European debt woes 'limited impact on China'

BEIJING - The festering European debt crisis could dampen investor confidence in the short run and pose challenges for China's economic restructuring, but would have only a limited impact on China's economy in the long run, a top executive at JP Morgan said Tuesday.

The unfolding euro debt crisis was still in flux, and it was likely for countries stuck in the debt quagmire, including Greece, to leave the single currency club, said Jing Ulrich, JP Morgan's managing director and chairman of Global Market, China.

"If the eurozone crumbles, the Chinese market will certainly take a hit," Ulrich said at a media briefing before the eighth China investment forum.

However, China's economic restructuring would help it to mitigate the risks brought forth by the debt crisis, she said.

In 2007, China's trade surplus accounted for 7 percent of its gross domestic product, while the figure shrunk to 0.05 percent in the first quarter of this year.

Meanwhile, a breakdown of China's quarterly growth showed domestic consumption had taken over as the main driver of the economy, contributing roughly three-fourths of the 8.1 percent growth in the first quarter, she said.

This showed China had reduced its reliance on exports for its economic growth, Ulrich said.

"Even if the eurozone does not recover in future years, China will not feel the chill as it had before," she said.

Speaking of China's role in solving the European debt crisis, she said, given their closely interwined interests, a sound Chinese economy had provided strong backing for the EU to tackle the crisis.

It was forecast 40 percent of global economic growth in 2012 would come from China, the second largest economy in the world, she said. In this context, China's endeavor to prop up growth by stimulating domestic consumption had contributed tremendously to the sluggish world economy.

On top of that, by holding European sovereign debt and encouraging its enterprises to invest in Europe, Beijing had done its share of lending a hand to the Europeans, Ulrich said.

On China's economic performance in the second half of this year, she predicted the economy would pick up pace and economic growth would be at 7.7 percent this year.

"New economic statistics released in May show that some sectors have started to recover. The bundle of easy monetary policies recently put forward by the central government promises a better second half," she said.