JPMorgan Chase & Co. tapped Lou Jiwei, head of China’s $332 billion sovereign wealth fund, and former U.K. Prime Minister Tony Blair to kick off a three-day forum in Beijing tomorrow on China’s changing role in the world.
Lou’s China Investment Corp. helped the nation become the world’s second-biggest buyer of resource companies. As China ventures abroad to sustain the world’s fastest economic growth, how the government meets the political and diplomatic challenges that this expansion presents will be a key issue for investors, said Jing Ulrich, the New York-based firm’s chairman of global markets for China.
“China’s foreign policy in the past has really been: we want to focus internally and we’re not going to bother anyone else, so you shouldn’t bother us,” said Shaun Rein, managing director of China Market Research Group, a Shanghai-based adviser on geopolitical and economic risk. “That policy might have to change. They can’t fly under the radar anymore.”
As prime minister, Blair sent more troops to fight overseas than any U.K. leader since World War II in a foreign policy that won kudos from the U.S. and proved divisive at home. Now Middle East envoy for the U.S., Europe, Russia and the United Nations, Blair’s experience makes his views on the geopolitical environment in which an emergent China will operate valuable, Ulrich said.
Blair has been a senior adviser to JPMorgan since 2008.
China’s high nominal growth rates -- averaging 10 percent a year for the past three decades -- are now translating into a sizable business in absolute terms for global investment banks. China’s companies have announced $162 billion of natural-resources acquisitions since 2008, data compiled by Bloomberg show. The U.S. accounted for $357 billion, and third-placed Canada $158 billion.
Heads of natural-resource companies account for six of the 13 keynote speakers at the firm’s seventh annual China conference. Luo Jianchuan, president of Aluminum Corp. of China, the nation’s leading producer of the metal, Greg Boyce from the biggest U.S. coal producer, Peabody Energy Corp., and Donald Lindsay from U.S. mining company Teck Resources Ltd., in which CIC has invested, are among them.
JPMorgan’s advisory and underwriting fees from China jumped more than 80 percent last year, said Fang Fang, chief executive officer of investment banking in the country. The country was JPMorgan’s biggest source of investment-banking revenue in the Asia-Pacific region for the first time.
China’s rising economic wealth is already translating to a bigger role in the global financial infrastructure, with the country winning more votes on the International Monetary Fund and taking part in the Group of 20 leading nations.
China will account for one-third of the forecast 4.3 percent global growth this year, according to Robert Subbaraman, Hong Kong-based chief economist for Asia at Nomura Holdings Inc.
“China is increasingly a bigger part of the global economy and political affairs, whether you like it or not,” said Fang, the only Wall Street banker to sit on the government’s China People’s Political Consultative Committee. “You’ve have to have a new strategy and a new mindset, and a new troop of people to address those increasing demands from other nations.”
Since December 2008, China’s navy has joined international efforts to stem Somali pirate attacks in the Indian Ocean in the longest and furthest deployment from the country’s shores in modern history.
Still, the growing clout has also created friction, with disputes over territorial claims flaring up into clashes and diplomatic spats with Japan, Vietnam and the Philippines over the past year.
China’s continued support for countries such as North Korea and Myanmar has also been an irritant in its relations with the U.S. North Korean leader Kim Jong Il and Myanmar President Thein Sein both visited China last week.
China, accounted for 83 percent of North Korea’s $4.2 billion of international commerce in 2010, up from 70 percent in 2009, according to the Seoul-based Korea Trade-Investment Promotion Agency.
Concerns that much of China’s increased clout, including the $3 trillion in reserve assets, more than double the amount held by Japan, is driven by the trade advantages it gets from keeping its currency artificially weak.
U.S. Treasury Secretary Timothy F. Geithner said last year that a bigger say at the IMF should see increased “responsibilities” in the global economy, a hint at China to accelerate currency appreciation.
More than 2,100 institutional investors, representing $15 trillion in assets under management, from over 30 countries will attend the “Ascending New Heights” China conference in Beijing on June 1-3, Ulrich said.