Abstract Globalization, rather than being a definite outcome, is a political discourse embedded in a complicated process. The perception of the coming global era casts a shadow on economies that are under market transition. Shanghai, the largest city in China, provides a vivid case for understanding local responses to globalization. The city has seen unprecedented growth in foreign investment and foreign trade since the adoption of the open door policy in 1978. The key argument of this article is that the influence of globalization does not lie in the quantity of foreign investment but in the catalytic effect brought about by foreign investment and foreign trade.