00:00
Okay. Hello john it's nice to meet you. Oh nice to meet you. Hi Hey, is it Matthew? Yes. Yeah.
00:36
Long time no see here we have blue panels. All right. Wait, looks like you. Looks like you gained some weight over the years. Thank you. So we'll run everything by the script and we'll keep the questions on china mainly to
01:11
you two minutes before life. So there's a countdown before we start. Okay. Is taking care of that part? Okay. So yeah, so one minute to go. Okay. Okay. Okay. Okay. I'll press now for the life. Yes.
02:23
Yeah. Yeah. Good morning and good afternoon and welcome to the asian banker Radio Finance Today. We're very excited that we'll be turning to our panel of senior and chief economist as well as banking industry experts to look at some of the key issues and factors that will affect the
03:31
global Economy financial system and specifically how the banking system in Asia Pacific will perform over the next 12 months. We will explore the head wings, red flags and risk as well as the opportunities that the industry can expect to encounter during this period. We are happy to have as our guest today john Gong who is the vice president of Research and
03:56
Strategy at the University of International Business and Economics. The university is based in Beijing with newly set up a campus in Israel so understand john is joining us from Israel makes where Radhika rao, she's the executive director and senior economist at DBS Bank. And we are pleased to have Selena link. Chief economist and head of Treasury Research
04:25
and strategy for global treasury at OcBc steven. Cochran is the chief ASIA pacific economist with moody's analytics. And finally to give a technology perspective we have Matthew who is the chief technology officer for Asia pacific and Japan at pure storage, a data management and storage technology company.
04:55
We are so pleased to have all of you join us for this bank industry outlook Radio finance session. We look forward to a lively and insightful and hopefully maybe even a provocative session um for our audience who's joining us by link in facebook or zoom. We want this to be an interactive session. We want you to be part of the conversation to send us your questions or comments.
05:24
Just use the chat or message or comment functions on those various platforms. In this radio finance section. We will discuss the outlook for the global and regional economies in ASIA pacific the dominant trends and challenges to watch out for and the effect of events such as the inflationary pressures that we've been experiencing lately. Economic slowdown, the continuing geopolitical instability and of course the long awaited
05:55
reopening of china and the impact on the various banking sector in the region. Global economic activity is experiencing a broad based and sharper than expected slowdown with inflation higher than seen in several decades. The cost of living crisis tightening financial conditions in many markets rushes unresolved a venture or invasion of Ukraine and the lingering COVID-19
06:23
pandemic and now with China's reopening and perhaps ah Specter of covid resurgence all weigh heavily on the media output for the banking industry. In AsIA pacific according to the international monetary fund or I. M. F. Global growth is forecasted to slow from 3.2% in 2022 under 3% 2.7% in 2023. This is the weakest
06:51
growth profile since 2001. Except for periods during the global financial crisis and the acute phases of the covid 19 pandemic where growth has to even further in ASIA pacific. The banking industry has shown resilience. It's effectively manage downside risk and accelerated digital adoption with the consolidation and optimization of operations. The industry has been able to support customers
07:18
across different segments and continue business as usual. The push towards digitalization and the advent of digital and the greek economy saw increased traction for the adoption of digital, green and sustainable finance. We have also seen the emergence of new digital assets and decentralized finance, emerging pirates and experimentation with central bank digital currencies but also
07:47
new financial market infrastructure that will be empowered by new distributed ledger technologies that will make stable coins tokenized assets safer, more efficient alternative to existing infrastructure. However, banks will still need to pursue new sources of value beyond those provided by new products, customer segments of business models by responding to market shifts and devising new
08:17
competitive strategies while increasingly partnering with non traditional players to future proof themselves banks, foreign future opportunities from some of these trends that we've discussed decentralized and sustainable finance adoption of open banking as well as Blockchain and cloud technologies. Banks have to take into account these emerging trends and developments as customers. Digital experiences are reshaping traditional
08:45
banking services and relationship. Now for our panel discussion, we want to start with the economic outlook right. The IMF has struck an even gloomier tone and its forecast for 2023 then in 2022, citing many downside risks and headwinds, it continues to be cautious about economic recovery and growth prospects. In 2023, I'd like to get our guest view on how
09:12
you see the pace of economic recovery in Asia pacific the prospect of ending covid 19 fully and how much of a uplift would give economies in the region And if China will finally abandons its zero covid policy and reopens its for this. What are the risk of a major financial market events in 2023. And to start off with
09:43
a comment from john Radhika Radhika selina given the take on ASIA pacific growth and risk that you see this year, starting with john okay, I will start with china as we all know, China has ended in 00 covid policy. All indications are pointing to the fact that the country is opening up like in cities in Beijing shanghai people are getting
10:10
out to the streets streets are getting crowded, there's traffic jams, most are starting to be filled, People are going back to work. So I think this is a very good sign. Um you know, from what I have read, the peaks of inflected infection in china have already passed actually, major cities. Um so you know, we're gonna have the spring
10:31
festival very soon and I think after that um it should be always small cell in my view. Uh you know, people should be more uh open could be more audacious in terms of going out and spending money. So I think, you know, china's economy is slated to come back strongly as we all know, typically after a pandemic is particularly after pandemic for such a long time,
11:00
you know, three years right now, Usually this is going to be a very strong rebound as we have witnessed, for example, in the 1918 1919, spanish food. Uh and the rebound is actually not just strong, but also for a fairly long time in the case of the United States for example, you know, it has a very strong growth for extended period of over a decade, almost a decade. Um and I would expect something,
11:25
you know similar in china as well. I think that there's still some risks, you know, and you talk about what is um you know, we're getting to the medical field and there's still this new variant virus nuclear coming out from different parts of the world. You know, this one variant from new England, the United States, whether it will have a such a material impact as it used to in 2020
11:49
2021 that that I'm not sure, but and I don't think it's, you know, from a very amateur response, not a medical expert in this field, I that I hope we will not get into a same situation again. I think we're going to say goodbye to covid for good. All right now in terms of economic performance. Um but here's my view um china is noticeably
12:14
different from north America as well as from european union. Um you know, the recession in the US, for example, is purely driven by the interest rate hikes. Um and uh In China, we don't have this kind of a situation. The inflation is very low around like 2%. So the central government has a lot of leeway in terms of using the monetary policy as well
12:39
as fiscal policy to stimulate the economy. The price level is low, the demand, the problem with Chinese economy is insufficient demand. So it's going to take some time for demand to come back, as the you know the physical money in students of the economy start to percolate down to people's pockets. Um So I would say it may take some time,
13:01
but the the end of the day, the government has more leeway in, you know, using different fiscal military policy tools to jumpstart the economy. So I think from this perspective china's economy is relatively in good shape. Um now overall is a, is a target number for 2023. The government has never announced anything yet. But if you look at the,
13:25
The growth targets across different municipal governments, provincial governments, overwhelming majority of these promises and cities have targeted a number that is not a 5%. So, so I think, you know, I'm a little bit more conservative. I think we'll probably, if you ask me to forecast the number, I would put the number at around 5% and if we're able to achieve around
13:49
5% for this year, that would be a great achievement. Okay, so you see China with the borders reopening economy economic recovery will be on page 5% growth. You predict radical. Want to hear from you about how you see the Asia Pacific economy doing now, that China is back on track. You know,
14:15
borders are open. Thank you so much. So I think I'll probably take the other part of the geography. Um you know, since john did mention about china extensively. So I think if you were to look at the Asean space, uh and uh you know, South Asia as well, um I think few teams that will play out this
14:35
year. I think first of all is the change in the growth mix. I think what china is going through this year uh is something that the Asean region went through last year, which is that reopening, you know, boost dynamics uh that helped growth. And apart from that there was also a huge export.
14:53
Like in fact the first part of the export like benefited electronics exporters. That's when you know when the pandemic was through and there was a very strong demand improvement for semiconductors and consumer electronics that after last year we saw the commodity of cycle. Um And that helped some other parts of uh you know the region namely Indonesia and Malaysia to start with.
