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00:00Hello, Telesur English presents a new episode of China Now, our media's production that
00:14showcases the culture, technology, and politics of the Asian giant.
00:18In this first segment, China Currents divides into top stories of the week, such as Western
00:22tech giants going to China, Japanese Prime Minister visiting the country, and China's
00:27breaking through in-brain computer interface technology.
00:31Let's take a look.
00:36China Currents is a weekly news talk show from China to the world.
00:40We cover viral news about China every week and also give you the newest updates on China's
00:45cutting-edge technologies.
00:47Let's get started.
00:57Welcome to China Currents, a weekly news report on the latest developments in China.
01:02I'm Chris, and in this episode, Western tech giants come to China, Chinese Foreign Minister
01:08visits Japan, China's breakthrough in brain-computer interface technology.
01:12First, let's move to Beijing.
01:15The 2025 China Development Forum was held in Beijing from March 24th to 25th.
01:21As a platform for direct dialogue between Chinese leaders and multinational corporations,
01:26international organizations, and foreign scholars, the forum outlines China's annual
01:31development priorities, making it one of the most closely watched events by global investors.
01:39This year's forum attracted 750 foreign delegates, including 86 executives from multinational
01:45companies across 21 countries.
01:48Among them were tech and semiconductor giants from the US and Europe, including CEOs from
01:54Apple, Siemens, Samsung, Qualcomm, and SK Hynix.
01:59John Neuffer, president of the US Semiconductor Industry Association, also attended.
02:04Ironically, Bloomberg recently reviewed that Trump's administration is sketching out tougher
02:09versions of US semiconductor curbs and pressuring key allies to escalate their restrictions
02:15on China's chip industry.
02:17Why do Western tech giants still turn to China?
02:20A key breakthrough in China that can resolve critical challenges in AI and chip development
02:25may tell the truth.
02:27The AI industry's relentless pursuit of higher computing power and advanced chips has hit
02:32a roadblock, overheating.
02:35As transistors and chips become increasingly dense, heat dissipation has emerged as a bottleneck.
02:41In November 2024, Reuters reports revealed overheating issues in NVIDIA's Blackwell AI
02:47chips and server ranks.
02:49By January 2025, unresolved thermal problems, causing reduced computing power and melted
02:55interfaces, forced Microsoft, Amazon, Google, and Meta to slash orders for new chips and
03:02revert to older models.
03:04The information reveals that NVIDIA reportedly pushed suppliers to redesign components, but
03:09solutions remain elusive.
03:11Silicon-based materials, it seems, have reached their thermal limits.
03:15Unfortunately, China's synthetic diamonds can help.
03:19Diamonds' thermal conductivity is 13 times that of silicon and 4 times that of silicon
03:24carbide.
03:26Chips made with diamond substrates could drastically lower operating temperatures.
03:30A report by China's climate securities estimates that diamond cooling technology could save
03:35data centers millions in cooling costs annually.
03:39The diamond thermal solutions market is currently valued at just $20 million.
03:43It is projected to soar to $15.2 billion by 2030.
03:48Western firms are taking note.
03:49U.S. startup Akash Systems, for instance, developed a diamond-cooled GPU technology
03:54securing $18.2 million in federal grants and $50 million in tax breaks.
04:00Yet, considering China produces 70% of the world's synthetic diamonds, most of these
04:05funds may ultimately flow to Chinese companies.
04:09Beyond raw materials, China also holds key patents for diamond chips manufacturing.
04:14Previously, diamond films were either too small, too rough, or too expensive for mass
04:19production.
04:20But in December 2024, researchers from Peking University, Southern University of Science
04:24and Technology, and the University of Hong Kong unveiled a breakthrough method to produce
04:29large, ultra-thin, and ultra-smooth diamond films at a reasonable cost.
04:35Published in Nature, this innovation paves the way for industrial-scale diamond chip
04:38production.
04:40China is also spearheading other next-generation semiconductor technologies.
04:44In March 2025, Hangzhou Jiaren Semiconductor launched the world's first 8-inch gallium
04:50oxide wafer.
04:51While the U.S. poured resources into computing power hegemony, China's focus on practical
04:58applications has driven its rise.
