Expect a huge rise in global influence by innovative Chinese companies over next decade, says JP Morgan Asia-Pacific chief

JP Morgan’s chairman and chief executive officer for Asia Pacific expects China to have at least a quarter of the world’s top 500 companies, and account for 20 per cent of global gross domestic product (GDP) within a decade from its current World Bank estimate of more than 14 per cent.

In an exclusive interview, Nicolas Aguzin also told South China Morning Post that its progress in the financial technology (fintec) and consumer sectors would be especially dramatic, with emerging Chinese firms becoming increasingly respected globally for their quality of innovation and creativity.

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As China’s corporate power rises and the country opens up further, JP Morgan – the world’s largest bank by market cap – has strong “China ambition”, said Aguzin.

“My ambition is to be able to participate actively in the Chinese market, to help both Chinese and global clients,” he added, revealing the bank hopes to more than double the share of its Chinese market revenues in Asia Pacific to 40 per cent, from the current roughly 15 per cent.

The bank wants to help international companies wanting to participate in the “Chinese miracle” to invest in one of the world’s largest equity and bond markets.

Plans are also afoot to offer a “whole portfolio of financial services” to Chinese companies that are eager to grow a global presence, particularly in sharing Chinese innovation in areas such as insurtech (insurance technology), mobile payments, and other types of digital business, Aguzin said.

“There is a lot of creativity and innovation in China, a lot of new businesses emerging every day,” Aguzin added. “A lot have innovative concepts that have not yet been seen in other parts of the world, such as in insurtech.”

He said his banks’ areas of focus will be the technology, health care and consumer sectors, particularly Chinese companies related to artificial intelligence, autonomous tech, and internet banking.

China took a huge step towards internationalising its financial services sector earlier this month, saying it will now allow foreign firms to own stakes of up to 51 per cent in local securities joint ventures (JV) and fund managers, a limit that will be removed completely in three years. Currently Western finance houses can own no more than 49 per cent of a domestic Chinese venture in these categories.

Government regulators are now hurriedly drafting detailed rules on the new holding rules, which will be unveiled soon.

“I really look forward to implementing as soon as there is some clarity around the new announcement.

“Having an entity that a foreign bank can have control is an important step forward, and hopefully we can have a very clear path to 100 per cent ownership,” said Aguzin.

Late last year, JP Morgan sold its 33 per cent holding in a local securities JV to its China partner.

“The more China opens and allows international players to participate in the financial markets, the more we will be able to offer our domestic clients internationally.

“We want to be able to offer our clients in China our whole portfolio of solutions,” he said.

He added the firm is happy working with local partners in providing those services, as “the Chinese market is growing so fast, there is room for everyone”.

Aguzin accepts, however, the likely timetable for a new securities joint venture still depends on complex planning of regulations and approval processes.

What does concern him, nonetheless, is China’s rising level of corporate debt, which current sits at around 160 per cent of GDP, making the country one of the world’s most highly leveraged.

If unaddressed, he warned, it could trigger systemic risks in the banking system.

He said he has been encouraged by the Chinese government’s efforts to address the situation by tightening bank lending, which has led to a drop in corporate leverage as a percentage of GDP in the second quarter.

“The issue of corporate leverage can be handled by the government and by the economy in general,” he said, “as China has the resources and the tools to address the issue.”