at artificially low rates.

Shanghai’s explosive growth has guaranteed the city status as one of China's most attractive property markets. Between 2003 and 2004 apartments in some districts of Shanghai increased in value by 120 percent: the Shanghai Municipality Statistics Bureau calculates that across the city, the price of real estate increased by 20.4 percent in 2004, and has already jumped again by 19.1 percent in the first quarter of 2005. Despite such price rises, Shanghai real estate remains extremely cheap by international standards and the strong economic fundamentals are set to push prices ever higher for some years to come.

The residential area per person in urban areas of Shanghai is 13.1 square metres compared with the residential area per person of 35 square meters in developed nations so the potential demand for property is significant. In addition, hotel space in Shanghai is at a premium, with close to zero room availability at some times during the year.

Afraid of inflation, Beijing also acknowledges a strong internal impetus to revalue the Yuan. According to economic forecasts by leading investment banks, there is an 85% chance that the Yuan will increase in value to a significant degree by the end of the year.

In international terms the Shanghai market is new and foreign ownerships rates are still under 5%. Increasing international demand will provide further stimulus to the market. International demand has been prompted since the Chinese government strengthened laws protecting private property in 2004. Additionally, the local government has tightened up the procedure of granting approval to property developers. These measures are designed to make the real estate market safer for property investors.

Importantly the Chinese government has also made sensible moves to prevent overheating of the market an facilitate stable long term growth. Such measures have included slight rises in loan interest rates.

Shanghai’s status as the centre for economic growth in China is absolutely established and the city confidently looks forward to status as an international metropolis. Growth in Asia has created room for a financial centre to rival Hong Kong; Shanghai is perfectly placed to grow into this role.

By joining the WTO, China has signaled a willingness to engage with the international community. WTO membership is just one point of progress that provides greater guarantees for international investors. The Chinese Government recognises that foreign investment is the best way to bring wealth and economic growth to China, and has worked to develop investment conditions that welcome investors and ease the repatriation of wealth.

Shanghai has always been open to international trade, but the level of internationalisation in the city is progressing apace. The city already has 32 foreign schools and 34,000 foreign companies.

Demand for rental property is ensured by strong local demand combined with massive demand for hotels and serviced apartments due to the constant rounds of international trade fairs and expos held in Shanghai. Between June and December 2005, 3 international trade fairs will be held in Shanghai each week. The number and frequency of such events are set to increase.

The economic strength of Shanghai, coupled with the deliberate development of the city as the economic centre of China, ensures that the city’s potential is founded on strong fundamentals. China is on-course to become the largest economy in the world: Shanghai is placed at the centre of this growth; Shanghai has a sparkling future which will be reflected in the property market.