05:00Chinese strategist Professor Wang Xiangshui notes that U.S. tech development is capital
05:05and AI hype-driven, with over half of its wealth funneled into seven tech giants like
05:10NVIDIA and Microsoft.
05:12This obsession with computing power has neglected real-world applications and diversified semiconductor
05:18use cases.
05:19In contrast, China's tech sector prioritizes solving tangible challenges.
05:24Its advancements in aerospace, electric vehicles, and 5G networks have created diverse demands
05:30for chips.
05:31For example, Huawei began developing Diamond Chips technology in 2023 to address heat dissipation
05:37in 5G base stations and low-orbit satellites, following patterns with Harbin Institute of
05:42Technology.
05:43Though China's tech firms lag behind U.S. giants in market value, their demand-driven
05:47model, emphasizing affordability, energy efficiency, and practicality, offers lessons for global
05:53players.
05:54That's why in 2025, Beijing has become a classroom for the world's tech elites.
05:59Next up, hello Tokyo.
06:01On March 22, Chinese Foreign Minister Wang Yi met with Japanese counterpart in Tokyo
06:06during the 6th China-Japan High-Level Economic Dialogue.
06:10The meeting marked Wang's first visit to Japan in four and a half years.
06:14The two sides reached a consensus on 20 key issues, expanding collaboration beyond traditional
06:19economic ties to prioritize marine environmental protection, combat marine debris, and strengthen
06:25monitoring mechanisms for nuclear wastewater.
06:29On March 12, Tokyo Electric Power Company released a new round of 7,800 tons of nuclear
06:35contaminated water into the Pacific Ocean.
06:39Since August 2023, the total amount has reached 85,800 tons.
06:45China has emphasized in their 20 consensus that there is no change in China's position
06:50of opposing the unilateral activation of a discharge by the Japanese side.
06:55The stance underscores Beijing's dual focus on safeguarding public health and addressing
07:00ecological risks to Pacific neighbors.
07:03Pacific Island Foreign Secretary General Baron Waka said,
07:06We have done our best to get Japan not to commence the discharge until there is full
07:10agreement that it is verifiably safe to do so.
07:13But Japan has taken a sovereign decision.
07:15What we need to focus on now is to hold Japan to account.
07:19China conducted independent sampling in October 2024.
07:23On January 23, this year, the China Atomic Energy Agency announced the test results for
07:28the first time.
07:29The activity concentrations of tritium, caesium-137, and strontium-90 in the samples were normal.
07:36However, CAEA emphasized that the results only reflect the radiation level of a specific
07:41time and place.
07:43China will continue to carry out international monitoring and independent sampling to prevent
07:47the discharge of Fukushima nuclear contaminated water into the sea from causing irreversible
07:53consequences.
07:54Moving on, China is promoting public health in the most challenging field.
07:58On March 20, a Chinese patient who can't speak due to amyotrophic lateral sclerosis regained
08:05the ability with the brain-computer interface's help.
08:09Assisted by a neurosurgical robotic system, Chinese doctor Zhao Guoguang precisely implanted
08:15the device into the region of the brain responsible for language motor control.
08:20Although the patient is unable to speak physically, the brain still generates specific electrical
08:24signals when attempting to form words.
08:27The BCI system captures these signals and decodes them using advanced algorithms, effectively
08:33translating the patient's thoughts into spoken phrases.
08:37Remarkably, after just three hours of training, the patient was able to produce full sentences
08:42such as, I want to drink water, and I want to go for a walk with my family, through brain
08:48signals.
08:49Clinical data shows the single-word decoding latency of under 100 milliseconds set the
08:54highest performance benchmark globally.
08:57The system, called Bainao-1, was developed by the Chinese Institute of Brain Research
09:02and marks the world's first successful wireless, implantable BCI designed specifically for
09:07the Chinese language.
09:09Although this technology is just being introduced for clinical application, China's National
09:14Healthcare Security Administration established a market guidance price for treatment costs
09:19on March 12, ensuring that this medical technology remains accessible and affordable for different
09:25income groups.
09:27And that's all for today.
09:28Thank you for watching this episode of China Currents.
09:30If you have any thoughts or comments, please leave it below.
09:34See you next time.
09:44We have a short break, but don't go away because we'll be right back.
10:15Welcome back to China Now.
