(Yicai) Aug. 5 -- The American Chamber of Commerce in Shanghai hopes that the “small yard,” or core economic and technological sectors that the United States highly restricts, will remain small and that US firms will have enough opportunities for business in China outside those limits, according to the organization’s president.

“Our hope is that we can keep the small yard small,” Eric Zheng said in a recent interview with Yicai. “Then outside of the small yard, hopefully there will be enough opportunities for our companies to do business. And I believe there is plenty of room for our companies to work with China.”

The term “small yard and high fence” describes a US strategic approach toward its economic and technological relationship with China that narrowly targets specific, critical areas of technology and industry for protection and restriction, while allowing more freedom and openness in other less sensitive areas.

“We would argue that it’s in the best interest of these two countries to continue to work together despite the competition,” Zheng said. “We recognize that hopefully we’ll find enough room to work together so that it will be a win-win scenario for both sides.”

Regarding the trade friction between China and the US, Zheng said: “definitely it is a concern” and impacts long-term planning for companies. “Because of the uncertainty, when you have geopolitical tensions not only between the US and China, but also around the world, … it's hard for businesses to plan for the long term.”

Zheng noted that the unpredictable nature of the US-China relationship poses a significant challenge for American firms seeking to make long-term investments in China. “When you run a business, you want certainty, you want predictability so that you can plan for the long term,” Zheng said, adding that “if the geopolitical environment is uncertain, that's a challenge.”

In response to these uncertainties, Zheng emphasized the need for American firms to bolster their operational resilience in China. "We're not talking about decoupling, but increasing resilience just to be prepared for some worst-case scenarios," he noted. "Covid is an example. During that period, there were many disruptions to global supply chains, so we have to be prepared to increase our resilience in those areas.”

‘We’re Not Leaving’

Despite the challenges, Zheng expressed optimism about the long-term prospects for American businesses in China. "We're here, we're not leaving," he said. "At the same time, we need to deal with these uncertainties, but with the ultimate goal of making it work for the long term in China."

To support its members, AmCham Shanghai has taken a proactive approach, engaging with policymakers on either side of the Pacific. "We try to talk to policymakers on both sides, to share our on-the-ground perspectives," Zheng said. "Policymakers should make decisions based on facts, not perception alone. So we try to share with policymakers on both sides about our experience here."

Zheng believes that the deep economic integration between China and the US, as evidenced by robust trade and investment flows, underscores the mutual benefits of continued cooperation. "These two economies are highly complementary to each other," he said. "So whether we're talking about trade or direct investment between these two countries, those are good."

Swelling Membership

Recalling AmCham Shanghai’s foundation in 1915, Zheng noted that there were quite a few US businesses in the Chinese city even back then. The chamber’s membership has expanded dramatically over the years to nearly 3,000 last year, making it the largest American chamber in the Asia-Pacific region. 

This expansion is mainly driven by the growth of China’s economy, Zheng said. Last year, China's gross domestic product reached CNY126 trillion (USD17.7 trillion) and accounted for more than 30 percent of global economic growth.

Even with a lower target of 5 percent growth this year, that still amounts to an addition of CNY6.3 trillion (USD884.5 billion). “That’s the size of an economy like Switzerland. So this is certainly one of the drivers behind our growth of membership,” he said.

Zheng also pointed to China’s manufacturing capacity, including its world-class infrastructure, skilled labor force, and thriving industrial ecosystem, as well as a growing consumer market and sizable middle class that draw American companies. 

Amid the reform and opening-up process of China’s economy, many US companies have grown alongside the country's remarkable development, he pointed out.

Zheng picked out a few “firsts” among pioneering US firms. 3M, one of the earliest investors in China outside of Shenzhen, is celebrating its 40th anniversary in the country, and American Insurance Group was the first US insurer to be allowed to operate in the country, entering the market in 1992.

Disney, “the largest single investment from the US,” he said, has built one of the most profitable theme parks in the world in China, and Tesla was the first wholly foreign-owned automaker to set up a manufacturing base in the country.

Growing Together

With AmCham Shanghai’s membership split pretty evenly between manufacturers and service providers, the chamber is seeing “more service companies coming because of the growth of the consumer market,” Zheng said. “We see a lot of interest in sectors like life sciences because China has such a large population. Public health, medical services, those are all very attractive opportunities for us.”

Another trend is the shift away from more labor intensive manufacturing to higher and more value-added manufacturing, he said. “China is moving away from highly polluted factories to more clean energy driven solutions. Our companies are growing with China because China is also trying to move up the value chain ladder. So we are growing with them,” Zheng noted.

As for the fierce competition in the Chinese market, Zheng said: “You don't want to be in the minor league because the players in the minor league may not be as competitive. We want to join the major league here in order to compete and learn from our local competitors so that we can improve our competitiveness.

“In order for a US company to be globally competitive, it has to be in China because this is such a competitive ‘gym.’ We can be here and we can work out and we can learn from other competitors. Despite  ‘neijuan’, the involution, we can learn and we can succeed here,” he said.

Editor: Tom Litting