Research Paper- Many observers, business people and in particular investors see labor cost developments in China as one of the main challenges for their Chinese subsidiaries. Especially in the East-coast region around Shanghai, labor cost has risen significantly within the last decade. For investors having subsidiaries in this region, the outlook on labor market might not look much brighter than it used to. Nevertheless, this development results from the impressive shift China has made in such a short period of time. China is now undergoing one of the most massive urbanizations in human history, which becomes nowhere more evident than in Shanghai.