WEBVTT - Jane Fraser Talks China Outlook, Citi's Growth in Asia

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio News.

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<v Speaker 2>We're very pleased, of course, to be here at the

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<v Speaker 2>twentieth anniversary of Cities China Conference here in Shanghai, and

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<v Speaker 2>we have none other than the chair and CEO, Jane Frasier.

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<v Speaker 2>Thanks so much for having us.

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<v Speaker 1>Well, we're delighted to have Bloomberg here. Thank you very

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<v Speaker 1>much for joining our conference.

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<v Speaker 2>So what do you hope to get out of this

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<v Speaker 2>and when talking to all your guests and your clients

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<v Speaker 2>and to understand a little bit more about the China market,

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<v Speaker 2>which you know very well. But we're coming out of

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<v Speaker 2>a bruising trade war. We're not even out of it

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<v Speaker 2>yet right. Some say it's a truce, not necessarily a

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<v Speaker 2>lasting piece. What has been your takeaway so far?

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<v Speaker 1>I think what's interesting this time at this conference is

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<v Speaker 1>that it's moved away from a China for China story

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<v Speaker 1>and instead we have had huge interests and a large

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<v Speaker 1>number of investors and companies coming to China to understand

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<v Speaker 1>what is happening here, as well as the Chinese companies

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<v Speaker 1>and investors that are looking much more externally now. So

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<v Speaker 1>that really feels like a sea change here. That's pretty exciting.

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<v Speaker 2>How do you serve your clients against the backdrop of

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<v Speaker 2>two governments that are trying to de risk, if not decouple.

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<v Speaker 1>I think the recent truth has brought some much needed

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<v Speaker 1>and welcome stability here. We're in a position now for

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<v Speaker 1>both sides that wanted to have a period now where

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<v Speaker 1>we can just we can move ahead and have a

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<v Speaker 1>more stable relationship between both of them. Is transactional, but

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<v Speaker 1>it's in both both sides interests. We see our client

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<v Speaker 1>base navigating this.

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<v Speaker 2>Well, Yeah, what's your vision for the China as the

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<v Speaker 2>China market as it folds into your overall restructuring plan

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<v Speaker 2>as well? You're now chair and CEO, first time that

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<v Speaker 2>those two rules have been joined in a couple of decades,

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<v Speaker 2>clear mandate to carry out your vision going forward?

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<v Speaker 3>What does that look like?

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<v Speaker 2>When you did exit your consumer banking business here like

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<v Speaker 2>you did in many markets around the world, you also

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<v Speaker 2>sold your retail wealth management portfolio to HSBC. You got

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<v Speaker 2>out of an investment bank JV with Orient Securities, I believe,

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<v Speaker 2>and you have an outstanding license application for your wholly

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<v Speaker 2>owned JD Insecurities.

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<v Speaker 3>So City has.

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<v Speaker 1>Been in China for one hundred and twenty four years.

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<v Speaker 1>We have a landmark building here in Shanghai. And what

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<v Speaker 1>we have done is focused our strategy and grow. We

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<v Speaker 1>are following our international clients around the world.

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<v Speaker 3>We're seeing them with.

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<v Speaker 1>Renewed interest and focus in China as we talked about,

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<v Speaker 1>and then we're seeing the Chinese companies innovating at pace

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<v Speaker 1>and also looking at expanding internationally. So we've been growing

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<v Speaker 1>rapidly here with a more focused strategy, and it is

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<v Speaker 1>the power of clarity and renewed purpose in the firm.

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<v Speaker 2>Now, before this interview started, you really countered what I

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<v Speaker 2>said is you're pulling back a little bit from China.

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<v Speaker 2>That's not at all. You're adding headcount. How Come what

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<v Speaker 2>are your headcount numbers? When we get headlines that your

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<v Speaker 2>IT department maybe thirty five hundred jobs are going to

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<v Speaker 2>be moving elsewhere and this, and that you pulled back

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<v Speaker 2>from retail three or four years ago.

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<v Speaker 3>Yeah, I think you're getting the story wrong. Good.

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<v Speaker 2>Yeah, that's why I serious.

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<v Speaker 1>City is on the city is on the front foot.

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<v Speaker 1>We are innovating, we are growing, We're helping support our clients.

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<v Speaker 1>Our clients are both building resiliency and they are reinventing

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<v Speaker 1>themselves with all the technological changes that is no different

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<v Speaker 1>in China than it is in other parts of the world.