10:17Today, Thinkers Forum welcomes Professor Shulan, Peter Chun-Hsien, and Louise Vincent-Gade.
10:23Let's see.
10:30If you follow China's S&T development since the late 1970s, China's reform, S&T has been
10:38an area that every generation of Chinese leaders have paid a lot of attention and pushed
10:45for reform and promoted the development of the area.
10:49So I think that has really led to a very strong research base in almost all major fields in
10:58the S&T area.
10:59I think that provided a very strong base, both in terms of research, but also in terms
11:04of talents.
11:06In fact, I think as you all know that the deep seekers, all of the people are trained
11:11locally in China.
11:14That's certainly, I think, the Chinese government's role.
11:18But let me also say that the local government in Hangzhou has also played a very important
11:25role.
11:26It's not coincident to see that deep seekers actually grew out of Hangzhou, where Alibaba
11:32also claimed Hangzhou as a home.
11:34Hangzhou has become a hotspot for innovation, particularly on AI and internet and so on.
11:42And because the local government has been very supportive and they were able to create
11:46an ecosystem that's really very nice for the new startups, for companies to work in the
11:55area without feeling the pressure.
11:57If you think of support research as an industrial policy, then people can say that China has
12:04had an industrial policy for many years.
12:07Because I think China has supported AI research since as early as the 1980s.
12:14I know the Chinese Association of AI Research was started in the 1980s.
12:19So there were, I think, some national R&D plans that AI has been part of that.
12:26But that's mainly supporting academic research in universities, in research institutes.
12:33If you saw the industrial policies more of supporting enterprises, I think that that's
12:39a different story.
12:40If you see Chinese AI industry, it's mainly private enterprise.
12:44They've been playing a very active role, a leading role.
12:47If you know the story about deep seek, this is somebody who's done quantitative trading
12:53and used the money he earned to get into this AI.
12:58Here I think the government policy is more about how to provide proper governance.
13:04I think there were a lot of hypes about so-called the geopolitical competition in AI.
13:10If you look at domestically, AI has been developed more in the sense of how actually it can generate
13:18services and efficiency and so on.
13:22So I think for many of the companies, they worry about how to actually find applications
13:27and how to find business models to make money out of it.
13:30I don't think Alibaba is concerned about geopolitics and Tencent is worried about U.S. companies
13:38and so on.
13:39So they are very much focused on domestic market, they're focused on commercial applications.
13:45So I think that's probably the general context of AI development.
13:52Of course, since 2022, large models became the hot thing for people to pursue.
14:02So I think many of these companies also, they wanted to also try to follow suit and develop
14:06big models.
14:08You might argue that that might be a competition indeed.
14:12Today this model performs better, tomorrow the other performs better, but still in the
14:17context of a commercial competition rather than in the geopolitics sense.
14:23So I would say that that's sort of more the general context of AI development in China
14:28if you look at it from inside.
14:30Basically, if you ask companies, they are much more concerned about how actually they
14:36can get a big model, how they can find applications.
14:40So I would argue that many people internationally see, view DeepSeek as a major turning point
14:48in geopolitics, in geopolitical competition of AI between U.S. and China.
14:56But I think domestically a lot of people see this as a turning point of really making the
15:01big model into what people call the vertical application, that is in specific application.
15:09It would really lower the threshold for many companies to join, to use the big models.
15:14So I think there's thousands of institutions of all kinds that began to use DeepSeek.
15:20And also I think probably several hundreds of millions of people are now using in whatever
15:27the software they can, the hardware they use.
15:30Indeed, certainly I think Chinese media is very similar to the media in New York.
15:36And they certainly wanted to put those in the geopolitical context.
15:40But I think in terms of you look at the company and look at the researchers in universities
15:46and the research institute, they are much different from what you saw in say UK, U.S.
15:53People focus on what they do and they are indeed very excited about the abilities being
15:58offered by all these kind of AI models.
16:02So AI for science and so on.
16:04Here I think there's not much difference.
16:06AI is such a wide thing, trying to separate global AI development ecosystem into different
16:13pieces.
16:14I don't think that's easy.
16:15If you look at the research communities, I think before the year of 2018 or 2019, there
16:25was a very intense collaboration between U.S. and China in terms of academia, very strong
16:33collaborations.
