Shanghai Rising

China struggles to build a livable city inside a world-class business capital

by Frederik Balfour

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Benjamin Wood swings his bulky frame over the saddle, straps on his helmet, and settles onto a vintage motorcycle with sidecar. The American architect kicks the engine into life with a single thrust and pulls into the rush-hour traffic coursing through Shanghai's trendy Xintiandi district. He soon steers down a narrow street and enters another world. While Xintiandi is all luxury shops and outdoor cafés, in surrounding neighborhoods the sidewalks are full of people playing mah-jongg in their pajamas, washing dishes at outdoor taps, or popping dumplings into bubbling oil. Life goes on much as it has for the past half-century.

As the bike gathers speed, Wood's white silk jacket flaps in the wind. Passing between some of the fast-disappearing courtyard houses of Shanghai, he waves at locals making dinner. "They know me pretty well in this neighborhood, because I like to ride through here a lot," he says, raising his voice to be heard over the growling motor. "What they don't know," he adds with a hint of regret, "is that I'm also the guy who is going to make this way of life disappear."

Although few might recognize Wood, virtually anyone who has spent more than a day or two in Shanghai will know Xintiandi. The rebuilt neighborhood is Wood's first and best-known work in China, a collage of cobblestone streets, narrow alleyways, and graceful tiled roofs. Xintiandi, which translates as "New Heaven and Earth," has become one of Shanghai's top tourist destinations. Foreigners love it because it evokes the colonial era and is one of the few neighborhoods to escape the wrecker's ball, while locals are drawn to the bistros, bars, and boutiques that lend it a Western cachet.

Wood's work at Xintiandi has become a symbol of the changing aspirations China has for Shanghai. In 1992, Deng Xiaoping declared that Shanghai would be "the head of the dragon" pulling the country into the future, and the Chinese have poured tens of billions of dollars into rebuilding the city after a half-century of neglect. The pace has slackened after a a scandal over municipal pension money spent on questionable real estate deals, but the city is still booming.

Problem is, Shanghai has long preferred megaprojects that blindly ape the kind of high-rise developments that scream "modernity" but have little to do with traditional Chinese culture. Until Ben Wood, that is. Xintiandi represents Wood's signature style: Instead of calling in the bulldozers, he imagines a rundown neighborhood as something refreshed. He refurbishes old buildings, saves the facades of others while gutting their interiors, and designs new structures that blend in.

That graceful melding of old and new fits Shanghai's ambitions as it steams toward its third decade of hypergrowth. Like Renaissance Florence, London in the 1800s, or New York early in the 20th century, Shanghai aims to muscle its way into a top spot in the global economic order—a role it played back in the 1920s. Today, Shanghai is the mainland's most populous city, with 18 million residents. It's home to the Asia headquarters of more than 150 global corporations, including General Motors (GM), IBM (IBM), and Alcatel-Lucent (ALU). And multinationals are boosting their commitment. GM today employs some 1,800 white-collar workers in the city, 60% more than in 2004, while Citibank now has 2,000 employees there, up from 80 in 1999. "Shanghai has very visible ambitions to be a major financial center in the region and perhaps beyond," says Richard Stanley, CEO of Citigroup China.

Expatriates love Shanghai's nightlife, while skilled young Chinese and migrant laborers have rushed to cash in on the city's surging economy. Shanghai is growing at 12%—even faster than the 10.7% expansion that China as a whole saw in 2006—and the city's gross domestic product was $136 billion last year. That's less than half of London's, but Shanghai's growth is three times as fast the British capital's.