15:18
So exports were doing well. There was Reopening dynamic but we're going to 2023 I think we're going to see moderation on both these fronts. You're not going to see the reopening tailwind anymore. But that said between exports and domestic domestic resilience will become very important uh heavily reliant on exports. Um I think will uh you know,
15:39
face a softer patch than the ones that are more domestically driven. Um So that's the first thing that we think and that's the next would be um terms of trade relief, you know, last year because of um we like to call it uh you know uh covid um inflation and followed by the conflict inflation. So you have had commodity groups not only energy but beyond that industrial metals and
16:03
all of that really rallied sharply this year we think of course china's reopening is bringing is is kind of marking a floor for some of the commodity groups. Uh but nonetheless compared to last year there's gonna be some relief for current accounts and such. And the third we think will be that monetary policy and fiscal policy will try to complement each other.
16:24
They have to move in the same direction. You mean you know when multi policy tightens you'll have fiscal policy as well which would tighten which then because that plays into your inflation dynamics. So we do think these three things will dominate um and something that will impact much of the APAC region. Uh And the question also mentioned about risks in the past and I just mentioned that you know
16:46
typically when the U. S. Rates are an up cycle, we do expect E. M. Stress. Um Asia has been quite has fared very well has been fairly resilient. Okay we're going to have lost connection with so um you will get connected back but we'll move to you know for your take on
17:13
economic recovery and also to back. I just sorry about that, I just made some good so we're just talking about stress and I think we have seen that in pockets of South Asia, we have seen them in Sri Lanka and Pakistan for example. So that will be something that will be under watch as well, not like the pandemic triggered it but they were already misguided economic policies that
17:37
played into the mix over to Selena. Okay well good afternoon to everyone. The benefit of going last is that actually I can see that you know, the two former speakers have said a lot of things already so I'll keep my answers short. But I think generally you know 2023 probably will be what I call a comeback here. 2022 was very volatile for markets. Growth was on the down slide from here.
18:03
Although a lot of the clients that we speak to in recent weeks suggest that a recession is imminent globally. But actually if you look within Asean, I do see pockets of resilience. So although we are expecting a growth slowdown but I don't think that it's going to be you know very you know, a recession by any means. Um and I think one thing to note really
18:26
is that the big tailwind, the big headwinds for last year, which was really the Russian Ukraine wall, the aggressive monetary policy tightening and china zero covid strategy now has effectively turned into somewhat of a tailwind for the Asean economies because inflation looks like they have picked and because they are stabilizing central banks are you know, probably in the late cycle they may be pausing sometime towards
18:51
the middle of this year. In china obviously has announced its reopening earlier than expected. So I do think that although the macro economic data, especially the growth front will still be fairly weak in the first quarter of this year but assuming that, you know, there's no reversal of the policy on the china's front as far as the company's concerned, I do think that there probably will see some stabilization and
19:14
pick up in terms of the growth momentum in the second half of this year. That's not to say that everything is hunky dory either because if you look at the key risk that has dominated you know, the world in the last 23 years actually they really haven't gone away. So I'm talking about geopolitical risk. You know, we live in a very polarized world and as far as the US china tensions and strategic rivalry for
19:39
advanced manufacturing, especially semiconductor chips are still there and we haven't had any resolution on the Russian Ukraine front either. So the tendency I think for some countries to slip back into more inward looking or protection list measures is something that still warrants some watching. Thank you.
19:57
And then we'll talk some more about that geopolitical instability and conflicts especially in this part of the world between the US and china. But now I want to hear from Stephen from a banking credit perspective on apec growth and especially his take on china as well, china has taken step through the last year to the risk, especially in real estate as financial services and
20:28
also um in restricting, you know, decentralized finance and digital assets as well as in the tech sector in general, how that impact china's financial credit landscape as well as the region. Sure, thanks so much and and and good afternoon everybody. Um In a sense, I think I can only echo uh many of the comments that have already been made uh
20:56
if you look at the Asia pacific region outside of china, you know, the two primary waits on the economy right now. Our trade and inflation uh trade is actually remarkably weak uh And and down over the year throughout much of uh East Asia and Southeast Asia, having to do with weakened demand from north America, weakened demand from europe.
21:23
And of course the weak demand that has uh come out of china as well. Uh imports have largely been flat over the course of the last year uh in china. So that's a big weight on all of the the export reliant countries of the Asia pacific region add to that inflation Selena mentioned, I think rightly so that we're in the late stage of uh inflation and monetary policy tightening.
21:51
Um It doesn't mean that inflation isn't behind us completely. Uh The top line inflation peaked some mostly around the region around september september or october although a core inflation and food inflation in particular is is very very high still. So there's still some issues in terms of managing inflation. So central banks will be cautious,
22:17
we're likely to see another hike or two through this quarter into perhaps april of this year before. Uh the central bank's reach, you know what they call their their their terminal rate. My guess is that they stay there and probably follow the lead of the Federal Reserve in terms of uh trying to manage uh currency values foreign exchange over the course of this year and we'll see some easing
22:44
of monetary policy late in the year or early next year. But I mean there are, there are strength in the economy as well and indeed uh the Asia pacific region uh is outside of the Middle East is the fastest growing region in in the world, even though it's slowed down. Uh the demand for services is fairly strong. Domestic spending continues to uh drive economies uh coming out of the covid cycle last
23:12
year. Uh And traveling tourism is helping pick up, particularly as borders have opened one around the world. And then of course more recently with china and we'll see more spending from chinese tourists throughout Asia in the, in the coming months. So we're probably maybe at the worst of the cycle right now. And I think beginning in the second quarter,
23:36
certainly by the second, by the middle of this year, we'll see some improvement in the economy, particularly. Uh Two things. Two risks. One of course is whether europe and north America fall into recession. The conditions are actually looking a little bit better today than they did about a month ago in both europe and north America.
23:57
We're already almost through january, which means that the winter heating months will come to an end soon in europe. And so that impact of natural gas prices will fade in europe and they've had a pretty mild winter so far. So that boats pretty well, if those economies can rebound a bit in the second half of the year. And indeed if china comes back as I think it
24:21
will. And as john mentioned uh, that will go a long way towards uh putting a floor under commodity prices and raising demand for um export goods from around Asia as well. There are risks. I guess that's the, we need to of course, uh mention the uncertainties. I do wonder in a sense how quickly china will
24:46
be able to turn around. I think uh, the consumer side of the chinese economy will come back very strong. We've seen that everywhere in the world that comes out of, of Covid, um, I'm not so sure how strong the ultimate growth rate for next year can be if the housing market, the property development market uh, isn't stabilized and actually get back on its feet and we see construction activity returned
25:11
to china. I think there's some uh question mark there. I don't think china has completely de risked to use the term that you used in terms of the property sector market so far. And I do think one of the key factors for china and maybe this is a longer term effect for china. But of course the news came out yesterday to
25:33
hit all the headlines about the population decline in china last year. And of course this is no surprise to anyone. It was, it was going to happen sometime very soon. Looks like the numbers are showing it for uh last year. What that means is productivity growth is really key to the long term growth rate and prosperity for china.
25:53
And what that actually demands then is really an efficient allocation of capital in china. And for that, I think china needs to continue going on in opening up its financial sector of inviting uh foreign financial service firms into china, providing that competition that may be required to truly create an efficient allocation of capital that maybe wasn't so important when you've got strong population growth and rising
26:19
education levels and lots of infrastructure development, you don't have to be quite so efficient capital allocation, but now it becomes critically important. So that's a bit of a longer term risk, but seems timely to think about in terms of what's just been in the news the last couple of days. Okay, how do you see that affecting credit in the banking industry around in china,
26:43
around the region? Well, certainly that the turnaround uh will help the banking industry and I think particularly if um the efforts uh right now to try to provide additional liquidity to the property development sector means that construction that has been stalled, actually works towards more of a completion and that means that buyers who have been boycotting payments because they haven't seen any any
27:12
progress on their units will actually begin uh mortgage payments. Again, that certainly helps in terms of the banking industry being able to turn around and and and lend further and manage the balance sheets in a more appropriate way. So I think that uh boats pretty well and again, demand from the private sector from the consumer sector should be fairly strong as well.
