The emergence of Shanghai's role as entrepôt centre since the mid‐1980s

Shanghai's new role as an entrepôt centre has emerged since the mid‐1980s when the central procurement system of export products was abolished. Along with Shanghai's investment, labour intensive industries have been shifted from Shanghai to its inland provinces. Consequently, the commodity composition of re‐exports has been rapidly changed from agricultural products to manufactured products. Meanwhile, the suppliers became much more concentrated in its immediately neighbouring provinces of Jiangsu and Zhejiang. However, the changing in the commodity composition is not due to the rise in the heterogeneity which would increase the need of the services of middlemen in entrepôt as suggested by the theory which was developed by Yunwing Sung. In the absence of a well‐functioning market mechanism, Shanghai's re‐exports became increasingly depending on the products manufactured in Shanghai's FTCs (Foreign Trade Companies)’ joint ventures invested in other provinces, while its comparative advantage in trade as a middlemen has not been fully utilized since then.