CORRECTED-UPDATE 1-JP Morgan bullish on China commodity demand, warns on social tension

(Corrects name to Jing Ulrich in first paragraph) (Adds quotes, background)

By Alejandro Barbajosa

SINGAPORE, April 5 (Reuters) - Social tension in China remains an investment risk as strong demand for coal, grains and copper pushes up commodity raw material prices, Jing Ulrich, J.P. Morgan China managing director, told a conference on Tuesday.

"Investors are always looking for the potential risks that have not been discounted," Ulrich said.

"One area that we need to pay attention to is social tension. That's why the government is targetting low-income housing and inflation control to try to ease the social tension that exists."

China plans to build 36 million units of low-income housing units, Ulrich said, citing the country's latest five-year plan. In addition, China plans to spend $400 billion developing its power grid over the next five years and $150 billion annually to build its high-speed rail network. [ID:nTOE72603Y]

"By all accounts, strong infrastructure spending will be maintained during this five-year plan," Ulrich said.

"China will continue to lead commodity demand growth."

The public infrastructure spending and related higher incomes should boost demand for imports of copper and coal for the power sector and increase demand for grains like soybeans and corn, Ulrich said.

China became a net corn importer in 2010, and purchases from abroad of the grain should continue to escalate, Ulrich said.

"People are getting wealthier and they need to eat soybeans and corn."

Corn Cc1 stayed near record highs on Tuesday on continued worries over tight supplies from top exporter the United States and expected demand from China.

MONETARY POLICY

China has moved to tackle rising inflation by raising interest rates and hiking the amount of cash banks must hold as reserves as it attempts to cool the economy gradually. [ID:nL3E7F10R5]

But the tighter monetary policy is not expected to dim near-term demand for commodities, Ulrich said.

"Commodities will still be a very bright spot for the near future, despite the uncertainty brought by the restructuring of the economy, we must not forget that China's fundamentals remain very strong." Ulrich said.

Still, higher prices in China and around the globe along with political uncertainty, should keep gold in investor sights as an inflation hedge.

Gold hit a record high above 1,447 an ounce in late March.

"I don't think this is the end of the gold rally," Ulrich said. "Gold is seen as an alternative to paper currencies."

Ulrich said there is strong demand for gold from investors in China.

(Editing by Ed Lane)