The incident is especially embarrassing at a time when China seeks to build Shanghai into a global business hub on par with the likes of London, New York and Hong Kong by 2020.
Yesterday afternoon, the Shanghai government issued its severest health warning as the city's pollution index ranged between 23 times and 31 times the levels recommended by international health officials.
In the first such advice since a new health warning system was launched in April, authorities urged residents to stay indoors and asked factories to either cut or halt production.
"I don't think it's fit for people to live in this kind of environment," said Shanghai resident Fan Jianjun, 34, who wore a face mask as he walked through the Lujiazui financial district.
"But I have no choice. I still need to work."