JPMorgan chair Jamie Dimon has warned of the risk for investor confidence of “uncertainty” about the Chinese government’s policies, as manufacturing data showed that the recovery in the world’s second-largest economy is faltering.
His comments came as a contraction in China’s factory activity cast doubt over the country’s growth prospects, shaking regional equity markets against a backdrop of worsening relations with the US.
“If you have more uncertainty, somewhat caused by the Chinese government . . . it’s not just going to change foreign direct investment,” Dimon told Bloomberg TV, in response to questions on China’s Covid-19 policy and its crackdown on consultants and the tech sector. “It’s going to change the people here, their own confidence.”
China is struggling to revive economic growth after abandoning its zero Covid policy at the end of last year, as Wednesday’s figures highlighted.
The official manufacturing purchasing managers’ index fell to 48.8 for May, compared with 49.2 in April, according to the National Bureau of Statistics.
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The data drove down Hong Kong’s Hang Seng China Enterprises index, which tracks large mainland companies, almost 2 per cent on Wednesday, taking the benchmark more than 20 per cent below its January peak and into a bear market.
China’s CSI 300 index of Shanghai- and Shenzhen-listed stocks fell 1 per cent.
The renminbi slipped as much as 0.5 per cent to Rmb7.1128 against the dollar, down about 3 per cent for the year to date.
“The foundation for recovery and development still needs to be consolidated,” said Zhao Qinghe, a senior statistician at the NBS. In the manufacturing sector, he said, “production and demand slowed distinctly”.
Economists said if the index remained several months below 50, which indicates a contraction, the government would consider stimulus policies to support the economy.
“We expected that the initial rebound would be led by consumption and services post-reopening and that optimism would eventually translate into a broadening of the base of this economic recovery to include stronger manufacturing and investment,” said Carlos Casanova, senior economist for Asia at UBP. “That broadening has not taken place yet.”
China’s economy grew rapidly in the first quarter but the rebound has since begun to falter. High hopes for business reopening have been undermined by a lack of investor confidence and geopolitical tensions after the US shot down a suspected Chinese spy balloon and ramped up sanctions on semiconductors.
Beijing has also carried out raids on foreign groups such as Bain & Company, Capvision and due diligence group Mintz and increased regulation of domestic private sector players including tech companies and education businesses.
Property investment, credit and industrial profits have declined, while indicators such as retail sales have fallen short of analysts’ expectations, casting doubt on the government’s modest full-year growth target of 5 per cent.
FDI as measured by one of the Ministry of Commerce’s principal benchmarks rose 2.2 per cent in the first four months of 2023 to just under Rmb500bn, though it declined in USD terms by 3.3 per cent to $73.5bn.
Dimon highlighted “scary” youth unemployment figures, which at more than 20 per cent in May reached their highest level since records began in 2018.
“They [China] need growth, too. And confidence is very important for growth,” said Dimon.
His visit to Shanghai is one of several high-profile trips by foreign executives as China reopens. Elon Musk, chief executive of Tesla, flew into Beijing this week and met foreign minister Qin Gang.
On Tuesday, Dimon met Chen Jining, Shanghai’s party secretary. In a statement published on the Shanghai government’s social media account, Chen said he hoped JPMorgan would continue to invest into China, while Dimon also said the bank would play a role as a bridge for foreign companies into Shanghai.
JPMorgan has invested significantly in the mainland, where the government has given foreign businesses greater flexibility to set up their own financial companies as part of a push to develop the country’s largely closed-off financial system. In 2018, Dimon said during an interview in Beijing that “we’re building here for 100 years”.
The bank’s Shanghai conference, which included speeches from Henry Kissinger and Baidu chief executive Robin Li, has attracted about 3,000 attendees but was largely closed to the media.
Additional reporting by William Langley, Andy Lin and Hudson Lockett in Hong Kong
Source: Economy - ft.com