16:35And also in terms of AI system, I think there's also very wide applications and collaborations
16:44and also people circulating back and forth.
16:48So I think there is a sort of kind of global ecosystem that's open source and people learn
16:56from each other.
16:59So for example, I think that some people argue that actually there are some Chinese AI papers
17:06were cited probably most in the AI field.
17:09So you might argue that the Metas model maybe have some roots in the Chinese research institute
17:16and you can also argue Alibaba's model may have also something from the U.S.
17:21So I don't know whether you can have some, whether you're able to say, okay, this technology
17:28is U.S. and indeed, I think there are indeed models from different companies.
17:33If you use that as a way, of course, we know there are all kinds of models from different
17:40companies.
17:48So in fact, back in 2010, I published a short article in the premier science journal called
17:57Nature, where I have actually published a forecast, which said that given the trends
18:02that had been developing prior to 2010, predicts that United States will get into high instability
18:10situation by 2020.
18:12At that point, I had no idea about Donald Trump or that it would be called MAGA movement
18:19or whatever.
18:20If Donald Trump was not there, was probably, was assassinated, things would still happen.
18:25Not now, but four years later.
18:28So we are looking to multiple years of social turbulence and political instability.
18:34My research group here in Vienna at the Complexity Science Hub, we have collected data now on
18:41hundreds of past societies over the last 5,000 years since the first state appeared.
18:49So what we see is that states can actually function well for a period of time about a
18:55century or so, sometimes less, sometimes more, but then inevitably, at least in the past,
19:01they enter into the period of social turbulence, political violence.
19:05So those are end times about which the book is about.
19:09So the United States had a previous period of political turbulence, which peaked during
19:16the American Civil War, and then it continued until, roughly speaking, 1920s, when there
19:22was another peak of instability, like urban riots, assassinations, many other political
19:29violence events, which did not fortunately lead to any kind of revolution or civil war
19:35because the American elites managed to push through a set of reforms that essentially
19:44rebalanced the economy and allowed the United States to become a very prosperous nation.
19:50So the period after the New Deal, even despite the World War II, the wages of American workers
19:58grew very rapidly.
19:59They grew together with the GDP.
20:02But what happened in the 1970s, two generations later, the American leaders have become sort
20:09of complacent.
20:10This is what I call the iron law of oligarchy.
20:14They basically started to go back away from the reforms of the New Deal era.
20:21For example, they allowed suppression of labor unions, you know, there were many different
20:26types of things.
20:27They started to reduce taxes on themselves and so on.
20:30What I call this, they turned on what I call the wealth pump, right?
20:34The productivity continued to grow, but the wages stagnated and even declined.
20:39And so all of that extra wealth that flowed from workers to the economic elites, all right.
20:47So that set up these three factors which drove the country into crisis.
20:53First of all, it created what we call popular immiseration.
20:57This was stagnating and even declining living standards of the majority of the population.
21:03Secondly, it has created a huge number of wealth holders.
21:09So the numbers of deca-millionaires, so people with $10 billion or more in wealth, has grown
21:15tenfold over the past 40 years.
21:19And the numbers of billionaires has grown even more, all right.
21:23The third outcome is because of the immiseration to escape precarious living conditions.
21:30Many people from the common American class, right, they wanted to escape and how do you
21:35do it if you don't inherit wealth?
21:37You go to college and then college degree is not enough, right?
21:41So you try to get a professional degree, a law degree or PhD like what I have and so on and so forth.
21:48So what this created, it has created what the situation you call elite overproduction, all right.
21:55So many, not all, but many of the wealth holders, Trump is of course the best example, but not
22:01the only one.
22:02Michael Bloomberg is another and many others.
22:04They actually try to convert their wealth into political power, all right.
22:10They either themselves become candidates or like supports other people running for office, right.
22:17And so you have many more people now competing for those offices.
22:21And on the other side, on the credential side, we have huge numbers of especially lawyers,
22:26all right.
22:27Law degree is the good route to political office.
22:31And again, you have four, five times as many lawyers as there are positions for them.
22:36And so there is again a lot of elite aspects.
22:39So this elite wannabes, what the problem is, is that some competition for power positions
22:46is good, but too much competition starts to corrode the societal frameworks.
22:55So because we have now three, four, five times as many people competing for, I mean, even
23:01maybe 10 times as many people competing for the limited number of power positions.
