China's financial center Shanghai boasts the best business environment in the country, according to a report on China's urban business environment index jointly released by the China Strategic Culture Promotion Association, the China Economic Media Association, WANB Institute and YICAI Research Institute.

With an index of 86.73, Shanghai topped the list of Chinese cities with best business environment, followed by the capital city Beijing at 84.63, and then Shenzhen, in South China's Guangdong province, at 84.48.

The report evaluates Chinese cities according to five "soft environment" indexes — technological innovation, financing, talent, culture and life — and two "hard environment" indexes, natural resources and infrastructure.

The supply of high-end talent, government investment in culture and education, attractiveness for foreign investment and consumption scale are also indicators under consideration.

Shanghai has the highest infrastructure and cultural environment indexes, and the financial hub's talent, technological innovation and financing indexes are in the top three of the country.

Although Beijing's soft environment index ranked first among all Chinese cities, its hard environment index lagged behind due to restriction of natural resources such as air quality, climate and forest coverage rate, the report said.

With the best hard environment, South China's Shenzhen also leads on the country's technological innovation index.

After decades of industrialization, the average level of the hard environment in Chinese cities has improved, though space remains for the development of soft environments. These are key to a city's business environment, the report said.