Shanghai has a long history of being the nation's leader in foreign trade. During the isolationist period of Mao's China, most of the nation's limited trade with foreign countries was conducted through Shanghai. Foreign investment in Shanghai is and has been greatly affected by the changing policies of the Central Government and is, die to the preferential policies, characterized by especially high levels of foreign investment by large multinationals as well as a large number of foreign funded financial institutions that have been set up in the city.
Before implementing more favorable investment policies in the Pudong New Area and other development zones, Shanghai was approved as one of the 14 "coastal open cities" which offer certain incentives sanctioned by the Central Government. The establishment of the Pudong New Area and other development zones saw some further preferential policies being introduced, including reduced tax rates for various kinds of foreign investment enterprises, determined on the basis of the nature of the enterprises or their specific location within the administrative jurisdiction of Shanghai. Thus, a range of incentives, which are sanctioned or provided both by national laws and Shanghai local regulations, is available in Shanghai and its surrounding areas.