JP Morgan Chase aims to boost Chinese presence
Updated: 2011-11-16 07:57
By Li Xiang (China Daily)
BEIJING - JP Morgan Chase & Co is planning to increase its investment in China and the US bank is actively seeking to tap business opportunities among the country's small and medium-sized enterprises (SME), said a senior executive of the bank.
"While some firms are selling their investments in China, JP Morgan is increasing its investment," James E. Staley, chief executive of JP Morgan Investment Bank, told China Daily in a recent interview.
With the European debt crisis causing sharp volatility, sluggish equity markets and a difficult environment for debt, major global investment banks have delivered weak performances in the third quarter. Many are now considering cutting staff numbers and scaling back expansion plans.
However, Staley said that JP Morgan has no plans to pull back expansion and will continue to invest in emerging markets such as China, Indonesia, Colombia, Russia, and Poland.
The focus of the bank's investment in the Chinese mainland will be the hiring of more staff for local businesses, Staley said, adding that the bank is satisfied with the operation of its joint-venture securities operation with the Shenzhen-based First Capital Securities Co Ltd.
Meanwhile, the bank has signed an agreement to invest in a joint-venture guarantee company providing financial services to SMEs, an initiative led by the National Development and Reform Commission (NDRC), China's top economic planner.
JP Morgan will invest $200 million in the venture and will own a 24.9 percent stake in the new operation. Other major investors include the Export-Import Bank of China, the Chinese steelmaker Baosteel Group Corp, HNA Capital Holding Co Ltd, and the German industrial giant Siemens AG.
"It is a very new venture for the bank and it is a significant investment that we are making, which underscores our commitment to being a partner with China," Staley said.
The new venture has capital of 5.1 billion yuan ($803.4 million), making it one of the biggest companies of its kind in China, according to a statement from the NDRC. The company will begin operations once it obtains all the required government approvals, according to a source close to the deal.
"This initiative will provide us with the opportunity to make an investment in a financial-guarantee company serving the SME sector in China, one of the key growth engines for the Chinese economy," said Zili Shao, chairman and CEO of JP Morgan China.
According to the NDRC statement, JP Morgan will provide technical assistance in areas such as development strategy, risk control and product innovation. The company will be run independently by professional managers recruited from the market, according to people close to the deal..
Commenting on the prospects for the fourth quarter, Staley said he expects the market situation to recover and an improvement in activity across the investment banking sector, given the high probability that US economic growth will begin to return to a more normalized level.
However, he noted that the risks in the eurozone and the European banking industry continue to be the biggest challenge facing the investment banking business in the foreseeable future.
Staley said that his bank has about $3 billion exposure to European sovereign debt, which he believes is "totally manageable".