Chinese Yuan

Mar 2 - An unexpectedly severe slowdown in China's robust economic growth could derail the fragile recovery in the rest of the world, the co-head of Barclays Capital said on Wednesday.

"Until the rest of the world really picks up, we've got an awful lot riding on China's continued economic performance," Jerry del Missier, co-chief executive of Barclays Plc's investment bank, told the Reuters Future Face of Finance Summit.

China is trying to slow down economic growth to combat inflation, through measures like boosting bank reserve requirements and ordering banks to lend less.

But too much of an economic slowdown in China would be "unexpected," del Missier said.

"It's a phenomenal story and they've done an incredible job," he added.

Although Europe's economy is currently more fragile than Asia's, del Missier said he remains confident in the future of the euro zone.

"People outside of Europe just don't understand the depth of the conviction of Europeans to make this work, how they view this as being critical to European society," he told Reuters.

"You are seeing a greater focus on fiscal discipline" in Europe, he added.

Del Missier and Rich Ricci took over running Barclays Capital late last year, when their longtime boss Bob Diamond ascended to become CEO of the British bank. Diamond said last month that Barclays will sell assets and reshape its portfolio to boost profitability, as tougher regulations cut into returns.

Under Diamond, BarCap became one of the leading investment firms in debt markets and is building up aggressively in equities and advisory. The bank expects to continue benefiting from increased deal-making and underwriting activities, especially in the natural resources sector, del Missier said.

He was also relatively optimistic about the outlook for sales and trading activity, despite an industry-wide slump in the second half of 2010 that affected many banks' fixed-income trading results.

The decline in trading volume is "circumstantial and not atypical given where we are in the cycle," del Missier said. "Those are businesses that tend to see significant surges in volume, when you have changes in monetary policy and when you have market volatility. We've sort of been stuck with very low interest rates for some time."

(Reporting by Maria Aspan; Editing by Gerald E. McCormick)