The thesis concentrated on studying Shanghai¡¦s transformation of industrial and business environment since 1990. Here, the researcher used China's entry into the WTO as the demarcation in this research. Moreover, the research reviewed major policies and foreign investors¡¦ arrangements in Shanghai, and then applied the ¡§PEST¡¨ model to foreigners¡¦ commentaries about Shanghai business environment. By casting correlative data, the researcher found that ¡§human governing¡¨ in bureaucracy, a risk would not be estimated, probably played the most important role in foreign investment environment. According to this finding, the researcher argued that the innovation would help the investors to decrease the risk.