Jamie Dimon, CEO of JP Morgan Chase, recently released his annual letter to shareholders.
Dimon said in the letter that the company could lose $1 billion of Russia-based investments, citing instability amid Russia’s invasion of Ukraine. The company will also continue leveraging its investments in China, Dimon said.
Dimon noted that JPM is "not worried about our direct exposure to Russia, though we could still lose about $1 billion over time," according to the letter. He also highlighted the company’s response to the crisis, stating that "JPMorgan Chase has also played its part in the implementation of the Western world’s policies and sanctions regarding Russia. Of course, we are following both the letter of the law and the spirit of all the American and allied sanctions.”
The letter also delved into the complex relationship with China, arguing that America does not need to fear a strong China. Dimon wrote that JPM considers its business operations with China to be beneficial even though some may consider it a financial risk.
In a recent interview with Nikkei, JPM President and COO Daniel Pinto explained the company’s business strategy in China and Asia at large.
Pinto said JPM’s investment relative to the size of China was not very large, explaining that China is "a country that will continue to be relevant for years to come,” according to Nikkei. “What we are doing is continuing to gradually invest in a very prudent way. It would be unwise for us not to invest in China given the size of the country and the potential. We will do it at a conservative pace to make sure that we don't take risks that are unacceptable."
The Southeast Asian country’s trade with western countries amounted to $3.6 trillion (exports and imports) in 20201, according to Dimon’s letter. By contrast, China’s trade with Russia in 2021 totaled almost $150 billion.
“Clearly, these economic relationships are critical to China and the West – China also has a huge interest in making this work,” Dimon wrote.
The executive stated there is a need to modify the structure of the global supply chain, particularly noting the importance of security surrounding the U.S. supply chain, according to the letter.
"For any products or materials that are essential for national security (think rare Earths, 5G and semiconductors), the U.S. supply chain must either be domestic or open only to completely friendly allies,” Dimon wrote. “We cannot and should not ever be reliant on processes that can and will be used against us, especially when we are most vulnerable."
The tension surrounding the supply chains, however, has not gotten in the way of JP Morgan’s commitment to China, which began in 1921, according to the company’s website.
The company serves "Chinese and international corporations, financial institutions and government agencies through our network in Beijing, Shanghai, Tianjin, Guangzhou, Chengdu, Harbin, Suzhou and Shenzhen," according to its website.
West Virginia State Treasurer Riley Moore highlighted the impacts associated with firms that invest heavily in China.
Moore said businesses accept increased financial risk because of China’s “lack of free market protections, intellectual property rights and outright government interference in markets and business activities,” according to a press release. "The Chinese government’s blatant interference and controls over businesses and markets creates a tremendous amount of uncertainty and risk for anyone attempting to invest there."
"China will continue to face pressure from the United States and other Western governments over human rights, democracy and freedom in Hong Kong, and activity in the South China Sea and Taiwan,” Dimon stated in his letter.
“To counter unfair competition on China’s part (i.e., subsidies and state-sponsored monopolies), we will need to develop thoughtful policies and strategies that work,” Dimon said in the letter. “We also need to develop ‘industrial policies’ that help industries important to national security (for example, semiconductors, 5G, rare Earths and others) succeed. I believe this could be done intelligently and not as ‘handouts’ or subsidies that create excessive profits.”