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<v Speaker 1>So I know this is a firm with clarity, a purpose,

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<v Speaker 1>with clarity of direction where we're headed, and we're really

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<v Speaker 1>delivering strong progress. So I'm excited by the upside that

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<v Speaker 1>we have. I'm excited about the progress we're making, and

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<v Speaker 1>I see it here on the ground in China. If

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<v Speaker 1>we think we move away from some of the just

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<v Speaker 1>headwinds that we all know about on consumer spending and

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<v Speaker 1>on the property market, you look behind.

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<v Speaker 3>That here in China. It's a manufacturing powerhouse. What are

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<v Speaker 3>we seeing?

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<v Speaker 1>Fifty percent of all robotic companies in the world are

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<v Speaker 1>here in China. China is writing the next chapter of

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<v Speaker 1>its economy around advanced manufacturing, around innovation, as well as

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<v Speaker 1>all Chinese companies expanding internationally. And we're both serving seventy

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<v Speaker 1>percent of a fortune five hundred that are here in

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<v Speaker 1>China as well as serving the Chinese companies locally tap

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<v Speaker 1>into global marketing.

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<v Speaker 2>So how does that equate to what the deal flow?

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<v Speaker 2>You see, who's the head global banking who we talked

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<v Speaker 2>to a couple of hours ago, extremely bullish on the

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<v Speaker 2>amount of deal flows going into twenty twenty six, what

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<v Speaker 2>kind of cross border with China do you see.

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<v Speaker 1>Look, I think we're seeing new corridors opening up, and

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<v Speaker 1>the scale of ambitions not just in China but in

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<v Speaker 1>Asia are higher than we see really in many other

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<v Speaker 1>parts of the world. So in these new corridors, we're

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<v Speaker 1>seeing the Middle East connecting with Asia. For the GCC,

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<v Speaker 1>you know, they were expecting Asia to be its largest

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<v Speaker 1>trading partner by next year. That's an entirely new set

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<v Speaker 1>of flows. In the last five years, Brazil's connection into

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<v Speaker 1>Asia and into China again very robust their major partners.

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<v Speaker 1>So you know, the world is changing rapidly. It's adding

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<v Speaker 1>new corridors, it's adding new flows, it's adding new wealth

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<v Speaker 1>and scale is the name of the game.

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<v Speaker 2>What will be your strategy with wealth management? You got out,

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<v Speaker 2>as I said, the retail fortune of your health management

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<v Speaker 2>was sold to HSBC. But you're going to be on

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<v Speaker 2>shore here, but you're going to do a lot of

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<v Speaker 2>it from Hong Kong and Singapore.

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<v Speaker 1>Rightw SO City is focused internationally on not on retail banking.

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<v Speaker 1>We are focused on serving clients who have cross boorder needs.

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<v Speaker 1>That is a very vibrant good segment of clients. Think

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<v Speaker 1>of individuals that are driving the mid market, companies are

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<v Speaker 1>growing internationally. We think of the world's billionaires and wealthy

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<v Speaker 1>that need access to global markets, and then we obviously

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<v Speaker 1>think of investors and corporations we're doing so there's a

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<v Speaker 1>lot of engine of growth.

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<v Speaker 3>It's going to be fifty percent of all of the

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<v Speaker 3>new high.

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<v Speaker 1>Network households created in the next three years will be

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<v Speaker 1>created here in Asia. So our focus is on what

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<v Speaker 1>is the wealth proposition for those as well as supporting

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<v Speaker 1>the companies and the engines of growth behind them.

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<v Speaker 2>Of hiring is going to be needed in this part

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<v Speaker 2>of the world, not necessarily China, but the rest of Asia.

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<v Speaker 2>At a time when we're also seeing Corporate America as

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<v Speaker 2>they invest heavily into AI, they've had to pull back

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<v Speaker 2>on hiring and jobs.

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<v Speaker 3>Have been cut. It's a great question.

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<v Speaker 1>I think AI is certainly changing a lot of what

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<v Speaker 1>we're expecting we're going to need in the world going forward.

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<v Speaker 1>So from city's point of view, for example, we see

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<v Speaker 1>this as an opportunity to really train our talent. How

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<v Speaker 1>do we empower our talent to use the AI tools

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<v Speaker 1>so they can be smarter in front of clients. They

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<v Speaker 1>can spend more time serving clients and coming up with

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<v Speaker 1>solutions as opposed to the more chure elements of being

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<v Speaker 1>a banker. We don't know how quickly it's going to change, Steve,

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<v Speaker 1>so you'll be certainly a lot of shift in coding jobs.

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<v Speaker 1>We've seen that already. Our productivity is up nine percent

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<v Speaker 1>year over year for our coding teams.

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<v Speaker 3>There's going to be new jobs created too.

