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Trade war

JPMorgan's Dimon fears 'serious repercussions' if US-China talks fail

Letter to shareholders calls risks to Chinese economy 'legitimate' but 'manageable'

JPMorgan Chase CEO Jamie Dimon told shareholders in his annual letter that concerns over China are "legitimate" but "manageable."   © Reuters

NEW YORK -- Jamie Dimon, CEO of JPMorgan Chase, America's largest bank, sounded the alarm Thursday over the Sino-American trade talks if the two sides cannot come to terms.

"We believe the odds are high that a fair trade deal will eventually be worked out -- but if not, there could be serious repercussions," Dimon wrote in a shareholder letter released that morning. His annual letters, much like those of Berkshire Hathaway CEO Warren Buffett, are closely followed and dissected by market watchers.

Dimon mentioned bilateral trade and the Chinese economy first among the "risks on the horizon that will eventually demand our attention." JPMorgan Chase believes that Beijing should and will "agree to some of the United States' trade demands because, ultimately, the changes will create a stronger Chinese economy," he wrote.

The U.S. and China have now entered into accelerated trade talks, which resumed in Washington on Wednesday after last week's round in Beijing, hoping to end the trade war in the first half of 2019 or even this month.

China is going to be "buying a lot of product from us ... more than anybody would believe," U.S. President Donald Trump told reporters Thursday during remarks on American opportunity zones, hours before meeting with Chinese Vice Premier Liu He to continue the trade negotiations in Washington.

Dimon wrote that China's "serious issues" for the next 40 years include rapidly growing corporate and government debt levels, financial markets that "lack depth," and frequently inefficient state-owned enterprises. He called concerns over the Chinese economy "legitimate" but "manageable."

He noted that China can move faster than developed democracies to address many serious situations. "Government officials can pull, in a coordinated way, fiscal, monetary and industrial policy levers to maintain the growth and employment they want, and they have the control and wherewithal to do it," he explained.

Dimon assured the U.S. public that China "does not have a straight road to becoming the dominant economic power," since it has "too much to overcome in the foreseeable future." He called for both countries to "maintain a healthy strategic and economic relationship."

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