27:37
Okay, and uh okay, now, so with the real estate sector, you know, the issues not fully resolved, you don't think that what do you think on John's and uh prediction of 5% growth for China this year, I would love to see 5% growth in China this year. And I think the potential is there uh for 5%. I do think though that there are some of these headwinds.
28:05
Uh and there could be, it really depends on how quickly consumers are able to come back. Uh certainly higher end households will be spending. We already see them buying airline tickets and traveling and uh and going out to restaurants looks like it's going to be a standout lunar new year this year for spending. But I think what really matters is whether middle income and lower income households can
28:31
continue to spend. And then again, I think given the size of the property development sector and the role that it plays in the economy, frankly, I think that's the big question mark of whether it can contribute what we might truly expected to contribute if it was fully functioning. I think that's probably the biggest risk right now.
28:51
So our, our forecast for growth in China is something less than 5%. We have about 4.34.4% growth uh figured for 2023 now for China. Okay, before we move to the next question, maybe for john to talk about china right, the that issue on real estate, you know how, how the economy grow, you know, with the current restrictions there in the real estate sector.
29:21
Okay, so like a 4.74 point eight students in my position. But anyway, so that's, that's a moot point. I want to talk about your question about the real estate market, I think I do want to point out to the speech made by Vice Premier liu yesterday at Davos is a whole paragraph about real estate property market in that
29:50
speech. I think what's uh significant is that it seems to me the chinese government has taken a almost like 100 and 80 degree turn in the last few months with respect to this industry. Um and I think, you know, the government realizes that the importance of this industry driving economic growth in the huge risk associated with, you know, seeing this industry go down the drain,
30:16
you know, it just cannot afford letting the this industry to to to to go away like this. So I think the government is indeed as we can see, you know from from local speech is indeed finding ways to um to stop the bleed the building to to to help the industry. So so I think, you know, we know that the industry very much reliance on government cooperation, I mean various levels of government in china.
30:41
Uh so so with the central government taking this position, I think there will be a lot of cooperation from various levels of the government to help the industry, you know, the do say tsunamis for the real estate industry in china is very much premised upon demographic trend in the future right now, I've been saying this for a couple of times so far when we all premised upon
31:10
the the notion that each household owns one house. Okay, it doesn't have to be like this, you know, already that the government officials in china advocating, I mean advocating people households to buy more than just 11 housing unit. So, so I think probably we're going to see something along that line in terms of boosting demand in terms of finding policies To help raise the company's.
31:38
Um it's still, you know, it's a very large component of GDP, I think it's about like a 30% of G. D. P. So, you know, I don't expect this to this industry to grow anymore. But at least to maintain the current level, I think it's still still quite possible. So so at least from doing a speech yesterday I see some bright spots that industry should be
32:00
should be able to do fine this year. Okay. You see more more central government support for developers who are kind of in trouble because of the crackdown with on the property sector. Um and we see that you know, because of that there appeared to be a kind of diversification, right chinese consumers or you know the population, a lot of the investments are in real estate.
32:28
Now there's kind of diversification into other financial assets. The savings rate for example, over the last year or so have increased tremendously. We'll continue that conversation right now. We want to talk about the banking industry itself, you know, we talk about the industry being resilient and the pivot towards a digital transformation initiative. So Matthew,
32:57
could you share your perspective or some of the key technology trends in banking in china and for the rest of Asia and I think we have a question on how do you see banks budgeting on expenditure for digital transformation initiative and what areas banks will be investing in? Yeah, thank you very much for the question and good morning or good afternoon, depending on where you are in the world.
33:22
Look I'm gonna I'm gonna bring inflation into the, into my response right up front because it's been such an important part of all of the answers that we've heard so far and from a tech perspective, I want to assure you that we're watching inflation really closely as well and particularly the way that ci oh, so that's it. Leaders within fine services organizations are actually responding to inflation because it means a couple of things for them.
33:46
It means that the cost of goods is increasing but also means that the cost of labor has been going up as well. Now this is really challenging for financial services organizations because if we actually investigate what's happening with it, budgets, what you'll find is that they're flat or perhaps in a slight decline. So what are we doing? Well, we're asking Ceos not to do more with
34:06
less but much more with much less. And what they're doing is they're looking to technology such as artificial intelligence such as machine learning and analytics to be able to assuage the capabilities of individual contributors within organizations so that they're able to extract more value from the investments that they've made now on the same path. We've also got an issue around infrastructure.
34:30
What do you do with these math data centers that are housing all of the banking information, the customer data and ineffectively holding the clouds as well? Well, what the Ceo is doing in response to that is sweating these assets longer. Okay, so we're going to start to see the life cycle of a server or the life cycle of storage unit actually be extended through this 2023 period.
34:52
But let me put it for just a moment because what we are seeing, uh we'll call it flat budgets. There's one area that actually bucks this trend, particularly from an fsc perspective and that's this issue of security. If we look back at what happened in 2022 there are a number of high profile security incidents and instances easy for me to say around the region that we're making front page
35:17
headlines and that's absolutely not what a financial services organization wants to see. So what's been the response to this? The first thing is that we've seen regulators around the region start to clamp down and be a far more defined in where data can be stored and what kind of security protocols need to be in place to actually protect institutional information and consumer data as well. Now, there's this new type of attack that we're
35:42
starting to see as well from a security perspective are called a ransomware attack. Our financial services organizations are taking a really different posture to this in 2023 than they were in 2022 because I think the paradigm in the past has always been around this separation of us and them security was about keeping bad people out and I think now in this world of open banking, this world of digital economy, us and them are kind of next to each
36:07
other and we need to take a different view on what security means. So the implementation now of security protocols means that you don't want to just be able to protect yourself but you need to go to the next level. Which is how quickly are you able to bounce back from an attack? What's your level of resilience like? And the regulators of cotton onto this as well?
36:27
We're seeing big changes in the way that the regulation is being written to protect consumer data and corporate data to ensure that organizations that do undertake or receive one of these attacks are able to bounce back really quickly. Okay, great. Thank you Matthew. So during this time, you know, with increasing um digital initiative,
36:51
digital digitalization of the industry, there is also a greater risk and the banks are spending more of their resources in addressing them and they're stretching out investment in their core banking system to this year's as well. Um Now back to china again john Selena. It seems to with the reopening to be kind of optimistic right in terms of your view
37:18
of how it will impact china and the rest of of the region, are there any worries besides of those structural issues, aging population, decreasing birth rate in, you know, in terms of um policies wise, you know, the title group that government appears to have over society over the economy the way they implemented zero. Covid the crackdown on real estate
37:45
and the tech sector. How does it, how does it add to financial stress in china? I want to point out, I'm sorry, go ahead. Uh sorry about that. Um Yeah, I want to point out one factor that may be important in terms of posing a risk to china's economic growth
38:12
that has to do with the Sino US relations. You know, we were starting to see this decoupling going on and this decoupling started out in the very high end of the technology sector. And I do see a trying toward broadening the scope of this essentially export control from the United States. Um and you look at the, you know, expanding attitude list at the Commerce Department for
38:39
example. Um and I think, you know, transports that will eventually make a huge um factory in terms of driving foreign companies operating in china to be, if not already starting, but at least contemporary moving out of china, this is a huge risk in my view. Um and I think the chinese government is cognizant of that and trying to find ways to
39:08
assuage the fact that this. Um but but I think the risk is just tremendous. You know, you look at the actions by apple computer by dale for example, trying to see this trend uh spilling over into the very normal, you know, electronic industries and I think that's a very dangerous trend. This is something that, you know, the business community.
