Shanghai is rising as a key shared service center because the city hosts a strong financial industry and has a high concentration of national and international company headquarters located here, an industry report said Tuesday.

"Shanghai has a number of important advantages in attracting shared service centers," said Nigel Knight, an Ernst & Young managing partner.

He cited the city's advantages of having a cluster of foreign companies which have set up their regional headquarters here, a large pool of talent, a mature and supportive business environment.

"More specifically, as Shanghai seeks to position itself as a leading world financial centre, it has been able to attract a number of financial companies to setup back-office operating centers," Knight said.

The financial industry now leads the next wave in the development of shared service center to take on increasingly more complex tasks and functions.

A shared service center fits enterprises which are large, has multiple business units across different regions or countries or companies with relatively standardized processes, large transaction volumes and possess well developed information infrastructure. "The financial industry is the one that best fits the characteristics (of a shared service center) and it is therefore no surprise that it accounts for over half of all SSC development in China currently," Knight said.

An Ernest & Young study showed that 68 percent of share service centers with annual revenue exceeding 5 million yuan (US$765,697) are domestically invested.