EARLIER this month, two influential art curators threw a memorable party in Shanghai. The hosts—Linyao Kiki Liu, director of Si Shang Art Museum in Beijing, and Klaus Biesenbach, head of MoMA PS1, a well-known space affiliated with the Museum of Modern Art in New York—picked an unusual venue for the revelries: a renovated underground bomb shelter. Dark and smoky, it is unapologetic in its cursory approach to decor. Though it is usually a sanctum for the kind of Shanghai clubber for whom expensive booths for playing dice are a waste of dance floor, that night it was filled mostly with an out-of-town crowd that had flown in to celebrate two concurrent art fairs, as well as the return of the city’s biennale. Shanghai, hip and hopping, seemed determined to present itself as a new centre of the art world.

Chinese contemporary art was actually born in Beijing. In 1979, soon after the country began rolling out Deng Xiaoping’s economic reforms, a small group of artists mounted an unofficial exhibition on the park railings directly opposite the National Art Museum of China. The show lasted just two days before being shut down, but the seed for China’s grass roots arts movement and spirit of collectivism was sown. A decade later, a few collectors were buying Chinese art. By the early 2000s the 798 arts district in the north-east of the city was becoming a vital destination for international dealers and curators. Now Shanghai is competing with Beijing to become China’s cultural capital.

Shanghai’s initial embrace of art was restrained. Beginning in the early 2000s, a few local galleries supported a scattering of artists. There were no more than a handful of museums. The prospect of hosting Expo 2010 helped motivate Shanghai’s local government to encourage property developers to launch an ambitious urban-regeneration programme that would reframe the city as a cultural hub. At the heart of this renewal was West Bund, a 9.4km tract of Shanghai riverside, whose old industrial buildings and former airport were to be repurposed under the manifesto “Culture First, Industry Oriented”.

The same year that Expo 2010 opened, the central government announced that it would build 3,500 new museums across the country within five years. It exceeded that figure three years early, in 2012. The call to action stimulated property developers to tag museums on to many of their projects in return for tax benefits and to curry favour with local authorities. West Bund was one of the most important beneficiaries of this policy.

In 2014 two landmark contemporary-art museums opened there. The Long Museum was the second outpost for the city’s most prominent collectors, Liu Yiqian and his wife, Wang Wei. (The couple recently turned heads when they spent $170.4m at auction for a famous nude by Amedeo Modigliani, an Italian modernist.) Later in 2014 Budi Tek, a Chinese-Indonesian collector, launched his similarly large-scale Yuz Museum farther along the river. The same year also saw the introduction of Le Freeport West Bund, a bonded warehouse built to help the tax-free import, export and storage of artworks. It allows collectors to sidestep the 17% value-added tax imposed on art and the customs duty on works brought into the country. A game-changer for freeing up the movement of artworks, it is a prime example of the city’s market-friendliness. Next year, two new museums will open in the district.

Over the past fortnight, Shanghai has attracted international art enthusiasts as never before. The smaller and more refined of the two art fairs was West Bund Art & Design. Its larger and only slightly longer-standing counterpart, ART021, took place in the grand, neoclassical Shanghai Exhibition Centre. Dwarfing both fairs is the Shanghai Biennale. Now in its 11th incarnation, it comprises a five-month-long exhibition and programme of performances and lectures.

The influx of collectors triggered by this triptych of events presented an important opportunity for galleries to hold exhibitions, unveil new spaces and host lavish soirées. Much of the activity took place in the newest art facilities—West Bund and the Power Station of Art (pictured).

All the glamour, though, cannot mask the concern felt by some artists and gallerists in Shanghai. Does projecting the city as such a high-end, resolutely outward-looking hub risk endangering some of other important corners of the city? In contemporary China there is little room for sentiment. Rapid gentrification is already forcing many small businesses to pull down the shutters, especially the humbler ventures that have long lent the city its richness—the family-run noodle joints, the bicycle-repair shops, and indeed, the venue of this month’s big art party, Shelter, which is due to close at the end of this year after the Culture Bureau refused to renew its lease.

This upgrading of the city is already affecting the arts sector. Rising rents—a direct outcome of urban redevelopment—have made the production of art in Shanghai difficult, forcing artists to the city’s fringes, and beyond. It risks crushing the kind of grass roots, artist-led initiatives on which so much of China’s contemporary art was founded. The shift also affects galleries. Three of the city’s most important names—MadeIn Gallery, Aike Dellarco and ShanghART—have relocated this year from Shanghai’s original art hub, M50, to West Bund. Their departure will mean fewer visitors to M50’s remaining lower-tier, entry-level galleries for whom a move to West Bund is out of the question. If M50 stumbles, that may affect new artists seeking representation in the city and younger, would-be collectors who want more affordable art than that shown at West Bund.

The cultural transformation of Shanghai has been astonishing. But it risks threatening the kind of complex, nuanced and sustainable engagement that a lively arts sector needs. If local government can encourage affordable spaces for young artists and help promote a climate in which artists and art professionals can thrive, then this most dynamic of cities might truly have it all.