And if there's no CCP, the KMT can do the same thing
So basically a repeat of the Shanghai campaign in the Northern Expedition? Worth also mentioning, whether or not it was the clandestine CCP involved (I'd say it's a mix of both that and GMD true-believers), that the GMD was also not above basically harassing Shanghai's merchants, in some ways similar to what would later happen in the early years of the PRC and in other ways similar to the Triads. (To use an old colloquialism, whenever CKS and the GMD had their eyes on the city, Shanghai basically got shanghaied.) I would not be surprised that if the GMD were to recapture Shanghai something similar would also happen if the GMD felt like it would help ridding Shanghai of "foreign" influence (and thus prevent it from becoming another Hong Kong).
What could lead to the International Settlement never being relinquished? Or would WWII have made that impossible?
WWII made it impossible because the Japanese extinguished all but the Vichy French concession, then handed it all over to Wang Jingwei's regime. That means a pre-WWII POD is needed, and in this case even the OTL International Settlement is a problem because it does not cover the whole of pre-1949 Shanghai City. A GMD-era POD thus doesn't work; Shanghai outside the concessions was chaotic even in the interwar period, and thus to tame Shanghai one would need to go for the warlord period (for obvious reasons pre-Northern Expedition), in which case a PRC-supporting US could come to an agreement similar to what I outlined in my first post in this thread (say, subject to a huge indemnity, disguised as economic aid, to China from the US, for example). Your best bet would be a Ch'ing-era POD, using the modern 1950s-esque boundaries, and thus having an International Settlement that is truly international - both Chinese and non-Chinese. Which would make for an interesting situation when during the 1911-1924 period the only areas of Qing control would be within the Forbidden City (at least the inner areas) and its interests in *Shanghai. Once the Great Qing's interests in Shanghai are abolished following Puyi's expulsion from the Forbidden City, a new agreement could be made that could secure some place for Shanghai; similar to what would eventually be the case for Macau, the Shanghai International Settlement - which, it should be repeated, in this case includes both Shanghai City and surrounding rural areas) could thus be reclassified as a Chinese territory (or, in other words, an
SAR) under international administration. This would mean that eventually it would have to be relinquished back to China, but not not quite yet (when the time is right). One thing eventually leads to another, and eventually - along with HK and Macau - Shanghai eventually reverts back to China in the 1990s. Essentially, no matter how you look at it, Shanghai will still revert to Chinese sovereignty in some form, even if indirect.