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<v Speaker 1>None of us quite know yet exactly how the timing

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<v Speaker 1>will play out, and we know there's a lot of

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<v Speaker 1>change ahead of that, but our approaches, we're going to

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<v Speaker 1>invest in our talent. Our firm is growing and that

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<v Speaker 1>should be able to support the needs going forward.

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<v Speaker 2>You mentioned the Middle East. I think you just came

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<v Speaker 2>back from Riard. You're col chair of the US Saudi

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<v Speaker 2>Business Council. I believe this also very bullets on India,

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<v Speaker 2>magnificent opportunity.

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<v Speaker 3>There's biased might be a little bit.

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<v Speaker 2>Biased maybe, but again what do you hope to get

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<v Speaker 2>from those markets as it fits into your restructing plant

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<v Speaker 2>and the vision that you just talked about.

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<v Speaker 1>The growth plans that we have going forward. Because we

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<v Speaker 1>are on the front foot, I cannot stress that enough

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<v Speaker 1>and you can see it in ourselves. So all of

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<v Speaker 1>our businesses we're taking share, we're growing very quickly and

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<v Speaker 1>our return are improving. So as we're looking forward its growth.

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<v Speaker 1>Let's take India. City is larger in India today. We

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<v Speaker 1>are the largest foreign firm by revenues in India.

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<v Speaker 3>When I look at Korea, we are aware.

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<v Speaker 1>I was just that that's another market where we were

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<v Speaker 1>the first foreign bank to open the doors in Korea

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<v Speaker 1>and we have a very strong position there supporting multinationals

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<v Speaker 1>and clients. So as I look around the world, it's

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<v Speaker 1>becoming more focus on diversification.

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<v Speaker 3>There is also a focus on reinvention.

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<v Speaker 1>What we are doing is helping provide the strategic advice.

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<v Speaker 1>We're helping provide the financing and structuring and arranging that,

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<v Speaker 1>and we're also helping manage the supply chain reconfiguration. We're

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<v Speaker 1>helping with the hedging and foreign exchange interest rates. Because

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<v Speaker 1>volatility is a feature, it's not a bug of this system.

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<v Speaker 2>Through your restructuring, you had to get rid of the

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<v Speaker 2>retail side, and there's are there other areas you would

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<v Speaker 2>like to divest.

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<v Speaker 3>I know you have the wrong story. The city is

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<v Speaker 3>about growing we're very we're very foot forward, very clear

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<v Speaker 3>on our strategy, and we're moving onwards.

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<v Speaker 2>I only ask because, again, the Russia situation is a

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<v Speaker 2>little bit different, probably than your overall strategy. We just

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<v Speaker 2>got a word that Vladimir Putin approved the sale to

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<v Speaker 2>Renaissance Capital of your bank in Russia, probably something that

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<v Speaker 2>you've been wanting to do for a while but was

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<v Speaker 2>held back.

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<v Speaker 1>We have been winding down, as many many companies have been,

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<v Speaker 1>the franchise in Russia.

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<v Speaker 3>We were waiting for the final approval to be able

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<v Speaker 3>to sell.

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<v Speaker 1>We've got a couple more to go to Renaissance, but

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<v Speaker 1>it's a tiny it's a tiny business, so it's in

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<v Speaker 1>the grand scheme of where city is, where we're investing,

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<v Speaker 1>on what we're doing.

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<v Speaker 3>It would be good to get that done.

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<v Speaker 1>But it's not critical to the firm's strategy going forward.

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<v Speaker 2>Let's talk about the outlook in the United States right

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<v Speaker 2>now as we head into twenty twenty six. We saw

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<v Speaker 2>the market reaction overnight simply we're seeing that the Fed's

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<v Speaker 2>equation the bets for possible easing coming up and now

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<v Speaker 2>fifty to fifty hours till below that because of the

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<v Speaker 2>aspector of inflation. What is your heltlook for FED action

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<v Speaker 2>going into the new year and the spectrum of inflation rising.

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<v Speaker 1>Look, I don't think we're out of the woods yet,

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<v Speaker 1>and there's a sensor that maybe another.

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<v Speaker 3>Shoe to drop.

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<v Speaker 1>It could be in tariff or in the labor market,

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<v Speaker 1>could be in the asset prices that are quite high

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<v Speaker 1>in the States. But all of that said, we're quite

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<v Speaker 1>optimistic about twenty six. The challenge for the FED right

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<v Speaker 1>now is with the government shutdown. You know, we all

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<v Speaker 1>have a death of up to date data which we

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<v Speaker 1>could do with. It's hard to make these calls of

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<v Speaker 1>exactly what's going on whilst we're waiting for the information.