23:05So in politics, for example, only one president, 100 senators and so on and so forth, right.
23:10So what happens to those who lose in this competition, frustrated?
23:16Many of them turn into counter elites.
23:19These are people who actually start working against the established elites.
23:25So they attempt now to overthrow them.
23:27And that's precisely what we saw in the French Revolution, for example, with people like
23:36Robespierre or the Russian Revolution, Vladimir Lenin, and many other examples in the history.
23:43What happened was that the counter elites, so they have overthrown the established elites.
23:49So who are the established elites?
23:51Prior to 2016, for example, right, we had two parties and one of them was the Republicans
23:57was the party of the wealth, 1%, and Democrats were the party of the credentialed people.
24:04So the 10%.
24:05So the rest of the population did not really get any voice in politics.
24:11And then what happened was that as Trump in his MAGA movement took over the Republican
24:16Party, they converted it from the party of wealth holders to, at least they claim it,
24:23the party of the right-wing populist party to represent the common people.
24:28And meanwhile, there was some sorting going back and forth.
24:31So Democrats became simply the party of the ruling class because some of the Republicans
24:36left the Republican Party and went to the Democrats.
24:40So many neocons, for example, did that and vice versa.
24:45Some of the former members of the Democratic Party, like Robert F. Kennedy Jr. or Tulsi
24:51Gabbard, right, they switched to the MAGA movement within the Republican Party.
24:57So we have this coalition of counter elites, which is, of course, Trump is sort of the
25:02center figure of it, but it would be a mistake to think that it focuses just on him.
25:07He has, as I mentioned, politicians like Tulsi Gabbard and RFK Jr.
25:12He has also brought up people like J.D.
25:16Vance. J.D.
25:17Vance moved up through the ranks of the Republican Party.
25:21And then, of course, we have wealth holders like Musk, which is very important.
25:25And he also is a counter elite because he was very unhappy with how he was treated.
25:32And on the ideological front, we have people like Tucker Carlson.
25:37So you can see it's a power network.
25:41So they have now managed to get into power.
25:43Everybody now understands.
25:45When I was writing my book two years ago, I said we are in a revolutionary situation.
25:51But now we are in a true revolution because, first of all, there are two aspects of
25:56revolution. First of all, it's a revolution of the elites, right?
25:59And that's what Trump and our network is trying to do.
26:02They're trying to replace the established elites with their own members.
26:07But also, not all revolutions are transformative.
26:10But the intent is to make this revolution transformative.
26:15So, for example, they are trying to change the attitudes towards the elites, genders,
26:21towards their role, very important, the role of America in the geopolitical scene.
26:27It is a very typical thing that once revolutionaries come to power, they tend to
26:32start fighting amongst themselves.
26:36So there is a saying, I forget who said it, but about the French Revolution.
26:41They said that revolution devours its children, that revolution eats its children.
26:48So it is a very interesting question whether this coalition will break apart because we
26:53see the tensions already.
26:54There are some right-wing populists like J.D.
26:58Vance and also Steve Bannon, who does not have any formal position, but he is influential.
27:05And then we have libertarian Silicon Valley types.
27:10So already Steve Bannon is, for example, is criticizing Elon Musk a lot.
27:16But so it all depends on the personalities, whether it looks like, for example, Musk and
27:24Trump have a personal friendship, how well it will survive the tensions and the stresses
27:31that they will undoubtedly go through is a big question.
27:35I don't think that Trump and his movement really understand the forces that drive the
27:41societies. For example, they worry about the well-being of common Americans.
27:46But notice that none of what they have done so far has really helped the workers.
27:53And of course, it's a very difficult problem.
27:55So we would have to, there are many ways that they would need to do it, you know,
27:59increase the minimum wage, actually increase taxes on the rich.
28:03But Trump has done the opposite.
28:05Then industrial policy, which would bring well-paying jobs back to the states.
28:09Actually, Trump is for that, but that takes a long time to implement.
28:14There is another element on the road to crisis, which is the weakness of the state that
28:20results from, becomes much greater than revenues.
28:24And so we get, the states get into debt.
28:27That's not, doesn't always happen, but it's a very common feature.
28:31So what Musk is doing with his doge is actually trying to reverse this problem.
