SHANGHAI, China — Nearly everywhere else in China, they make change by handing out grimy, tattered 1 yuan (12 cent) bank notes. Here, pockets jingle with gleaming new coins.

It's only one of the many ways that Shanghai's appearance-conscious city fathers distinguish their town — the once-and-future ''dragonhead'' of the Chinese economy — from the rest of the country.

Shanghai threw itself something of a coming-out party by playing host to President Clinton recently. And no other city in China better embodies the nation's huge ambitions than the one that keeps nearly a fifth of the world's construction cranes twirling overhead around the clock.

The metropolis of 15 million people is in the midst of a 10-year, $112 billion building boom that represents the largest urban makeover in history. It is relocating nearly a million residents to build roads, bridges, tunnels, subways, light-rail lines, industrial parks, factories, malls, hotels, museums, theaters and office towers. It is expanding its port, building an airport, constructing a beltway and making itself into a telecommunications hub where continental and intercontinental fiber-optic cables plug into each other.

Ten% of the world's construction is taking place in Shanghai, much of it in the Pudong district on the eastern bank of the Huangpu River. There, some of the world's highest buildings have been erected, and planners have essentially created a city out of what once was farmland.

''Shanghai is going to be another New York City,'' says Li Wuwei, an influential political figure and economist at the Shanghai Academy of Social Sciences.

The central government is determined to build Shanghai into China's showcase city, and the reasons are plain. It sits midway up the long Chinese coast, 25 miles from the mouth of the Yangtze River, which stretches from the Pacific Ocean to the country's impoverished heartland.

Shanghai is the key to unlocking the hinterland, allowing it to share in the two decades of growth enjoyed by the country's coastal provinces. The Three Gorges Dam project will allow ocean-going ships to move from the sea to Chongqing, 1,000 miles inland, making Shanghai the financial, commercial and industrial gateway to an economic zone that runs along the Yangtze Valley and is home to nearly 200 million people.

Shanghai provides the Chinese government with almost one-ninth of its revenue and accounts for 8% of China's economic output. The city and surrounding Jiangsu province are China's richest and most productive by far.

Shanghai's potential as both consumer market and production and transport hub has drawn General Motors, Sony, Intel and scores of other big investors. Air traffic is projected to soar from 11 million passengers in 1994 to 33 million in 2005, prompting the decision to build a new Pudong airport that will be five times larger than the current facility.

Physically, Shanghai bears little resemblance to any other Chinese city. Beijing is built on a traffic grid and is an architectural wasteland crammed with dreary gray, Soviet-style monoliths, formless apartment blocks, and kitschy, pagoda-topped hotels and offices.

In Shanghai, Pudong's skyscrapers stare westward at the elegant, old stone banks and trading houses that line the Bund, the waterfront promenade that helped give the city its reputation as the ''Paris of the East'' in the 1920s and '30s. Twisting boulevards are dotted with stunning colonial structures built by the French, British, Germans and Americans.

Both Chinese President Jiang Zemin and Premier Zhu Rongji served as mayor and Communist Party secretary in Shanghai.

And both retain a keen interest in what goes on there. In fact, jealous bureaucrats from other parts of the country grumble about the ''Shanghai clique'' that runs China, often singling out its hometown for special treatment.

But all the development has come at a high price. The building binge has led to staggering environmental degradation and left enough surplus office space for at least the next five years. There has been so much building, in fact, that the city is sinking — by about 0.4 inches a year — from the weight of all the new structures and the excessive use of underground water.

Under Zhu and current Mayor Xu Kuangdi, Shanghai has moved to cut the bureaucratic red tape that continues to keep business bottled up elsewhere in China. As a result, the city has attracted modern facilities and high-tech investment. Its industrial parks are home to biochemical and micro-electronics companies. Its consumers have access to electronic banking and debit-card purchasing.

''In Beijing, you can have great discussions about the arts, economics, politics, reform, but nobody does anything,'' says William Brent, a Shanghai-based American who publishes on-line newsletters about China's entertainment industries. ''Here, if you can get anybody to discuss it, it's a city where you can get things done.''

After Communist rule began in 1949, Shanghai's history of embracing outside influences made it the scene of some of China's most vicious political purges. Similarly, intellectuals and ''rightists'' there suffered greatly during Mao's Cultural Revolution that began in 1966.

That could explain why Shanghai's current renaissance is almost purely a commercial one. Despite the construction of an impressive museum and the opening in August of a performing arts center, there seems to be little interest in turning Shanghai back into the cultural mecca that made it a magnet for tycoons, bankers, traders, mobsters, writers, starlets and cabaret singers that it was during the Jazz Age.

''People are interested mainly in making a buck — now,'' Brent says.

In many respects, Shanghai has led the way in economic reform. It strengthened state firms by allowing them to try a mix of private and government ownership. And it claims to have built a safety net — of jobless benefits, worker retraining and placement, pensions and health care insurance — for 96% of its workers.

But even fast-growing Shanghai can't absorb all the workers who are losing their jobs as the state sector slims down. Li estimates the city has 210,000 ''off-post'' workers — those who have been sent home and are collecting a fraction of their old pay.

''Pollution and traffic are big problems,'' Li says. ''But we have to find these people jobs, or they pose a risk to social stability and jeopardize our future.''