As a matter of fact, when I visited Shanghai only 5 years ago, there were still many areas of Shanghai that still looked like this.
When the government set-out to transform Shanghai into the "New York City of China", they were faced with a dilemma; how to make the peaceful transition. So, since China is still a communistic country the people's homes actually belonged to the government, so in simple terms, the government could do whatever they wanted as it was their property. Fortunately the ruling party decided to compensate the "Owners" for their property before tearing it down to build the skyscrapers you see in today's skyline. But who are the "Owners". The original owner before the revolution, or the current occupants. Since it was difficult, nie impossible, to trace the original owners, the inhabitants were termed the "Owners" and compensated for their houses. Although this compensation was quite generous, it generally was not enough for the "owners" to buy even a 1 room apartment in the new building. But then again, most of the "owners" would not want to live in a "new, foreign city", so many decided to move to locations where they could continue the lifestyle they had come to know, which meant a move to a location outside the city. Thus the city has been a very modern and progressive city which is now the center for trade and commerce.
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