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US-China tensions

China lacks clear path to global dominance: JPMorgan's Dimon

Wall Street CEO talks of great power competition with US in annual letter

JPMorgan Chase CEO Jamie Dimon dissected China's strengths and weaknesses in his annual letter to shareholders published Wednesday.    © Reuters

NEW YORK -- A handover of global leadership to China is not inevitable, if only the U.S. confronts its own failures head-on and starts thinking longer-term, according to a lengthy analysis by JPMorgan Chase CEO Jamie Dimon on the great power competition that looks to define the 21st century. 

In his annual letter to shareholders, published Wednesday, Dimon dissected China's strengths and weaknesses and introspected America's own, characterizing the Sino-American contest to be at a turning point.

"China does not have a straight road to becoming the dominant economic power," wrote the Wall Street executive. Likewise, "while I have a deep and abiding faith in the United States of America and its extraordinary resiliency and capabilities, we do not have a divine right to success."

Chinese leaders see an America that is in decline -- losing ground in technology, infrastructure and education, torn by politics and inequality, and unable to coordinate government policies to accomplish national goals, Dimon said his letter. "Unfortunately, recently, there is a lot of truth to this."

Facing a challenge from China, which uses a system of government that allows for consistent leadership and policy execution over several years, Dimon argued the U.S. government also needs to implement multiyear budgeting, planning and reporting to enable long-term public policy. 

Echoing U.S. President Joe Biden's vision for the country's post-pandemic economic recovery, Dimon said Washington needs an intelligent industrial policy -- be it investment in infrastructure or funding for research and development to advance crucial technologies -- in areas where the free market alone is not sufficient. 

It is also imperative that the U.S. addresses its inequality, which lies at the crux of America's divisive and dysfunctional politics.

"The fault line is inequality," the investment banker's letter said.

Visitors wearing protective face masks walk along the Shanghai Disney Resort. Growing middle classes "almost always demand political power," Dimon said in his letter.   © Reuters

But Beijing is not an invulnerable rival either, Dimon assured. "The country will have to confront some serious issues" in the next 40 years: from environmental problems to state-owned enterprise inefficiency, from record debt levels and flawed financial markets, from aging demographics to its own growing income inequality, from growing political pressure from Western governments to skirmishes with its Asian neighbors.

And while China's recent success has its leadership feeling confident about its authoritarian governance, "growing middle classes almost always demand political power, which helps explain why autocratic leadership almost always falters in a larger, more complex economy," he argued, adding that the lack of transparency and rule of law does not bode well for the country's financial system or the internationalization of the Chinese yuan.

"Fundamentally, we need not fear the success of China; we need to fear only our own failure because that is the only thing that will truly limit us," Dimon concluded. America just needs to "roll up its sleeves and bring bold leadership to our self-inflicted problems."

The final remarks evoke a similar view from Bridgewater Co-Chairman Ray Dalio, who in September said that America's "greatest war is with ourselves."

Looking to the near term, Dimon advocated for a "healthy strategic and economic relationship" between the two countries.

JPMorgan said in its 2020 annual report, also out Wednesday, that China "represents one of the largest opportunities for our clients and the firm."

As of the end of last year, the institution had $21.2 billion in total China exposure -- including lending, trading and investing -- its fourth-largest exposure outside of the U.S.

Last year, JPMorgan became the first foreign asset manager onshore in China after obtaining a majority stake in a local joint venture, over which it expects to have full ownership this year. The investment bank has also been a lead underwriter for some of the largest Chinese initial public offerings in the U.S.

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