Members of the American Chamber of Commerce in Shanghai said a pending new free-trade zone in China's largest city will help attract more foreign investor attention that had been going to inland cities in recent years.
Many U.S. enterprises have been wary of investing their operations in Shanghai because the cost of operating within the urban metropolis is significantly more expensive than other inland cities.
"Surely, the cost of doing business in China is high, but they are moving inland to less-expensive areas," AmCham Shanghai Chairman Robert A. Theleen said at a news briefing Tuesday as part of the group's Washington visit. "They are moving from places like Shanghai and Guangdong to these inland areas."
As a result, the U.S. has favored investing in Chinese inland cities, causing China to become more geographically fragmented from a business point of view, Mr. Theleen said.
U.S. business leaders in Shanghai are eagerly awaiting the opening of the Shanghai free-trade zone, which is being given a high priority by top officials in Beijing. New Chinese Premier Li Keqiang will attend the ceremony later this month and Bloomberg News recently reported the free-trade zone will contain special features to attract financial and service industries.
"Chinese investors see it as a bridge to American investment," Mr. Theleen said. "There has been a rise in the Chinese middle class, partly because China is currently the third largest export market for the U.S."
AmCham Shanghai, founded in 1915, now is the American Chamber of Commerce in the Asia-Pacific region. The 12-member delegation of the AmCham Shanghai chamber was in Washington as part of a three-day annual "door-knock" tour that encompasses a series of high-profile meetings on Capitol Hill.
"From the previous meetings we had at the Senate, we were very impressed," Mr. Theleen said. "The questions were very nuanced."
Despite the uneven pace of development in China's regions and the recent political transfer of power, foreign investment remains strong, U.S. business leaders said.
"There was no significant slowdown in foreign direct investment, except in 2011 and 2012, during the transition of the Chinese government," Mr. Theleen said. The U.S., he added, "was the only country in 2012 that increased its foreign direct investments."
The free-trade zone hopes to signal the start of a new U.S.-China economic reform before the new Chinese political leadership under Mr. Li and President Xi Jinping passes its own business reforms. With the zone's anticipated financial liberalization, other business sectors can take root.
"We will run a pilot program and, if it is successful, we will expand it," AmCham Shanghai President Kenneth Jarrett said. "The chances of success are greatest in China."
Despite the promising potential of a free-trade zone in Shanghai, the AmCham Shanghai delegation acknowledged possible risks, in particular the level of corruption. "Corruption is recognized," Mr. Theleen said. "However, brand value helps to alleviate this. U.S. companies will lose credibility if [brand value] is violated."
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