Shanghai will continue to host the Masters Cup until 2008 despite last year's withdrawal of top players.
Nalbandian ended Federer's two-year Masters Cup reign last year
Lleyton Hewitt, Andy Roddick and Marat Safin all missed the event in November while Rafael Nadal and Andre Agassi were forced to retire with injuries.
But tournament boss Brad Drewett said: "I am confident the Masters Cup will continue to play a significant role in the development of tennis in China."
David Nalbandian beat world number one Roger Federer to win last year's event.
International Tennis Federation president Francesco Ricci Bitti said: "It is very good news for tennis in China, that the Masters Cup will remain in Shanghai.
"There will be many milestones for tennis in China over the next few years with the Olympic tennis event in Beijing and three more outstanding editions of the tournament season-ending championships in Shanghai."
Shanghai will join New York, Frankfurt and Hannover in hosting one of the versions of the year-end championship four or more times.