39:31
Um the other communities can do very little about it is purely a matter between the two governments at very top level, two governments between china, the United States and I hope through various values, the chinese leaders, we have to, you know, sit down with the american side and work out a solution, talk about a solution. Um, otherwise I think we are really getting
39:55
down this very slippery slope of essentially a totally bifurcated world and that's not going to be good for china, not gonna be good for the United States as well, but in the whole world. Okay, so, so this by unification, right? This, this confrontation, especially in the tech sector between the US and china where you have,
40:18
you know, US technology company under pressure not to do business in, in china, especially when it comes to sensitive technology, so to speak, semiconductor being one, you know, green technology for example. Um now I know moody just came out a report, I saw technology fault line because of geopolitical tension ah, steven, could you comment on this and what's the greatest greater
40:46
impact? Not just to china, but the region. Yeah, I think uh one way to look at this is to think of decoupling as being driven by two different forces. I mean decoupling has, has in a sense already started. We can see some shifts in direction of foreign direct investment. Uh, you can see some of the benefits of that
41:07
coming to Southeast Asia? And Vietnam is always the prime example, but many other countries benefiting from a shift in investment? But going back to this idea of two patterns, there is first of all the direction that private investment is taking and I think private investment rightly so is simply trying to move away from the concentration risk of having everything in one place.
41:33
And I think in a sense that's natural and particularly as other countries become competitive with china, uh, in terms of labor force skills and in terms of the willingness uh, to accommodate uh, this kind of investment, uh, that, that, that's very natural not that there is an exodus out of china, but there is simply a diversification of supply chains and a little bit of a reduction of that
41:57
concentration risk. So in a way that's a bit normal and was already beginning to start as costs, labor costs in particular in china where began to rise and became slightly less competitive versus say Southeast Asia, South Asia or even latin America. The other side is, is the risk, the risk that john talks about and that's the issue of
42:21
security risk and government policy related to that. And the difficulty here, I think, um, is that security risk is how do you define security risk? Well, you can define it in any way you like, right. And, and it's being defined in a broader and broader way and more and more industries and uh, and how do you,
42:41
how do you draw the line? How do you actually truly identify, well, what's a security risk and what is simply Related to uh politics that remains to be seen uh, and uh, probably will expand before. Perhaps there is some improvement simply because at least in the US uh, one of the few issues that Republicans and Democrats agree on is you know, trying to contain China in in in a certain way.
43:09
Anyway, I do look positively at the discussions that have been taking place since the G-20 in Bali. Uh, and I think it's today that the Treasury Secretary Janet Yellen is supposed to meet with the vice premier and uh, these are the kinds of discussions that as john mentioned are really important in trying to come up to common understanding of how trade should be managed and what are the,
43:32
what are the true issues and what are issues that can be in a sense put aside. Okay. And how would that kind of flow over to trade and the financial services sector and in the use of technology for example. Right. I mean there's technology coming out from from china. You know, they are, you know, cloud services,
43:54
data services provider like Huawei and so on so forth. They are doing business in the rest of Asia. Right, Indonesia and so on so forth. The that create a hard choice for some of these countries to choose between chinese and Western technology to use so to speak, Radhika. What was your view on this?
44:20
Sure, thank you. And I think that that is quite an important spillover from what's happening in china. And I think the uh perhaps we could discuss this later, but uh the geopolitical tensions too and you can call it Cold War, all of that has benefited um Asia, especially the Asean space. Uh and uh you know, you've got this infamous china plus one strategy.
44:45
So most of the companies have been looking, I think the presence of FBI investment into china is still very healthy. But I think there's just a shift in terms of how the supply chain works now, which is not just in time but just in case. So you keep a foot in some of the other countries and some especially give you the example of Indonesia.
45:05
Uh now what Indonesia has done is that it's it's been a commodity exported raw material commodity exporter for the longest time, they've now been keen to move up the value chain, try and export more. I mean get deeper into the aluminum E. V. Industry and for that instead of just selling out there. Um raw material, crude form of commodities that
45:27
attracted investments and china is a very big player in Indonesia in this space. So so in in that in that way I think you've seen china go out and invest as well as well as some of these countries benefit from ordinated for another example would be India for instance, which has seen, you know, some of the consumer electronic companies uh, setting up shop there as well. Um, for example,
45:49
iphone and the likes. So, um, this part of the region has certainly benefited from china kind of emptying that space of certain manufacturing. Um, you know, especially the low end manufacturing facilities and I think as wages have gone up, uh, some of these countries again are more more competitive competitively, um, as well. So you've seen, again, offshore western
46:11
investors as well, as you've seen, you know, china based investors as well, looking to get deeper and there is really a competition in terms of, you know, who can make the regulatory, uh, you know, backbone much healthier. So, uh again, I'll bring Indonesia's example because there was a big, you know, labor law change that was undertaken in midst of the pandemic.
46:33
There has been a bit a bit of back and forth on getting that ironed out, but that's where most of this region is headed, which is, it does realize that being very service oriented as has not been very, you know, job helpful for job creation. So trying to build up that manufacturing base and this provides a window to expand that that footprint.
46:54
Okay. Now, because of that, I have spoken to some bankers, they call it the real painting of china, right? This whole china plus one. and obviously some countries, some markets in Asia, specifically Southeast Asia has benefited as ridiculous, shared. Um and and that has also caused china to be
47:16
closer to some asean as a region. We see capita and wealth flow coming out from china as a result. What have been the net impact of that for the region as a whole? Um maybe Selena. Okay, thank you. Actually, I'm gonna stick my neck out a little bit here and say that my growth forecast for the Chinese economy this year,
47:42
it's actually 5.3%. So it's slightly higher than I couldn't help respond to the discussion going on between Not because I'm a China bowl per se, but mainly because of the very low-based effects from last year. Right? I mean fourth quarter growth was above 2%, 1st quarter, maybe slightly over 3%. I think second quarter you're going to get a
48:05
huge jump is probably going to be about 7% and a lot of the provinces etc, although there's no national growth target have set it about 5% or so. So I think what's more important than, you know, the away from a zero covid policy is actually the very important policy shift that we're starting to see in the property market front. I think john alluded to that earlier.
48:26
So I think to be the key risk about China really is the confidence factor. I mean financial markets have rebounded back very strongly. So I just give you an example, country garden for instance, you know, the 2025 bond at the worst last year when confidence was very low as trading less than 10 cents to the dollar is now back to around 70 cents to the dollar.
48:46
And the policy shift Israel because if you remember Sifi which actually defaulted offshore, they have just been given approval to do an on shore funding. So you know, the policy support I think will basically set a floor to the property market, but that also ties into what I see as the key risk for china. It's a domestic confidence that really matters Because last year household deposit savings was
49:08
very, very high. You're talking about 17.8 trillion remedy, you know, weigh in excess of the 10 trillion that we saw the year before. So the reason for this excessive savings suggest that you know, consumer confidence is weak and a rather safe rather than spend. So now that we are having a reopening the question is whether they're going to deploy
49:25
some of these savings back into the consumer spending whether you spend it on shore in china or they go on a revenge travel and spend it in the Asean countries or elsewhere in the world. I think that may mean that china could potentially be a key contributor to global growth when the develop markets are performing very poorly this year. So you know, your question about the wealth and capital flowing out from china to the rest of
49:49
the region. I mean here in Singapore, we definitely feel it right last year. You know, there are all these stories going around about, you know Bentleys and rolls Royce being bought up by the chinese. A lot of it was of course tied to the tech money and crypto and startups, et cetera. Maybe some of that has fizzled out a little bit
50:07
this year. But I think the reopening of china essentially will usher back all the tourism receipts. And if you look at the Singapore Tourism Board, they have given a fairly robust forecast for both visitor arrivals and also tourism receipts for Singapore in anticipation, you know that the chinese tourists will be a key part of that. So I think that also means that we have to brace ourselves a little bit because the
50:31
assumption was inflation late last year and it's going to stabilize and subside this year. Right. But if chinese money comes back in a very, very strong way, it could actually contribute through higher demand for goods and services. And in turn it could mean that structurally inflation could stay elevated for longer, we're not going back to the pre covid days of inflation.
