The caveat here is that you have to study from books if you're not in the right place, if a significant part of your learning is from interaction, your location can matter as vocabulary can change entirely (in some instances) from region to region.

I noticed that many of the words for items in Taiwan are not recognized here in Shanghai, and Shanghaiese infuse Mandarin with a lot of their own Shanghaiese words so... yeah.

Some American buddies of mine studying in Beijing complained that people in Shanghai couldn't understand them whereas people in Beijing had no problem, goes to show that Mandarin is not just a tad different in different spots, in varies widely.

If you want real models for your spoken Chinese, it is at least a little bit better to set yourself up in a city that was properly "Sinofied" like Anhui, Xi'an, Beijing and others as they speak Beijingese "official" mandarin.

Surely it does matter! I think that the language environment is the most important thing everyone should consider, i.e. learning Chinese in a city where Putonghua Mandarin is spoken on the streets as a better and quicker way to learn Chinese. Harbin is very famous for its standard Mandarin pronunciation. I studied in Harbin Mandarin school last summer and quite well satisfied with both teaching and accommodations there. I really have no hesitation in recommending this school and in recommending Harbin. Their website address is http://www.1to1mandarinworkshop.com/

Hello everyone! I can recommend one school in the center of the city.

School Get in2 China is located in the heart of Beijing.
Near subway stations YongHeGong, DongZhiMen, BeiXinQiao. All training and office space located in a cozy courtyard, decorated in traditional Chinese style (District DongZhiMen), the very atmosphere which promotes the study of Chinese language and culture of China. All teachers are professionals who have degrees in education "Chinese as a Foreign Language" and years of experience with foreign students. School Get in2 China is unique and attractive in that it can provide its students with training in both Chinese and foreign companies in Beijing during the training. Minimum period of training - 1 month.

Over the past few years School Get in2 China hosted and produced more than a thousand students from 40 different countries. Many former students of the School Get in2 China recommend it to friends as a great place to study Chinese language. Quality Control System School Get in2 China covers the external and internal monitoring of the level of professionalism of teachers, quality of training, teaching aids and materials, cultural activities, training and housing. Employees of School of Chinese companies Get in2 China is always ready to answer all questions and wishes the students to make the time spent for studies in schools, it was a pleasant and productive. While attending school organizes trips for sightseeing and cultural activities, such as Beijing Opera, Acrobatic Show, Beijing Zoo, etc., as well as travel to cities in China.

Educational Programs:

1. Basic course.
The program involves 10 hours per week of Chinese language in small groups of 5 to 8 people. Suitable for those who wish to receive only a "superficial" knowledge of Chinese language, giving more time to travel and travel around the country, cultural events, etc.

2. Intensive course.
The program involves 20 hours per week of Chinese language in small groups of 3 to 5 persons. Designed for people who want to get “deeper” into language and culture, or have some future plans about China or who really enjoy studying languages and at the same time would like to enjoy different social activities, parties, travelling etc.
Participants join a small group of 3-5 people and have 20 hours per week of Chinese. All study materials are issued and approved by BLCU, Beijing (Peking).

3. Education + Training Course
The program combines Chinese course (2 or 4 hours a day) and work in a dynamic business environment (earnings 1500 - 6000 Yuan). We offer paid internships in marketing, sales, public relations, real estate, media, design, law, and so on. This is an excellent opportunity to gain experience in the Chinese or foreign company in Beijing. Such training can not only immerse themselves in cultural, but also the business environment in China, to learn about all the complexities of doing business in China, which could prove very useful in the future.

Accommodation:
1. Private room in shared apartment.
Apartments are 1 -, 2 - or 3-room apartments, fully furnished, with a standard set of kitchen utensils, TV, DVD and wireless Internet access. When you check in Multi-bedroom each student is given a separate room. Bathroom, living room and kitchen are common to all living in the apartments.

2. Living with Chinese family
Private room, all the necessary items, at least 2 meals a day - all this is expected when staying in the family. In all families have a standard set of amenities, bath / shower rooms (often a separate shower for guests), kitchen, dining area, TV, DVD, internet, telephone and so on.

School contacts:

Tel: +86 10 64034923
email: info@getin2china.com

Their website address is http://www.getin2china.com/LanguagePrg.aspx

Location is very important, but the most important is your personal desire to learn chinese and be able to speak!

If you think about coming to China to learn Chinese you can try Hutong School. The first branch of Hutong School was opened in Beijing, first, in the area close to Gulou and second, in the CBD, in Sanlitun. Now Hutong School is expanding now has strated to accept applications from those who would like to take Chinese classes in Shanghai!

Please for more details go to Hutong School's website: http://www.hutong-school.com/
To get information about learning Chinese: http://www.hutong-school.com/learn-chinese-in-china
If you are interested in the internship offers, check out this page: http://www.hutong-school.com/internship-in-china

It's a bit of a cop out to say but I believe learning Mandarin in Shanghai is way more difficult than elsewhere in China. You need serious motivation: it is very easy to manage with just basic phrases and many locals will speak Shanghainese to each other as a matter of course, and particularly to exclude outsiders. If you are planning to learn by immersion then you really need to proactively "immerse" yourself. I've heard from many people that Beijing is way better for learning - the accent is clearer, you will hear it everywhere you go and fewer people speak English. I'd say if speaking Chinese is your goal then Beijing is your best bet.

Anyway, that's my twopenceworth. Good luck.

The Shanghai accent is most definitely difficult to understand. I wouldn't say, though, that it is Shanghainese that gets in the way of foreign immersion; I would argue that the reason it's so easy to get by in Shanghai without conversational Chinese is the large amount of foreigners living here. Beijing, too, has a large population of foreigners, but in my mind there is a larger portion of students immersing themselves in the Chinese language in Beijing. Shanghai is more of a businessman's town, where all the comforts for expats are easily available. The smaller the city and the less foreigners the better, if you're looking to really get into a Mandarin based lifestyle.
Motivation is certainly the single most important factor is Chinese study. Without it, no location matters much.

I don't think that won't be a problem if you study Chinese online. You can find a local Chinese teacher who speaks standard Chinese and have tutoring online whenever you like. I highly recommend getting in touch with www.learnchinese1on1.com since I also had a pleasant time with them two weeks ago. They do the tutoring on skype so I can have the lessons in accordance with my schedule.