BEIJING- A U.S. business group said on Monday it was worried that protectionist sentiment could rise in both China and the United States as the global economy shrinks.

The American Chamber of Commerce in China also said in its annual white paper that China was still crucial as a base for manufacturing and increasingly as a market, but the regulatory environment was opaque and sometimes worked against foreigners.

The risk is higher in an economic downturn that governments will turn to protectionism, AmCham China Chairman John Watkins told reporters.

We want to highlight that risk in both countries, he said.

On Friday, China approved a postal law that could severely restrict foreign companies such as FedEx Corp and TNT in the fast growing express delivery sector.

That law comes only weeks after Beijing blocked Coca-Cola Co from buying China Huiyuan Juice, a case that sparked widespread nationalist sentiment in the mainland. A buy American provision in U.S. President Barack Obama's stimulus plan attracted criticism from trading partners around the world.

The postal law's vague wording also opened the door to inconsistent or arbitrary implementation, highlighting another major complaint of U.S. businesses.

The chamber's two main goals in 2009 are overcoming protectionism and improving implementation of China's regulatory environment.

U.S. companies feel we have to go by the spirit and letter of the law ... and sometimes we feel at a disadvantage, he said.

The white paper will be distributed to nearly 2,000 officials and lawmakers in both China and the United States, with the aim of helping mold policy and fostering dialogue.

Watkins said while China had made strides in opening its domestic economy to foreign investment, there were still areas where domestic players were favored.

With some of the things going on with 3G and the Chinese standard ... there is clearly a bias toward the local producers, said Watkins, who is also the president for Cummins Inc in East Asia.

Some of our members are very concerned, he said.

Beijing delayed issuing third generation (3G) wireless licenses for years, allowing a domestically developed technology time to mature and compete against widespread global standards.

In last year's white paper, AmCham listed protectionism as the third biggest risk for its members, who said rising costs were their top concern.

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