28:39But I don't see them yet understanding that they have to turn off the wealth pump.
28:46All right. So that I don't see happening yet.
28:50Essentially, if you give people power, right, they are tempted to use it for their own
28:58ends, right, for their own enrichment.
29:02That's why human societies go into cycles.
29:05This is the iron law of oligarchy.
29:07One of the Davos, I forget, a year or two ago, was about inequality.
29:12It was the actual, the main theme.
29:14And they all talked about it, but they agreed that, yeah, economic growth will take care of it.
29:20That's a very self-serving attitude.
29:22Economic growth is not taking care of it.
29:23We have lots of economic growth, but its fruits are not going to the common people.
29:28So it's the vested power, vested powers.
29:31They have interest in, they have selfish interest.
29:34And as a result of that, they undermine the societies that sustain them.
29:39And that's how they end up oftentimes in the revolutions.
29:43So far, I'm actually very heartened that we have not had huge amounts of violence.
29:49All right. But we are in a very fragile situation.
29:53It can escalate.
29:54One group starts using methods, the other side will respond, and that can quickly escalate into the actual civil war.
30:02All right. Then territorial fragmentation along the lines of American civil war in the 1860s, that still is possible because now the more liberal states like California, for example, right, as they call them, the left coast.
30:17So California, Oregon, and Washington, they have been actually fairly quiet.
30:24Right now. But it's only been one month.
30:26We'll see. Because they are planning to resist, for example, the forced deportations.
30:32That is a potential flashpoint that can lead to more violence.
30:37Right. But for now, it looks like that the previous ruling elites, right, they have been so shocked by what's happening that they actually don't know how to react.
30:49All right. They have not yet organized themselves into a reactionary, counter-revolutionary party.
30:57This will probably happen, but we'll see.
31:07It is the start of an important bull market in China.
31:10I think we're going through a very, very important shift in narrative, both amongst domestic investors and foreign investors.
31:18When looking at Chinese equities, now China essentially dominates every industry in the world, even at the very pinnacle of technology.
31:25I think this is why DeepSeek matters.
31:28DeepSeek shows that even at the very top of technology, China can compete with the West or even go above the West.
31:35And so this gives a lot of comfort to the leadership.
31:40It's like all of a sudden, the fears that China's growth could be contained by a Western blockade are essentially gone.
31:47And so now we're entering into a new phase where the leadership keeps talking about boosting domestic consumption, about boosting the domestic consumer.
31:57And if you want to do that, the simplest way to boost confidence, because what China suffers from is a lack of confidence.
32:05One way to boost confidence is to get a stock market bull market going.
32:08And I think that started last, in basically February 2024.
32:14So it's a little over a year old now.
32:16And for a year, Chinese stocks have been moving higher.
32:19I think a Chinese equity bull market is starting.
32:22Foreigners are just waking up to it.
32:24Domestic investors are just waking up to it.
32:26Flows are starting to pick up.
32:28But it's just the beginning of a story that should last many years.
32:31I'm sure you've heard the saying that bull markets climb a wall of worry.
32:36That's what bull markets do.
32:37You have all these concerns and the bull markets just drive through them.
32:40And I think that today you're seeing this.
32:43It's very typical behavior where everybody focuses on the negative because we've had three, four years of, you know, really bad stock markets.
32:51Everybody focused on negatives.
32:53I got this isn't going to last.
32:54Oh, you know, real estate, bad news.
32:56Oh, you know, confidence is so bad, etc.
33:00But the markets just continue to move ahead.
33:02It's very, very typical of how bull markets evolve.
33:05When you have to be worried about the bull market is when everybody thinks it's going to keep going higher.
33:09When everybody says, oh, you know, sunshine every day, ice cream for breakfast, when everything is awesome.
33:16That's when you have to worry about the bull markets.
33:18And in China, to your point, we're not there.
33:21Now, there's no doubt that the Chinese economy has had basically five, six really rough years.
33:26Some of that was self-inflicted.
33:28To be honest, you know, the COVID lockdowns lasted for too long and really shook people's confidence.
33:35Now, the reality, though, remains that if you take a step back, China's economy today is by far the most competitive economy in the world.
33:43And you see this through Chinese trade numbers.
33:47China's trade surplus keeps on making new highs every single month.