50:52
So even in Singapore, a lot of the F and B. Entertainment, hospitality, hotels, tourist sites, they're all gearing up for the potential wave of tourists coming back. So we'll have to wait and see, okay, and with that, you see kind of inflation accelerating prices going up for the that's really on the short term. But I think on the medium term it goes back to
51:18
the whole issue about um us living in a polarized world, US china strategic rivalry on some key industries being there. You know, as economists, we always look at what's economically efficient, It doesn't make sense to, you know, diminish china's role as factory of the world and to have additional duplicate production china plus one type of diversification strategy.
51:45
Right at the end of the day, the manufacturers would have to pass on the cost to the okay, unless you have other factors which Stephen, you know, alluded to this whole definition of security, right? Especially national security and that's the reason that the US has cited for its hardened position against china and china's involvement in sensitive technology.
52:14
Now, what would it take for for that relations to improve, you know, what kind of signals I guess should be coming out from china more so from china than from the US john okay, yeah. First of all, let me make a comment about this idea about national security uh played out international trade, there's a there's a broader trend towards what I called
52:40
the national securitization of trade. This issue actually, you know, it is indeed being supposed to be regulated at W. T. O. In the GATT agreement, there is indeed an article I think, remember if I remember this, correct, this Article 21 I believe, talking about the national security exemption to government intervention in free trade.
53:03
Um, and and the notion that is mentioned in that article is actually very narrowly defined. It's called uh it's called the uh strictly referring to uh national security interests, I think, Essential Security, I'm sorry. Yeah, it was According to essential security interests. And if you look deep in detail about Article 21, they're really talking about things strictly
53:28
related to military and defense items in trade, things related to war, for example. But now these days, the whole notion of national security has been just broadened to a very large extent. I have a phrase, for example, is a total adulteration of the concept national security, for things including, for example, statecraft and politics Economic security.
53:54
I mean, you know, if you've heard about the term economic sovereignty, right, things like that, National economic competitiveness of national technology, competitiveness, things related to terrorism, possible crimes, even corruption, you know, climate agenda, um, you know, security, all these things can be lumped together as a national security.
54:18
So, you know, if you have such a broader interpretation of national security, um, you know, I see free trade going down the path of limited trade, managed trade in the end, it's gonna be no trade. So, you know, I think this is a this is a great issue that has to be really, really discussed at W. T. O. Level. People have to come together to come up with
54:41
some consensus regarding, you know, what is the western red line? What's the what's the red line here? Right? And uh you know, the W. T. O. Member countries have to come to some consensus about exact definition of national security otherwise, you know, given the politicians uh this wild interpretation while advocation
55:04
of national security, you know, this is this is a major mess your systematic threat to global trade to globalization. You know, this is not the uh if it continues, we're going back to the 31 days. And so you know, you're kind of saying summarizing is uh us kind of returning inspect on W.
55:35
T. O. And the room based trading system. Um and we're here since the trump administration and and even now with the biden administration, they have been critical of the beauty o obviously china has benefited since its membership in 2000 and entering the global trading system and and so on. But I know that there's been an accusation to say that it's not totally follow the rules as
56:02
well and now to want to kind of you know, use the route for its benefit. Maybe maybe steven. Well, I I think indeed that's the that's where the um uh policies from the U. S. Are certainly derived from, you know, looking back in the past and looking at at how uh china and others have in a sense,
56:30
uh you know, twisted the rules if you will. Uh and it's time for all parties to really come together and maybe perhaps rethink or reaffirm uh you know what the rules are for for, you know, fair trade across the world and and and really implement those very fairly. I think one of the difficulties to do that is going back to W. T. O. Probably not.
56:57
I wish it were as easy as going back to W. T. O. You know, that would that would be an ideal world, right? Uh Part of the problem I think is that, you know, we're really in this it's not a bipolar war polar world of east versus west or US versus china. But there are there were in a multipolar world where we have the us of europe china
57:21
Russia India asean, I mean, all these various interests from various parts of the world and managing all these different interests uh is uh it's a tough job. Uh Having said that maybe indeed W. T. O. Is the ideal place for all those interests to come together, but to manage all those different interests in this multi polar world that we live in right now, uh it's it's going to be difficult.
57:46
Mhm. And in addition to that that there seems to be this willingness to not follow the rules right to bend the rules and and to question the rules in the first place that the very foundation of rules, if you observe the U. S. Congress, for example, even within its own party to follow simple rules in terms of choosing a speaker for the house.
58:13
So, so I think that says a lot where the world is going. Um Now we kind of switch here back to the banking industry. We talked a lot about a new competition within the industry. But before that Stephen, if you could also talk to us about the credit outlook for the banking industry in the asia pacific given the environment that we see increasing interest,
58:38
re putting pressures on funding costs, on asset quality and so on for sure. So um you know, going back to uh interest rates uh our outlook of course is that interest rates will uh inflation will peak this year and that monetary policy will begin to ease late this year. Early next year. Selena of course brings up some interesting risks in terms of perhaps higher inflation for
59:04
a longer term coming from uh decoupling uh policies. But I do think at least, you know, if I'm looking at a macroeconomic perspective and the cost of funds, the rising cost of funds that banks have faced over the last uh two years, that at least that is period is just about over uh and things I think I think we have to think about this year as being a transition year as monetary policy rates
59:33
level off and probably stay at a terminal rate through much of this year before beginning to come down next year. So uh cost of funds will still remain somewhat high for the next year, which means that you know, cost management, cost control. Uh Some of the things that Matthew was talking about earlier are going to be very very important uh continuing through this year until
59:58
we see a more in a sense of more uh normalization of the yield curve in which banks can operate in a little easier environment. So that's still in a year to come I think. Okay. And in terms of you know, asset quality, you know, specific markets um do you see the industry overall resilient with the exception of maybe some markets really or Selena
01:00:28
that was a comment from Yeah, go ahead. Uh Yeah, sure. I mean in terms of um spillover from inflation and then to monetary policy and that after I think for the banking sector in general, um Most of the countries they have gone into this crisis with with you know, uh with their books in fairly good condition.
01:00:55
But of course in the first two years you've seen the governments provide a lot of uh you know, help as well to the industry, to the Corporates. Uh So and some of those um forbearance is actually still continue in some countries in particular. Uh So there is I think when the now that the economies are fully open and many of these support measures are taken off,
01:01:15
there could be some impact on the bank banks books as well. But the other part of this story is also about uh you know when when credit is picking up and you've seen that in and quite a few of the asian countries, what's of interest is that Corporates that they the ones that used to borrow much more actively in the offshore markets. Because the Fed has high created a much faster
01:01:39
pace than their local central banks have, have in fact turned towards their own onshore lending books and particularly bank credit. And if the markets are conducive to market borrowings as well. So that's the other trend that we have seen in starting in the past year. And I think that's gonna be in this year as well because we don't think Uh as a house view, we don't expect the Fed to cut rates this year
01:02:02
hold and probably look to ease in 2024 and the similar tune for Asia in general as well. So most of the rate hikes likely to finish by the first half there and then they hold to make sure inflation, particularly core inflation has come down. Um uh you know uh for sure and consider lowering rates especially if growth risks um arise as well.
01:02:26
So that's where I think the interplay of banking sector performance as well as monetary policy is um in in this part of the region. Okay, great. And Selena. Okay. I would say actually there are both pros and cons right process of course rising interest rate environment or if the central banks like the Fed is going to hike and then pause at
01:02:52
relatively high levels typically that is beneficial for Nim. But I also recognize that you know the environment is one where growth is slowing quite dramatically, especially in the developed world and that is of concern of course to this part in Asia because a lot of our growth and trade is tied to the major markets and then if you look in terms of trading activities actually volatility is our friend.
