Transit visas are for persons who are staying for a short period while in transit between two other countries.  You must have residency in the destination country or have a valid visa for it.  The fee appears to be the same as for a tourist visa, so check whether you might as well get a tourist visa instead. 

Some airports do not have an international transfer area and you might have to collect your baggage and exit into the main area so you would expect to need a visa.  However, in some instances the airport immigration officials will issue you with a 24 hour 'Stay Permit'.  When you make bookings that look like you will not be checked straight through to your final destination you are advised to ask the airline or the agent, or contact a visa issuing consulate to check if a transit visa is required. See also Airline Regulations

Visa Free Transit
1. No visa is required for foreigners who hold air tickets to the final destination and have booked seats on international airlines flying directly through China, and will stay in a transit city for less than 24 hours and do not leave the airport.

2. Visas are not required for passport holders of the following 30 countries, who transit through Pudong Airport or Hongqiao Airport or seaports of Shanghai, provided they hold valid passports, visas and tickets to the final destination and have booked seats, and stay in Shanghai for less than 48 hours (going out of the airport is allowed): Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, New Zealand, Norway, Poland, Portugal, Republic of Korea, Slovakia, Slovenia, Spain, Sweden, Switzerland and USA.

Requirements
1. Applicant's valid passport must have at least six months of remaining validity with at least one blank visa page in it.
2. One truly completed Visa Application Form (Form V2011A). If someone else travelling with you shares the same passport, or if you are applying for a visa in a country or territory other than the country of your current nationality, you should fill out the Supplementary Visa Application Form (Form V2011B) 
3. One color passport standard photo (2X2 square inch) is glued or stapled on the application form.
4. A valid visa to the country of destination
5. An air ticket showing transit through China / airline ticket to the final destination

How to Apply
1. You can personally submit the application to the visa office of the Chinese Embassies, Consulates and other Chinese diplomatic missions which hold consular jurisdiction over your residence.
2. Or you can entrust someone else, a travel agency or a visa agency to act on your behalf if you can't come in person. Power of attorney is not required.
3. Mailed applications are not accepted by most of Chinese embassies or consulates in overseas.
4. No appointment is required.

Processing Time
1. The regular processing time is 4 working days
2. Express Service: 2-3 working days processing; US$ 20 will be charged per visa.
3. Rush Service: 1 working day processing; US$ 30 will be charged per visa.

Visa Fees
The visa fees are subject to your nationality and the number of entries. Please see the below fee table about applying for a transit visa in USA: