A woman saunters through the central business district of Beijing. Due to the recovery in traditional industries, Morgan Stanley Capital International China's earnings growth is tipped to climb 15 percent in 2017 compared to last year. Zou Hong / China Daily

Chinese mainland could use Trump presidency to enhance its global, regional status, advises banker

Morgan Stanley Capital International's (MSCI) inclusion of A shares is just a matter of time and will, probably, will be realized in the next five years, according to a senior banking executive.

Currently, China already accounts for nearly 27 percent of the MSCI Emerging Markets Index through shares of mainland enterprises listed worldwide, including those in Hong Kong and New York, and this could be boosted by various factors.

Jing Ulrich, managing director and vice-chairman, Asia Pacific, at JPMorgan Chase & Co, told China Daily that MSCI China's earnings growth this year is expected to rise 15 percent, compared to 2016, due to the recovery in traditional industries. She prefers new economy sectors, information technology, insurance and brokerage industries, but stays neutral on mainland banks.

Capital outflow from the mainland, she pointed out, does bring risks, with such outflows being stepped up, coupled with high levels of debt, non-performing loans and misallocation of capital.

Capital outflow, which is mainly used as a deleveraging tool by the corporate sector, still remains a key policy focus, with the amount reaching $700 billion last year and $330 billion in 2015. But, as a large part of corporate balance sheet adjustment has already taken place and many mainland companies are converting their US dollar debt into renminbi debt, she expects this year's capital outflow will not be as high as in 2016, while corporate outbound investments in 2017 will continue to see a high growth trend in the wake of last year's increased momentum.

As for the mainland housing market, Ulrich said she doesn't expect a crash in property prices, but activity in the sector this year will be less intense compared to 2016.

Ulrich forecast that the mainland GDP this year will reach 6.5 percent, while the US dollar is likely to hit 7.1 against the yuan by the end of the year.

She said that despite US President Donald Trump's protectionist and combative approach to global issues, China could use the opportunity to strengthen both its regional and global role, as the mainland is a rising power economically, politically and militarily, and some countries still want to have closer regional trade cooperation despite Trump's scrapping of the controversial Trans-Pacific Partnership trade pact.

"In the event of a trade war, no one will benefit," Ulrich warned, stressing that sectors that rely heavily on the US market, like telecom, office machinery and furniture, would be hard hit, as well as American companies themselves.

She predicted that bilateral trade between the US and the Chinese mainland would reach almost half a trillion US dollars each year, noting that the US and Chinese mainland are the world's two largest economies with very strong economic ties, and that if China's exports to the US were to drop 10 percent, the mainland's GDP growth would slip 0.1 percent, based on JP Morgan's quantitative analysis.

tingduan@chinadailyhk.com

(HK Edition 01/25/2017 page8)