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<v Speaker 1>But as we look further out into next year, I

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<v Speaker 1>think the resiliency of the corporate balance sheets, the strength

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<v Speaker 1>companies leaning in to innovation, investing in AI, you know,

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<v Speaker 1>there is some I think the doomsdays will be proven wrong.

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<v Speaker 2>We're a couple of months out now from when we

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<v Speaker 2>had concerns rise about I think there was one tricolor

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<v Speaker 2>of the subprime model lender. There were failures. There was

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<v Speaker 2>concerns about non performing loans. What does your balance sheet

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<v Speaker 2>look like as far as that and where is your

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<v Speaker 2>worries live.

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<v Speaker 1>You know, our balance sheet is pristine, but I think

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<v Speaker 1>part of that is because it's very heavily our investment grade.

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<v Speaker 1>On the corporate side, we're over eighty percent investment great globally,

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<v Speaker 1>and when we look at the consumer side, it's about

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<v Speaker 1>eighty six percent prime. So you tend to you know,

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<v Speaker 1>we tend to see the most resilient, healthiest parts.

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<v Speaker 3>Of the economy on the balance sheet.

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<v Speaker 1>All of that said, we haven't seen a thing that

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<v Speaker 1>is concerning us. The consumer in the States is being

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<v Speaker 1>fiscally responsible. Companies have been building up some more cash,

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<v Speaker 1>either for a rainy day if it proves necessary, but

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<v Speaker 1>most of them for investment, and they're you know, they're acting.

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<v Speaker 3>From a position of strength.

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<v Speaker 1>We'll keep an eye on the labor market, will keep

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<v Speaker 1>an eye on some of the areas of mid tier

0:13:20.240 --> 0:13:24.000
<v Speaker 1>players in private credit and the like. But as far

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<v Speaker 1>as we're concerned that second third order effects the banks,

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<v Speaker 1>the bank's not seeing anything that we're worried about.

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<v Speaker 2>Are you concerned by what some say maybe bubble forming

0:13:35.880 --> 0:13:38.440
<v Speaker 2>an AI? We talked about the advantages of AI, but

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<v Speaker 2>how much of a bubble are overheating.

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<v Speaker 1>I'm not sure if we're just in with a lot

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<v Speaker 1>of our tech clients and the West Coast. I don't

0:13:46.920 --> 0:13:48.920
<v Speaker 1>think anyone was ready to say that it's a full

0:13:48.960 --> 0:13:51.800
<v Speaker 1>on a high bubble, but one is. No one is

0:13:51.840 --> 0:13:55.120
<v Speaker 1>saying that there are some real pockets of let's call

0:13:55.200 --> 0:13:59.960
<v Speaker 1>it the British understatement, frothiness in the market. It's more

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<v Speaker 1>around the edges. What I found interesting is we can

0:14:04.440 --> 0:14:08.200
<v Speaker 1>see a lot of the demand for the infrastructure build

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<v Speaker 1>that's going in AI and the energy for the next

0:14:11.120 --> 0:14:14.520
<v Speaker 1>couple of years. You know, where you saw some opinions

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<v Speaker 1>diverge was in the three to five year period, could

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<v Speaker 1>be in danger of overbuilding, But no one's feeling that

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<v Speaker 1>for the big investments that are going on at the

0:14:24.240 --> 0:14:26.880
<v Speaker 1>moment for the next couple of years. So I think

0:14:26.880 --> 0:14:31.600
<v Speaker 1>on that one, certainly some pockets of frothiness there on

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<v Speaker 1>the valuations, but the core infrastructure investments are important, and

0:14:40.160 --> 0:14:42.040
<v Speaker 1>as we're seeing in our own bank, and I think

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<v Speaker 1>many companies are, we'll start getting some of the productivity

0:14:45.000 --> 0:14:49.360
<v Speaker 1>benefits coming through. But the scale, the scale and the

0:14:49.400 --> 0:14:52.400
<v Speaker 1>pace of investment is unprecedented, that.

0:14:52.480 --> 0:14:53.040
<v Speaker 3>Is for sure.

0:14:53.160 --> 0:14:54.480
<v Speaker 2>Jane Frazer, thanks so much.

0:14:54.800 --> 0:14:55.120
<v Speaker 3>Thank you.

0:14:55.200 --> 0:14:57.520
<v Speaker 2>Hope you don't mind me playing the devil's advocate. I

0:14:57.560 --> 0:15:00.320
<v Speaker 2>have the story straight now. Thanks. Thanks, thank you.

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<v Speaker 3>Very much for having us here. Thank you CHININGA conference.

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<v Speaker 2>The twentieth anniversary of that conference here in Shanghai,