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J.P. Morgan's chairman of global markets reveals the next big wave of investment opportunities in China amid the economic transition.
Editor’s note: The author is the editor-in-chief of the business channel at China’s People’s Daily.
BEIJING, China — For a long time, China has served as a sustained growth engine for the world’s economy. However, after a decade of miraculous expansion driven by exports and investment, China’s economy is slowing, and is moving away from the model that has served it so well.
Is the "oriental pearl" losing its luster? Or is it appreciating in value?
Jing Ulrich is especially qualified to answer these questions. Ms. Ulrich is the managing director and chairman of global markets, China at J.P. Morgan. She is one of the most prominent advisors to some of the world's largest asset management companies, sovereign wealth funds and multinational corporations.
Ulrich recently sat down and had an in-depth conversation in Beijing with Zhenyu Li, the editor-in-chief of the business channel at China’s People’s Daily.
In the first part of this series, Ulrich breaks down the major economic trends and the next big growth engine in China.
In the second part, the "Oprah Winfrey of the investment world" reveals the under-the-radar investment opportunities in China and shares her exclusive insights on the much-anticipated financial reform in the world's largest developing economy.
Here are excerpts from their conversation, edited and condensed by GlobalPost.
Zhenyu Li: As a well-respected advisor to some of the world's largest investors, you have witnessed first-hand how they react to China's economic slowdown. I mean their confidence toward China.
Jing Ulrich: Yeah, from my personal experience, I have seen enthusiasm toward China among some investors drop over the last several months, but I think global investors shouldn't overlook the opportunities in the world's second-largest economy because of its slowdown. On the contrary, the on-going consumption transition might well create some of the best opportunities to invest in the ever-changing developing economy.
For example, the continued rapid urbanization in China will unlock a new wave of opportunities. China needs at least $6.4 trillion to bring 400 million people into the cities over the next decade.
As more people move into the city, and with the increasing living standard of the average Chinese people, a lot of new opportunities will emerge from such sectors as education, e-commerce, media and other service industries.
Zhenyu Li: The latest official data from China showed that China's foreign direct investment growth reached a two-year high in June despite the economic slowdown. And I think the establishment of a free trade zone in Shanghai, the gradual liberalization of China's financial sector and a possible China-US Bilateral Investment Treaty also mean huge business opportunities for global investors.
But that's the big picture. To put it in a more specific way, in the next three to five years, what do you think will be the next big investment opportunity and new investment channels in China for global investors?
Jing Ulrich: Global investors are obviously watching the Chinese market very closely. Despite China’s slowing economy, it is still growing very rapidly in comparison to developed markets. However, China’s financial markets are also quite volatile. Many global investors would like to increase their exposure to China, but they are trying to find the suitable ways to invest in China, which involves equities, fixed income and also private equity.
Investors looking at China can also consider multinational corporations as good proxies for China's growth. For example, if you look at auto, luxury goods and industrial companies, a lot of them are Fortune 500 companies. They are global companies, but they have significant exposure to China.
So, from a global investor's standpoint, they will find the best investment opportunities whether they are in China or overseas to get the best exposure to China's growth story.
Of course, they also need to take into account risks involved. So, I think many investors we talk to around the world are trying to diversify their risks. They are investing across sectors, across asset classes and they are watching the Chinese markets with a great deal of interest.
Zhenyu Li: Talking about equities, you know, China recently further expanded the QFII quota, allowing global investors to buy more domestic stocks, bonds and money market instruments in the Chinese mainland. Actually, it almost doubled the quota to $150 billion. How do you see the interest levels among global investors at getting involved