33:52You know, China's trade surplus right now is about 90 billion a month U.S.
33:57dollars. It's no country has ever run a trade surplus this big.
34:01And it's a real testimony to how competitive Chinese businesses are.
34:05And you take any field, you take automobiles, you take industrial robots, you take train building, power plant building, solar panels, batteries, you name it.
34:15China's at the top of the global game today and to the point where very few can compete.
34:20When you start off with that, like what should be happening, it's all the people making money selling solar panels, selling batteries, selling all the things that China's selling.
34:30They should be taking that money and reinvesting it at home or consuming.
34:34But because their confidence has been crushed, because people are so afraid, they just do one of three things with it.
34:42They either take that money and leave it at the bank.
34:45And the banks, because there's no demand for credits, the banks have nothing to do but buy bonds and bond yields go to new lows.
34:53Option one. Option two, they buy gold.
34:56And then the third thing they do, if they can, is they keep that money abroad.
35:00So you look at Hong Kong, US dollar bank deposits in Hong Kong have grown by 250 billion dollars over the past couple of years.
35:10It's like it's just enormous amounts of money.
35:13Now, if the Chinese government manages to boost people's confidence, both the businesses and the individuals, the money is there and the money keeps coming in, 90 billion a month.
35:24So I think we're in the process of mending that confidence.
35:28And so I actually think that the government's five percent target is achievable.
35:32So really, very few people have traveled in China in the past five years, which is crazy because it's obviously the second biggest economy in the world.
35:42And it's still growing decently.
35:45Just walking around the streets, there's so many car brands that didn't exist five years ago, 10 years ago, producing really high quality cars and at very, very affordable price points.
35:57So the Western world is completely missed out on this story.
36:01I keep saying, look, you have to go see China.
36:04You can't underestimate how much it has changed in five years on so many different fronts, because it's not just the manufacturing.
36:11It's also the fintech.
36:12I wrote this piece about a year ago now called Prejudice in China.
36:17People are holding on to past prejudices.
36:20They might have gone to China 10 years ago, 15 years ago.
36:23And back then, China was an economy that essentially produced cheap goods cheaply.
36:29It's like it was, you know, China quality was seen as inferior for a lot of people.
36:34If you haven't been to China in the past five years, that's what they're still stuck with.
36:37It's a frame of reference that has been bypassed.
36:40You know, the assumption I think most Westerners have is it's communist.
36:44Therefore, it's going to fail because all the other communist countries have failed.
36:49Now, I always say, well, look, the interesting thing today about China is the CCP has been in power longer than the Soviet Union existed.
36:58China doesn't feel like it's collapsing at all.
37:01You know, you're getting better trains.
37:03You're getting, you know, less pollution.
37:05You're getting airports being built everywhere.
37:08China now is even producing its own plane.
37:11China is sending like missions to the dark side of the moon.
37:14So I think there's communist element is a big part of that bias.
37:19I do tend to believe as well that, look, in the Western world, we have this conception that people from Asia can't be creative, that it's almost like we have a monopoly on creativity.
37:31We're always surprised when Asians do better.
37:34And so I think we have this tendency to always underestimate the resiliency and the hard work, frankly, of Asians.
37:41And, you know, today, it's amazing.
37:43I was being interviewed by American TV channel.
37:47One of the first questions they asked was, you know, yeah, but there's no creativity in China.
37:50I said, how'd you figure?
37:51Like, they're producing better cars.
37:53They're producing better movies.
37:56Like, go see Ninja 2.
37:57It's like the world's highest grossing cartoon.
38:00But people hold on to these prejudices long after they're proving to be not true.
38:06You can't understand the Chinese progress, the economic progress, the growth that you've seen, etc.
38:12If you don't understand the level of competition that most Chinese businesses have to deal with, to be a successful businessman in China means that you're going through just insane levels of competition.
38:28And if you don't run twice as fast as the next guy, you're not going to win.
38:33If you look at the U.S., it's like, OK, they decide to do electric cars.
38:38So essentially, they tell Ford, GM and Tesla, we'll give you big subsidies to do electric cars.
38:46And then GM and Ford fail and Tesla succeeds.
38:49And the end result is you get Tesla's for 70,000 U.S.
38:53dollars and Elon Musk gets to be worth 100 billion dollars or whatever the number is.
