US firms pin hopes on financial liberalization

Editor's note: To show a clearer picture of what foreign companies expect from the coming free trade zone in Shanghai, Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai, shared his thoughts.

Q: How does the chamber feel about the China (Shanghai) Pilot Free Trade Zone?

A: We are excited about the FTZ, and we are waiting with eager anticipation for the details. One thing significant about the zone is its relationship to China's economic reform agenda. There is an expectation that the leadership will announce its plans for what they want to do for the Chinese economy to continue to grow. There has been a lot of talk about making the economy a lot more market-oriented, allowing more competition, and the need to rebalance.

What are the biggest challenges for foreign companies doing business in China?

While intensifying business challenges like rising cost, talent shortages and increasing domestic competition are part of the new normal in China, and likely more manageable, regulatory and policy challenges have the potential to make continued investment and organic expansion a more significant challenge for foreign firms. Major challenges are about market access, rule of law and transparency issues.

How do you expect the FTZ to help remove such barriers, and what reforms are highly anticipated by American firms in China?

Market access, in theory, would be improved as the whole process of registering companies is expected to become a lot simpler. There are also indications that investors don't have to have approval to set up a business. Instead they can just go ahead and register. So that would simplify things for foreign companies.

Main elements people look forward to include the financial and service sectors. It looks like we will have financial sector liberalization. It might be easier for banks to register or establish branches in the zone. The second is the strong emphasis on the services sector. It will break down barriers for foreign companies in this area to be active.

Do you foresee many American businesses setting up in the area?

The best way I can answer this is that if the FTZ takes concrete steps to facilitate and welcome foreign investment, you will definitely see a lot more foreign companies set up operations here. As I said, we are really looking to the details.