01:03:17
Right? The more markets, the wider the spread you can charge and there's probably a greater churn in terms of the investment in hedging ideas. But on the loan portfolio side I think the risk is of course because of the growth slowdown, you know, you may actually get more distressed situations arising or default or bankruptcies and that's something that is usually kind of like a train wreck,
01:03:45
it takes a bit of time for it to develop. So I think you know there's some recognition that in the equity market downward earnings revisions haven't fully reflected some of that corporate story yet. So I would say overall is relatively resilient, I would say on the whole for the agent banking industries but there are some of these you know, factors that we have to consider.
01:04:08
Okay, great. Thank you Selena. And earlier we talked about increasing competition from digital fintech and decentralized finance players. How do you see that unfolding in 2023 how will digitalization adoption of new technology ownership structure, You know, the shift from capital expense and investment into operational expense,
01:04:35
Opec's and new data technologies such as Ai and ml shift the banking industry in the coming year. Matthew, yeah, there's a there's a lot going on inside the banking sector. There's these huge waves of megatrends that it is coming in to disrupt banks around the region. There's a couple of things that I'm watching quite closely. One of them is this concept of machines as
01:05:01
customers and that's going to radically change the way that financial services organizations are interacting with the world around them. And if we think about this in a little bit of detail, it's no surprise because over the last few years we've seen what I like to call a Cambrian explosion in the amount of intelligent devices that we have available to us available to consumers and also within with other organizations as well.
01:05:29
And this is brought about by the cost of merchant silicon being so low and the fact that we can make just about any inanimate object intelligent. So this puts a lot of pressure of course onto the financial services sector to be able to respond to this challenge. And I think they're doing this quite well the way that we're seeing this expresses typically with a lot of investment around automation
01:05:51
technologies and in particular artificial intelligence. And I think we've learned a lot about a in the last few weeks as well with this headline grabbing chat GPT We're seeing and trust me, we've only just begun on how transformative this technology really will be. It's not far off. We'll actually have GPT four,
01:06:16
which will, you know, not just increase the capability of chat GPT three by an order of magnitude, but something like three orders of So the level of intelligence that we're starting to see exhibited by these Ai creations is actually quite phenomenal. So banks of course are now responding to this. Lots of investment around people around data science and also around the back end infrastructure to be able to support this
01:06:44
because large amounts of transactions that were typically occurring between a human being and the bank are now machine to machine initiated. The other thing that we're looking at of course, is this concept of defi I think the banks themselves are going to start investing quite heavily in finding out how they can themselves decentralized and still be able to remain interconnected in the broader ecosystem of the
01:07:10
financial services industry. So expect to see a lot of spending around research and development within this space and that's going to have a corollary effect as well for the type of trans actions that are taking place. And you did mention your question around tokens around the block chain and what the future will hold within this particular space. And while I think a lot of the enthusiasm if I
01:07:35
put a lot of the enthusiasm for N. F. T. S and for the Blockchain is probably eased through the end of 2020 to a lot of people got battered investments in the underlying technology is good, It is solid and in particular N. F. T. Technology where you're able to apply unique witty to a physical object and then be able to move that into the digital realm and then back
01:07:59
again utilizing this type of tech is actually quite interesting for financial services and it actually starts to blend this this digital world with the physical world will be able to move things back and forth and maintain ownership of unique items. So there's a lot going on in the banking space, a lot of really interesting advancement taking place and it makes me wonder whether banks today are more like financial,
01:08:25
more like technology companies that have a banking license than the other way around. Okay, now on the headline grabbing you know, item you mentioned of chad GPT right for our audience. This might be the first time they are hearing about it unpacked it for us. You know, this is the use of artificial intelligence to generate content. It can be used where lies the opportunity
01:08:53
for application for the banking industry and beyond. Sure, sure. I mean, I think firstly a technology like this doesn't come along too often some people are comparing the rise of chat GPT three to the invention of the printing press. We're not quite sure how disruptive it's going to be but for the people that are listening in, if you're not familiar with GPT three,
01:09:18
I hope you're Googling it right now. But essentially it's a natural language processor. And what that means is it takes large amounts of data inputs across a multitude of languages. And those languages may not necessarily be human languages by the way, it could be plus it could be python, it could enable you to code. So I'll park that 1 to 1 side.
01:09:39
Its capabilities are absolutely enormous. What we're seeing at the moment though is pretty rudimentary deployments of this where it's used as a chat bot and the ability to be able to interact with online assistant if you will from one of the major banks so that you're able to transact or do some basic things without the need to interact with the human operator. I think where this is going to go in future
01:10:04
though, is that it will start to break down that necessity that we have at the moment and this need to be able to interact with the machine through a keyboard and mouse in the future. And this is quite profound the future. The keyboard will be your voice and that means we'll be able to interact with inanimate objects like I was talking about earlier because we're putting so much intelligence
01:10:26
inside it and therefore it's plausible that you could have a conversation with your fridge. Smart fridge that will enable you to transact with. I'll pick on Radhika here with DBS uh and be able to do financial services transactions now to get to that point. Of course there's a lot in the way, there's a lot of development taking place. And of course I keep coming back to this
01:10:49
concept of security because we really are opening ourselves up quite early. The point I want I want to make finally is that this is genuinely revolutionary technology and I know for a fact that the financial services organizations are actively using it and very, very encouraged by what they can do with it. Okay, obviously there's a lot that's written about it that there's a lot of you mentioned one of the potential risk in terms of maybe in
01:11:18
terms of cybersecurity, how it might be used for that. And yeah, well this is where we start to talk about the device ecosystem where we've got machines interacting with the bank themselves. So, you know, it's plausible that any endpoint device could could be vulnerable. So once you see the word smart in front of the technology toast a smart fridge,
01:11:46
that becomes a new vector for attack in the past. Security was far more simple, like I was talking about, you know, it might be a tunnel between two main frames between two banks. Of course that paradigm is decades old and now we've got this very rich ecosystem of attack vectors so it's possible not possible, it's definitely happening where security
01:12:09
needs to go to a new levels to be able to protect our financial services records. Okay great. Thank you. Math. Now talk about financial markets around the region as well and 2022 hasn't been a good year for for financial assets right? With you know uh with the specter of higher interest rate, with the crackdown on tech stocks and technology as a whole.
01:12:35
And you know the you know the drop in the value of many tech stock. S except price barber has someone been deflated with losses across major global exchange at the same time, you know losses also in digital asset exchange. You know with the collapse of the F. T. X. Is quite recent. But beyond that you have terror lunar and so on so forth.
01:13:03
Talk about the emerging stable Coins. What do you see for financial markets in 2023 obviously there's a lot of values in the market with prices low and that is really your area of focus selina. Okay thanks. Uh I think you know it's quite interesting because we are approaching chinese new year. So there has been a lot of function talk going
01:13:35
around but you know someone told me over dinner last night that actually is a no brainer. You don't need a functioning master or market wanted to tell you this. Typically the year of the Tiger is bad for markets. The year of the Rabbit is good for markets. All right. That was very neat summary of what investors need to know.
01:13:56
But on a more serious note, I don't feel that the market has, you know, swung very much from the pessimistic side from fourth quarter last year to a very optimistic start. So I mean, I raised example about the pricing for one particular chinese high, you born developer on the whole china reopening story. But there are many examples of this. The other one of course being the U.
01:14:21
S. Treasury market, right? Because you look at where the two year treasury yield is trading around 4.2%. You look at where the 10 year Treasury yields trading 3.5%. You look at where the fat is heading come february when they're gonna hide another 25 basis points and probably in March again and maybe one more after that they're going to keep
01:14:38
it there. It's going to be closer to 5%. So there is a bit of a tussle of wheels going on between the fat and what they want to convey in terms of their resolve to them down demand and keep a lid on inflation versus markets which are trying to, you know, look further into the future and say, the principle is that the fact we have to cut rates by the end of this year.
