A new site for the building of rockets, satellites and spaceships is being erected.
The base will also house a new space museum, which should open to the public in 2007.
The Shanghai Academy of Spaceflight Technology (SAST), which supplies parts for China's manned spacecraft, is constructing the building to house research and manufacturing units in the city.
The 80-hectare base will integrate research, experiment, manufacturing and logistics functions.
All astronautics research institutions and factories in Shanghai will be moved to the new base, according to an unnamed SAST official.
SAST will also restructure conditions at work to make sure everyone is as efficient as possible, the official said.
The new base will also take on some China-foreign cooperative aerospace projects assigned by SAST's boss China Aerospace Science and Technology Corporation, the official said.
SAST successfully made the propellant and communication systems of Shenzhou V, China's first manned spacecraft, which was launched in 2003.
One top job of SAST this year was to supply the propellant module, power supply and communication systems for China's next manned spacecraft, Shenzhou VI. These elements have already been finished and sent to Beijing for assembly.
SAST is also supplying parts for the Long March 2D rocket which will lift off for the second time this year to complete satellite launch tasks.
The construction of the base will be completed in two phases, the first due in 2007 and the second in 2010, according to the official.
The new base will also contain a space industry museum, which will open to the public in 2007 and cover three times the area of SAST's current museum.
The new museum will display parts of satellites, rockets and airships developed by SAST.
"We're thinking about showing as many models as possible to let citizens view them with their own eyes," the official said.
(China Daily April 18, 2005)