Dialogue with JP Morgan’s Jing Ulrich on China’s economy and finance

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Ms. Jing Ulrich, often dubbed as “unofficial voice of China," has served as managing director at JP Morgan Chase & Co. since 2005 and also as its chairman of Global Markets – China and vice chairman of Asia Pacific. Forbes describes her as one of the first financial advisors to cover China when its stock market first opened its door in 1992. At the 2017 Fortune Global Forum in Guangzhou, she sat down with CGTN Digital to share her views on China’s economy and the financial sector under the latest government policies.

Below is an edited transcript of the conversation for clarity.

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CGTN: What’s your forecast of China’s GDP growth in 2017 and next year? Will the cooling housing market take a bite on the economy?

Jing Ulrich: China’s GDP growth in 2017 has surpassed market expectations, we forecast for the full year of 2017, GDP growth to be around 6.8 percent. In 2017, the positive momentum will continue. The main driver of China’s GDP comes from personal consumption, in the first three quarters of this year, consumption accounted for 65 percent of China’s growth, which is really quite remarkable. Even though the housing market is cooling down, we don’t think it is going to affect GDP growth too much in 2018.

The main drivers of growth have shifted from manufacturing to services, from investments to consumption. Plus, innovation also becomes critically important for the new economy in China. We remain quite optimistic about China’s growth in the new year to come.

CGTN: Last month, the Chinese government pledged to further open the financial sector to foreign investors, what will be the future of Chinese finance after this move?

Jing Ulrich: Openness is new buzzword here in China and globally, so the financial system has been gradually opened up for foreign investors over the years. Chinese government recently announced that foreign investors can invest over 51 percent in Chinese banks, security firms, and insurance companies, this is very important for foreign banks and institutions seeking to do business in China.

This is also positive for Chinese financial institutions because foreign companies will bring more technologies, more managerial expertise, and additional capital. It will also bring competition. I think increasing competition will make Chinese financial companies more competitive, so further corporation with foreign banks and financial institutions will also help improve the overall efficiency of the Chinese financial sector.

CGTN: How do you see the booming Fintech industry in China?

Jing Ulrich: China is now the global leader in fintech, especially in areas such as digital payments. China has a very large mobile population, actually, the single largest in the world. Leading companies, such as Tencent and Alibaba have really pioneered the payment industry in China. The two together account for over 80 percent of the third party payment market. So in payments, China is really leading. The society has gone from cash to cashless, and cardless.

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CGTN: Any gap you see, compared with developed economies?

Jing Ulrich: Of course, there are still some gaps between China and developed economies. One area is investment channel. Here in China, a lot of Chinese citizens have accumulated huge amount of wealth over the years: China’s total bank deposits amount to 25 trillion US dollars, over 200 percent of country’s GDP, but investment channels are still narrow. People can invest in property and bank deposits. But bank deposits don’t give high returns these days. So many investors are looking at other channels, the capital market, equities, and bonds. And also they are looking beyond China’s borders to overseas as well.

So in the future, we hope there will be more channels opened to Chinese investors, more asset classes, from equities, bonds, commodities and gold. So this way Chinese citizens can create more balanced portfolios for their personal wealth.

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CGTN: China recently tightened rules on asset managements, how will this impact on the financial industry?

Jing Ulrich: In terms of stricter regulations on asset management, it is very important that Chinese governments focus on risk management for the overall industry because there are a lot of retail investors in China who may not aware of investing risks. So investor education is critical and risk management is also very important. I think it is absolutely right for the regulators to put a lot of emphasis on risk management and this is protecting the wealth of retail investors in China too.

CGTN: The US is set to hike interest rates in December this year, and probably four times hike next year. Also, with Trump’s tax cut, what are the spillover effects on Chinese currency and Chinese economy?

Jing Ulrich: The US economy is going well. Unemployment is at 16-year low, so there is reason for them to hike the interest rate.

Now we have US tax cut pending, some people are concerned that rising US interest rates and the reduction in US corporate taxes may affect emerging markets, because US dollar is likely to get stronger in the new year against other currencies, and capital flow directed to us as well.

However I don’t think this is going to affect China in a very significant way. Chinese economy has its own dynamics. It is going to grow quite strongly in 2018. Currency is also very closely managed by the Chinese central bank. So in short term, there may be capital flows that will favor US market because of strength of US dollar and lower US corporate tax. But in the medium long term, we don’t think RMB will depreciate against US dollars. Also Chinese economy is very strong: There are many investment opportunities. A lot of foreign capitals still prefer high growth areas and high growth region, such as China.