01:14:57
Right. And that that's good for, I don't know, but the pricing for the Treasury market looks a bit aggressive to me. Right? Yeah. Okay, sure. I do hope Selena is right. And you know, we can all go long risk the rest of this year, but certainly between the bond markets and equity markets.
01:15:19
Uh there are a couple of things that are playing out and in some form, it's, it's like a rotation last year. You did say, many parts of Asia actually face born or foreign outflows from the bond markets, um You know, particularly in some countries where the proportion of foreign investors presence in the bond market was very high, it almost halved.
01:15:42
While at the same time, equity markets were doing well. Um Go into 2023, it looks like China's reopening as in fact, uh cause a rotation, you've seen money flow out of equities and come back into bonds uh, into Asia. So, a couple of friends, I think in that on in that field that we'll be looking at, and you've spoken about,
01:16:03
uh, the digital assets, uh, and the price bubbles there, of course matters. The digital expert here, but I think from uh from an investor's perspective, I think this long debate over Kryptos role, uh, is it an investment avenue, is it a payment mechanism? And of course many of the central banks and regulators coming out,
01:16:23
uh, to highlight risks, in fact, are not to be too, in the past couple of years. And I think when, what you did see is that when rates are low liquidity is flush and now those risks really show up and when these things reverse out the asset class and whole has had a very tough time. And even there, I think investors have been a bit discerning. You've seen some which are fundamentally flawed.
01:16:44
And you've seen sharper correction there and you've seen some stable assets and memory markets have a very short memory. In fact, if you go back and look at Bitcoin prices now, and in theory, prices now they've gone back the FDX, uh, you know, blowout levels. But I think what this shakeout has basically shown us is that the regulators have to really go deep,
01:17:07
um, and fixed the, um, you know, rules and regulations around it because certainly a lot of retail exposure has been revealed in this particular as a class, and, and, and, and also long risk. I do hope that investors are much more educated this time around before putting the money in. Okay, I have to ask you this, the DBS is one of very few banks that operate a digital
01:17:35
asset exchange. Right. But it is not for the retail customers for sophisticated credited investors. What's the, what's the, what's the house, you, what's the advice to investors when it comes to this space? Um, I think I would certainly not, I would not comment on that because it's a very specific product and the compliance will come after me.
01:18:00
Yeah, yeah. This entire exercise certainly does show us that, you know, retail investors, education, investor education becomes extremely important. Um, so you do go with the assumption that the institution houses perhaps privy to more information than the retail investors. So, um, that's the general advice. Uh, that will go with it.
01:18:24
Okay. Before we get to the concluding remarks from all of you on some of the key trends and risk to watch out for. We've got questions that came and about the future of micro finance and non bank financial institutions. I guess that is um, if I read it correctly in terms of how they serve the underserved market, right, Which is kind of part of
01:18:51
sustainable finance providing financial inclusion and so on, so forth. Ah, not really competing with mainstream commercial banks, but I want to kind of broaden it a bit because in the last 23 years, there has been also a lot of digital only banks have been licensed to operate right too, for the same reason of serving the underserved segments in respective markets.
01:19:18
Um, I don't know whether you have a view on, you know, what does the future hold for this, you know, is there a role for, for such financial institutions. Yes. For the micro finance that serve those specific segments, one can argue that there is the whole reason to exist but for digital only banks that only serve them, you know, do we really need them to just serve this
01:19:45
purpose? Um john what do you think? And I want to ask everyone? Yeah, okay, well this is actually a general problem. You know, usually commercial banks hate to make loans to small and medium size businesses, especially micro financing because the cost is typically high, it's not just like in china but everywhere around the world.
01:20:08
Now the, you know in china we have a very unique situation because the president, she is very adamant about helping you know, these uh essentially the bottom shelf of the society, the rural communities, the people are making small businesses, things like that nature. So in china, you know, the government has developed a set of very unique strategies and policies to help this
01:20:36
type of financing. I actually, I'm a little bit familiar with that through a working with a medium sized city in china, they have come up with some kind of a creative ways for example, I think one example is that the collateral capital is actually also contributed positively by the municipal government's fiscal budget is as a way of alleviating the cost of providing financing to
01:21:04
Yeah, somewhat like a state subsidy. So that having said that I think the kind of digital transformation or revolution as as Matthew was talking about right um may be able to provide some hope of level the playing field between land into big businesses and small businesses. Um And the idea is that um you know, a lot of these sort of very labor intensive work social with approving a loan at the
01:21:33
bank somehow can be done by the machine. And then from the machine's perspective, the bank's perspective um additional economic with the marginal cost of providing a smaller to a a small business might be just the same as a two to a large business because you know, the machine can process information you know very quickly and the amount of information. So so my hope is that the digital
01:22:02
transformation in the banking industry can somehow help with solving this problem. Um and you know, this is my hypothesis, I'm not an expert in terms of retail banking and commercial banking operations, but your experts can tell me rather right or wrong, you know, I think there might be a hope of solving this technology language. Okay, addressing the others of segment to you know technology.
01:22:30
Right? So there's a role in china which is a huge country, you know, which has got a real need to provide. I know financing for small, especially rural enterprises. I wonder whether steven want to have a comment on this as well, I'm not an expert on this either, I must say, but everything I have read about microfinance
01:22:54
that has been remarkably successful tool in lifting up lower income people in small business people uh around the world, this originally came out of South Asia. But if you look at any country in the world, whether it's a developed economy or a developing economy, there is always a portion of the population that is either unbanked or underserved by
01:23:22
banking. And nearly every economy I think could benefit from uh more efforts in terms of micro financing and trying to truly address the needs of uh small small entrepreneurs, individual business people and so forth. Um I think it has been viewed as a very labor intensive operation in the past because there's some training that goes along with this.
01:23:47
If you've never had a bank account, you don't even know where to start. Right? But here again this is where Ai and chat. Gpt and so forth. Where this new technology could go a long, long way uh because the one thing that we do know is that even in lower income households, smartphones are are ubiquitous. And so if that becomes a tool for banking and
01:24:11
banking and providing banking services uh for lower income individuals so much the better. Okay great, thank you. And uh the person perhaps we were all kind of insight from a technology perspective Matthew we wanna kind of echo steven's sentiments though by no means am I an expert, a expert at this space but you know the reading that I have done,
01:24:42
you know, I think about the region that we're in the Asean region, absolute growth locomotive pa possibility for the global economy but we need to lift a lot of people out of poverty, there's a lot of unbanked people and when I look at countries like parts of Indonesia into Laos and cambodia, these sort of technologies can have a profound impact on people's lives and certainly elevate help
01:25:10
elevate people from poverty. Also, Stephen's right on the mark where he was talking about the adoption of smartphone technology, which is a really wonderful gateway to be able to connect with financial services organizations, being about a fintech startup or a traditional firm. And if we look around the adoption rates of of the Asean region,
01:25:33
we find something rather interesting. You know, many people for the last few decades didn't even have landline technology. They seem to leap frogged the landline itself and gone straight to smartphone tech. So that says a couple of things. It says that the investment in underlying utilities and infrastructure is is that to be able to support this.
01:25:55
So that's a great tick in the box. It says that there's a technology savvy pop as well so that people know how to use and interact and are quite native with the tech. So if we're able to lay over the top of that some kind of fabric that connects payment networks and the ability to be able to move money, whether we do this with crypto or whether we do this through more traditional mechanisms I think is irrelevant,
01:26:19
but it's absolutely solvable because the fundamentals are in place. Okay, great. Thank you. Alright, so I hope that answers the question of who will send that question in. Okay. Now to conclude like everyone to kind of talk about the one key trend and one key risk that you will be watching out in 2023 starting
01:26:44
with John and then we'll go down to Radhika Selena Matthew and then finally steal. I think in general 2023 would be a good year. I stick with my prediction that China's GDP people will be around because I was around 5% in terms of the risk, I would refer to something. I'm not, I'm not an expert in that is the variant of the new pandemic of this new virus. I hope it's not going to evolve into something
01:27:13
big. I hope we're going to say goodbye to this for good. And other than that, I'm all optimistic for this year. Do you see china going back to locking down the entire nation again? I don't think so. I think, I think our leader learned the lesson.
