Abstract: Shanghai is China's largest economic centre and port city with the spatial advantage for economic development.Ocean frontage, estuary location on the Changjiang River, extensive hinterland and bordering Huangpu Jiang as link best describe the spatial factors of Shanghai's geographical location.The aggregate effect of these spatial factors account for the locational superiority of Shanghai over other cities of China.Shanghai is located in the plain of the Changjiang Delta, contiguous to the Tai Hu (Lake) Basin, the heart of the Delta.It has long maintained close economic ties with other parts of the deltaic region.Before its designation as a treaty port in 1842, Shanghai was merely one of the towns of urban agglomeration in the Delta and acted as the outer harbour of Suzhou,At the turn of this century, Shanghai emerged as the largest city and economic centre of China, Statistics about the birth places of the inhabitants of Shanghai or their ancestors may demonstrate the economic ties between Shanghai and the above-mentioned areas,On the eve of liberation, inhabitants born in Jiangsu Province accounted for 39% of Shanghai's population,and those born in Zhejiang Province, 19%.Before liberation, capitalists of Jiangsu and Zhe-jiang Provinces either invested much of their capital in enterprises in Shanghai or divert a part of their capital earned in Shanghai to develop the economy of their home towns.It is evident that the capital and labour force exported from Jiangsu and Zhejiang Provinces have substantially contributed to the growth of Shanghai's economy.As the basic factor, the predominance of spatial location stimulates the economic development and urbanization of Shanghai, The urbanization progress has been developed rapidly since liberation,Before 1958,Shanghai was a solitary city without a regional urban system.The limited urban area was very much restricted for economic growth.In that year, ten neibouring counties of Jiangsu Province were incorporated into the municipality of Shanghai.Sinca then, an urban system with a hierarch of five levels has taken shape.Namely, the city proper, suburban industrial districts, outer-suburban satellite towns, county seats and towns directly under the counties, and state-farms.Before liberation, both Chinese and foreign capitalists endeavoured to make use of the spatial advantage of Shanghai to gain high profits.As a result of uncontrolled development, the spatial arrangement of central city was chaotic and crammed.Due to the aftermath of the long-standing urban policies, such as "construction first, livelihood second" and "consturction wherever there's a room", the overall congestion and spatial confusion have not been fundamentally relieved.Intensive space utilization of the central city is manifasted in the following aspects.1, overpopulation.2, overgrowth of industrial enterprises.3, shortage of per capita living space.In view of the fact that the coefficient of space utilization of the central city is too high and the use of urban space has already reached saturation, construction and renewal of the central city should be based on the policies of spatial decentralization of factories and population, readgusting the spatial distribution of enterprises, gradual increase of space to meet the needs of livelihood and production, amelioration of environment quality, and striving to reestablish a harmonic relationship between man and environment in the city.