JPMorgan's Dimon Aiming for China Venture With Full Control

(Bloomberg) -- JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon, who in December agreed to exit a minority-owned Chinese investment-banking joint venture, said the U.S. bank is seeking to find a new structure that would eventually give it full control.

“My longer-term dream is that we have, we own, 100 percent of something,” Dimon, 61, said Monday in an interview with Bloomberg Television's Stephen Engle in Beijing. The CEO said he'll be patient in negotiations with Chinese regulators. The process “is complicated, so we respect that and we tell them what we'd like and hope it'll happen.”

JPMorgan moved to sell its stake in JPMorgan First Capital Securities late last year after six years in the venture. Its partner, First Capital Securities Co., was to buy out JPMorgan from its one-third stake for 307 million yuan ($44 million at the time), the Chinese firm said in December.

Since UBS Group AG and Goldman Sachs Group Inc. established Chinese joint ventures more than a decade ago, foreign banks have struggled to challenge local players. One competitive disadvantage is that Chinese rules limit them to minority stakes, reducing their sway over key decisions.

China has made “huge progress” on market reforms, Dimon said, adding that he would like to increase his firm's businesses in the nation. The firm's businesses in China include corporate banking and stakes in a fund manager and in a commodities futures joint venture, according to the bank's China website.

JPMorgan said in February that it won approval to underwrite corporate bond sales in China's interbank market.

The issue of control contributed to JPMorgan's decision to sell its stake in the First Capital venture, whose business included equity and debt underwriting and mergers advisory.

“Joint ventures by nature have sloppy corporate governance,” Dimon said. Any new venture structure would have to allow JPMorgan “a certain amount of management control,” he said.
 
China's government in November said it's committed to letting overseas banks own bigger stakes in securities and fund-management joint ventures in the country. The rule limiting offshore ownership to 49 percent will gradually be relaxed, the Ministry of Finance said at the time, adding that foreign investors' participation can boost the industry's competitiveness and global influence.

Dimon said his bank would consider setting up a business in the Shanghai Free Trade Zone, without providing more specifics. The Shanghai FTZ is studying allowing foreign investments in financial institutions to exceed current caps, Zheng Yang, the city's financial services office director, said in June last year, without giving a timetable for any changes.

As China's leaders remain on track with financial and trade reforms, Dimon said he sees full yuan convertibility in the next five to 10 years.

American Patriot

“Twenty years from now, they will house 35 percent of the Fortune 3000 and we should go for that,” Dimon said. “They've made huge progress in reforms, financial reforms, market reforms.”

When asked if he intended to stay on Donald Trump's business advisory council after the U.S. president announced his intention to pull his country out of the Paris climate pact, Dimon said: “I am an American patriot and I want to help the president of the United States,” adding that he didn't want to “overreact” to the issue.

On Friday, Dimon said he “absolutely” disagreed with Trump's administration on the issue, but said there was a responsibility to engage elected officials “to work constructively and advocate for policies that improve people's lives and protect our environment.”

Trump's call on Paris prompted Walt Disney Co. CEO Bob Iger and Tesla Inc. founder Elon Musk to withdraw from a presidential jobs panel.

--With assistance from Alfred Liu and Sree Vidya Bhaktavatsalam

To contact the reporter on this story: Philip Lagerkranser in Hong Kong at lagerkranser@bloomberg.net.

To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Darren Boey, Peter Vercoe