01:27:31
I think government learned the lesson. You know, at this point, there's no turning back other than and you know, maybe there's an entirely different variants of this virus that's just killing people like crazy, maybe, you know, we have to go back to that. But other than that, and I don't see that quite like it actually,
01:27:48
even as a, as an amateurish observer. But other than that, I think, you know, should be smooth sailing for the rest of the year. Okay, great. Thank you, john Radhika. Yeah, I would think um, one probably not restricting myself to 2023, but I think inflation uh cyclically is going to come down this year again because of high base
01:28:13
effect. And like I mentioned earlier that COVID inflation followed by conflict inflation. But we do think if we look another, you know, 558 years into the horizon, there are bigger structural factors that could keep inflation as a recurring problem. I mean, things like climate, uh, you know, natural disasters,
01:28:33
you've seen actually green tech, if there is a policy push to move from fossil to green tech at this point, it's still quite expensive. So you could have an underlying price pressure from there as well. And this big talk about league de globalization, whether one agrees or not. I think if the world does go towards, you know, it used to be a point about the lowest price and competitive advantage and
01:28:56
that's where facility should be set up no longer. So everybody wants. Uh So I think that is something that we're looking at from uh, you know, pipeline perspective specifically, of course inflation this year, I think it's going to be um lower and most of the countries uh and the risk if any I would think would be on the again tying it back to E.
01:29:17
S. G. Front. Um you know we are very focused on sustainability the green part of the story but it also has uh the environment part of the story but it also has a social factor. So it needs to be I think played differently for different countries. So you know any countries that are still in the developing part of the curve will go green but we'll go green with a significant lag because
01:29:38
getting to the here and now becomes very important for most of these countries. So uh getting growth up um even if they're for fossil fuel dependent I think it's it's gonna be a slow moving. Okay so this move towards kind of greater green and sustainable economy does bring its inflationary pressure as we move because of the
01:30:04
cost involved, the amount of investment is required. The price point is still high at this point. Thank you Selena. Okay so what I think will be quite transformative is actually the lessons we have learned over the last three years from the pandemic that actually we should expect
01:30:23
disruption whether it's viruses or whether it's from geopolitical divisions or war whatever is the case. So it means that actually we have to be fairly nimble and agile and be prepared for black swan events and gray rhino events and whatnot. So I hope in, you know, whether it's for countries or businesses or even individuals, we don't go back to assuming that life will be just as normal again.
01:30:50
And that means that we won't be prepared for the next disruptive change that comes along. So it could be E. S. G. Could be climate change, it could be another war. I hope not. But you know, we just have to brace ourselves. I think the risk is that um, what I tried to say a little bit earlier is that financial
01:31:10
markets tend to be forward looking but we tend to always try to look at the glass half full when things are looking a little bit brighter. We tend to look at the glass completely empty when things are, you know, when the growth numbers look terrible. So So we swing from one extreme to the other extreme. So markets tend to go through this boom bust cycle cycle,
01:31:30
but we just have to adjust to the volatility I guess. Okay, I guess for you you're kind of more optimistic towards 2023 and pretty kind of very bullish on China. Like I said, I think the low based effects will play in the growth rebound for china. The reopening did come a little bit earlier than expected,
01:31:54
but like what I was trying to convey earlier, I think it's beyond just you know, dropping the zero covid strategy really. I think there has been a policy pivot for some of the key sectors including property and some of the support that they are extending to ensuring that growth remains a priority for this year. Okay, great. Thank you Selena and Matthew.
01:32:17
Yeah, I want to touch on E S G. As well and I kind of think it's something of a double edged sword, there's a lot of opportunity but there is a lot of headwind with E S. G. You know banking, financial services organizations are looking to be carbonized at the moment. Um and the way that we can look at this is to see the big shift between 2022 2023 where
01:32:39
the DSG conversation was largely held by the C suite. You know, it was aspirational if you will 2023 it seems to have broken the bounds of the C suite and moved into the M suite and we know once managers get involved that means these are attached and we're seeing some real action around s within financial services organizations and that's challenging because what this means is there are now mandates and
01:33:06
copies for individuals to extract energy consumption from their daily operations. We're seeing this in it. So less servers, less storage but unfortunately these are the items that are growing inside a data center and then there's the other side of the coin here and I think anyone from the banking sector that's listening to this does need to be cautious and have a backup plan to
01:33:31
think about what happens in the event of say a moratorium on data center construction. We just came out of the moratorium here in Singapore that lasted the last six or seven years. And even with the lifting of that it's still with a lot of caveats. So we know that data centers, massive facilities, put a lot of pressure on water on power facilities and that's why
01:33:53
we see governments putting policies in place that actually limiting the construction of these facilities. Now, if that happens in a part of the world where you're looking to make a large investment and there's a lot of policy attached, the data can't leave that particular jurisdiction, then you need to have plans to back pocket about what you're going to do because it could take you by surprise.
01:34:16
Okay, great, thank you Matthew. And finally steven and what a kind of a more and more question to that is, you know, I do you agree with the I. M. F. Kind of forecast gloomier forecast for 23 compared to 2022 knowing what we know now, you know, I think that forecast was published before china reopened this order.
01:34:44
Yeah, I I have to say the I. M. F does sound extraordinarily uh gloomy. There have been some comments coming out of Dallas that there may be some revisions to the the outlook for 2023. I do think that the opening of china is a game changer in terms of how we think about the global economy and if indeed uh china can come back as quickly as we think it can. If if the second quarter is a strong quarter
01:35:10
for china it continues through the rest of the year, then this year will be a good year and 2024 would would be a gangbuster year. So there's a lot of upside potential there coming out of china and then uh I think there is some upside potential even for uh the outlook for North America and for europe as well. Going back to the just one comment, going back to the comments about E.
01:35:38
S. G. Uh this is a a huge trend that I think um on that is a positive in terms of new investment spending, new technology, particularly in places of the world like Southeast asia where technology can leapfrog into that that that the new tech technology space very very quickly much more quickly because there's less installed capacity that has to be dealt with.
01:36:04
Uh and uh so I think that creates a lot of potential as well. Okay, great. Thank you to Stephen and to all our panelists genre because Selena and and Matthew for your insights. So I I guess if not by consensus but by the vast majority everyone feels 2023 will be a kind of brighter a year. Kind of more
01:36:33
optimistic with China's reopening Of course, you know as a Selena mentioned it won't be totally hunky dory right there are some risk as well um and you know it will be kind of writer for for the U. S. And and europe with coming towards the end of the rate hike cycle. Um and you know markets probably going to be doing better cost, probably gonna go down with you know mother winter mother
01:37:05
than expected. There were worries that you know whether the with harsher winter that that kind of drive up energy costs and drive them kind of into recession faster um but china opening up also create a risk as well as we hear increasingly from from geopolitical tension between the two superpowers, incident sectors in stock in
01:37:36
technology for example access to technology to chinese technology companies but then also create opportunities for markets in Southeast asia with china plus one. So overall kind of more optimistic but there are risks as well. Even in areas such as E. S. G. In the transition, how you know economies
01:38:00
manage the investment and cost of that So many many things to kind of ponder and watch out over 2023. Well thank our panelists for your insights and your analysis and we hope that our audience have found this session insightful and useful. You have missed any part of the session and would like a playback do visit the asian banker, radio finance website where you can download
01:38:28
recordings of this session as well as past sessions until the next event. We wish you all a good day and again, thank you to all our panelists. Thank you. Thank you. Thank you. Bye.
