chongqing2.jpg[UPDATED] Liberty Mutual Group, the US insurance firm, has won approval from regulators to incorporate a local insurance subsidiary in Chongqing, the new megacity in western China.

Liberty Mutual launched its Chongqing branch in early 2004, making it the first foreign insurer to expand non-life insurance business to China's relatively unexplored western region.

Consultants increasingly urge western firms to look to second-tier inland cities like Chongqing rather than China's big coastal cities, where the competition for both real estate and local workers is now fierce. China's government is also seeking to divert FDI to China's relatively unexplored interior.

While unknown to many western companies, Chongqing (pictured) is already bigger than European countries like Slovenia or Croacia, and its metropolitan area, with 31m inhabitants, is second only to Tokyo in size.

UPDATE: EngagingChina has just learnt about First Line Capital, a US-listed boutique investment bank that hopes to make Chongqing's attractions as a business location more widely known. It has already listed two Chongqing-based companies on the OTC Bulletin Board in the US. Given OTCBB's shaky reputation, that probably isn't the best way to attract the attention of mainstream investors.

See these EngagingChina stories for more on Chongqing. The New York Times also recently profiled Chongqing here.

American International Group (AIG), the world's largest insurer, is sticking to the more familiar coast, nevertheless. Its subsidiary, AIU Insurance Co, has won approval to establish a wholly-owned subsidiary, AIG General Insurance Company China, in Shanghai.

AIG General will be headquartered in Shanghai and the existing AIU branches in Shanghai, Guangdong and Shenzhen will be consolidated into AIG General. The firm says the local subsidiary may establish new branches in other areas of China over time.

AIG was the first foreign insurer to receive a license to operate in China back in 1992

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