Over recent decades, many of the world’s largest multinational businesses have set up operations in Shanghai. Central among this group are those from Germany.

Indeed, German companies began establishing themselves in Shanghai as early as the late 19th century. Now, 37 years after the start of China’s reform and opening up era, many of Germany’s largest and most successful companies have set up regional offices in the city.

In the past, Shanghai’s geographic location was the main attraction for foreign enterprises that sought to expand their business activities in China. Located at a tributary of the Yangtze River, Shanghai is a convenient staging point for both inland and outbound transport.

Electronics and heavy-equipment conglomerate Siemens was among the earliest German companies to set up shop in Shanghai. Its positive experience here reflects on the city’s unique character. The company’s first order in China came in 1879, when the local government purchased a ten-horsepower steam engine with a generator to light the port of Shanghai.

In 1904, Siemens established its first permanent representative office in China in the city, marking a major milestone in the company’s engagement with China.

But for Siemens, Shanghai’s uniqueness goes beyond its economic strength.

According to statements from Siemens China, Shanghai’s favorable investment and policy environment, as well as its abundance of domestic and overseas talent, have contributed much to the city’s economic development.

Shanghai is a key market for Siemens in China. The company’s east China regional headquarters is located in the city. What’s more, Shanghai plays host to more than 20 of the company’s business units as well as multiple R&D centers.

Meanwhile, German specialty chemical company LANXESS believes the city’s openness and relatively free business environment have done much to lure investors from Germany.

“Shanghai has developed into a cosmopolitan city, with efficient infrastructure, a dynamic business environment, highly professional support from the government, and a large international business community,” said Ming Cheng Chien, CEO of LANXESS China.

“In addition, with its openness and acceptance of different cultures, the city attracts a large talent pool of local employment candidates as well as great talent from around the world.”

Shanghai’s development is further backed by the China (Shanghai) Pilot Free Trade Zone, established in 2013. LANXESS has already registered in the zone, which is offering various administrative and financial benefits for foreign multi-nationals.

“We appreciate the efforts Shanghai has made to continue driving the country’s economic growth. LANXESS has confidence in the Chinese market and is committed to further investment here,” said Chien.

LANXESS has its China headquarters in Shanghai and operates a number of plants in the area, including an inorganic pigments plant in Jinshan District.

In the automotive industry, tire-maker Continental is also attracted to the advantages Shanghai is able to offer. The company established its first joint venture some 20 years ago in the Chinese mainland with Shanghai Automotive Brake Systems Co.

“Shanghai is a large metropolis and one of the most historically significant cities in China. Continental chose to set up its regional headquarters here because of its innovative spirit, high-efficiency government, easy access to talent, convenient transport and high quality-of-life,” according to statements from the company.

Continental has its regional headquarters on Dalian Road, near several other multinational businesses.

“Shanghai has a transport network leading to other parts of the country. The railways, highways, ports and airports of Shanghai connect it with different countries and regions,” according to the company. “Shanghai’s local public transport system around Dalian Road is also quiet convenient. Metro Line 4 and the Dalian Road Tunnel provide an easy commute for our employees, customers, business partners and other stakeholders. The new Metro Line 12 enhances the convenience of transportation here.” In 2014, the Shanghai government announced that it would accelerate work on building a technology innovation center with global influence. The government has already published a series of measures aimed at supporting such plans.

These measures aim to offer an innovative approach to institutional reforms in a variety of fields and areas — including science, education, fiscal policy and taxation. Specifically, authorities hope these measures will pave the way toward a more “start-up friendly environment” for young companies as well as new investment options for domestic businesses.

“Shanghai is an ideal city for research and development activities due to its sound regulatory environment, outstanding talent resources and its closeness to real market needs. Its vitality and inclusiveness make Shanghai an ideal destination to develop cutting-edge technologies,” according to Siemens China.

During its 2014 fiscal year, Siemens had an R&D workforce of about 4,500 people in China. The company says it continues to attract partners and customers in Shanghai through continued investment in its R&D capabilities in the city.

Continental, for its part, has capitalized on Shanghai’s abundant intellectual resources when it comes to boosting innovation. These include resources offered from well-known colleges and universities, such as Fudan University, Jiao Tong University and Tongji University.

Also with its regional headquarters in Shanghai, German chemical giant BASF is also stepping up efforts to boost innovation.

In late July, the company broke ground on the second phase of its Innovation Campus Asia Pacific in the Pudong New Area. The 90 million euro (US$100 million) expansion project includes an R&D center and auxiliary facilities. The project is scheduled for completion by the end of the year.

“By 2020, around 25 percent of BASF’s R&D employees will be located in the Asia Pacific. The expansion reinforces BASF’s commitment to globalizing its R&D activities and capturing growth opportunities in China and the Asia Pacific,” said Andreas Kreimeyer, member of the Board of Executive Directors of BASF SE and research executive director.

The Innovation Campus is BASF’s most important R&D center in the region and is expected to become one of its largest R&D sites outside of Germany. With the expansion, BASF’s regional research capabilities will be further strengthened, focusing primarily on advanced materials and systems as well as new areas like the automotive, construction, health and nutrition, home and personal care industries.

“The Innovation Campus Asia Pacific in Shanghai has proven to be an effective platform that not only responds quickly to market needs in China and the Asia Pacific, but also connects BASF with the science community across the Asia Pacific. The enthusiasm for innovation among our colleagues, customers and partners is the cornerstone of a sustainable future in the region,” said Martin Brudermüller, vice chairman of the Board of Executive Directors of BASF SE, responsible for Asia Pacific.