38:58In China, capitalism works differently.
39:00In China, OK, you know what?
39:01We need to produce electric cars.
39:03And then what happens is that every local party secretary, every mayor, every provincial governor says, I'm going to call my bank and I'm going to say, hey, Agricultural Bank of China.
39:15I've got a local car producer here, you need to give him loans so he can start producing electric cars.
39:21And before you know it, you have 130 car producers in China and it becomes what I've come to call the Hunger Games of capitalism.
39:28And this is what happens in an industry after industry.
39:32But the end winner is actually the consumer, because the consumer, instead of having one guy who's worth 100 billion dollars like Elon Musk, what you end up with is many car companies.
39:44And the consumer in China today has a wide choice of cars that are much cheaper than cars anywhere else in the world and sometimes now much better than cars.
39:54And this is how capitalism is supposed to be.
39:57More competition.
39:58Capitalism isn't supposed to be one or two companies like Microsoft, Google, Tesla that control an entire industry and make super fat margins and end up in a quasi-monopoly situation and then spend a bunch of money lobbying the government to maintain their quasi-monopoly situations.
40:17That's not what capitalism is about.
40:18Capitalism is about companies fighting it out.
40:22And yes, like sometimes making very, very slim margins.
40:26Now, that's part of the equation.
40:28The other part of the equation is a government that does deliver on infrastructure needs.
40:33So it does deliver on the roads, does deliver on the railroads, does deliver on the airports and basically on the backbone that you need to have a modern economy, does deliver on the electricity grid.
40:45And now a lot of people say, oh, yeah, but they've overinvested in this, et cetera.
40:48And that's probably true.
40:49But I think if you're the Chinese government, you say, OK, we're never going to hit it quite right.
40:54Like we're not going to hit the perfect number for investment.
40:57So do we want to overinvest or do we want to underinvest?
41:01If you underinvest, you end up with power outages, which means that you're then hurting industry.
41:06It always makes sense to overinvest.
41:08So the whole system in China is built towards always excess competition and excess overinvestment.
41:17That's how the system works.
41:18But that's how you get a lot of progress and that's how you take out, you know, whatever it is, six or seven hundred million out of poverty.
41:30So I think like nobody had China catching up on the eye as quickly as they've done on their bingo card, it's it's been a very rapid development.
41:38I think it's very exciting.
41:40It highlights a number of trends.
41:42You know, one of the reasons the US was so successful was you had the whole Silicon Valley ecosystem.
41:46Right. And it seems pretty obvious to me now that there's a whole ecosystem in Hongjo, you know, you look at all these companies that are coming out.
41:55They seem to be all in Hongjo now.
41:57You have a whole ecosystem in Shenzhen.
41:59So you already have like two Silicon Valleys now.
42:02China has caught up on the eye.
42:03China hasn't yet caught up on semiconductors, but clearly the government is throwing money at this.
42:09It's throwing human resources at this.
42:12When you look at pretty much every major semiconductor company in the world, whether TSMC, NVIDIA, Broadcom, AMD, now Intel, they're all run by people of Chinese ancestry.
42:27Maybe Taiwanese, maybe.
42:29So very clearly there's something in the Chinese culture that like works well with semiconductors.
42:36So I think China will catch up.
42:39Now, look, I've been thinking for more than a year that it's Chinese equity is the place you want to be today.
42:45Look, the way I look at it, Chinese equities right now are still not very expensive.
42:50They have massive government support because bond yields are very low in China.
42:55Retail investors are taking money out of the bank.
42:58You're earning zero percent at the bank.
43:00You're still getting good dividend yields on a lot of stocks.
43:03So the gap between dividend yield and bond yields is close to record highs.
43:08And you've got strong momentum now after a lot of bad momentum.
43:11So, you know, you go through your checklists like, OK, good valuation, good momentum, good policy support, good earnings yields.
43:19It's like check, check, check, check, check.
43:20If you don't buy now, when are you going to buy?
43:23So I am optimistic on China.
43:26Again, I think it's the most competitive economy in the world.
43:29I think that's a fact.
43:30It's not an opinion.
43:32And this was another episode of China Now, a show that opens a window to the present and the future of the action giant.
43:41Hope you enjoy it and see you next time.