No Mercy / No Malice: Coexistence or Confrontation?

What’s next for the U. S. and China? This week, we're sharing a recent episode of China Decode. https://www.profgmedia.com/p/coexistence-or-confrontation Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Scott Galloway?

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• 1:39Scott Galloway?

  I'm Scott Galloway, and this is No Mercy, No Malice. The U.S. is the world's indispensable nation. China is the most consequential. Alice Hahn and James King, the co-hosts of China Decode, are our Sherpas for navigating the crisscrossing fault lines of competition, containment, and cooperation that shape sino-American relations.

• 2:07Speaker 03

  One of Trump's many weaknesses is believing he's playing three-dimensional chess when he's eating the pieces. Things are different now. In 2017, Trump visited a China still playing catch-up, calling itself a developing country, needing America more than America needed it. That country no longer exists. China's GDP is 54% larger. Its navy, 370 battle-force ships to America's 296, is now the world's largest.

• 2:47Speaker 03

  China added 78 warships between 2015 and 2023. The US added 20. A single Chinese shipbuilder last year produced more tonnage than the entire US shipbuilding industry has delivered since World War II. Meanwhile, DeepSeek shredded the assumption that chip controls could contain China's AI ambitions. And Xi, who in 2017 was merely consolidating power, has since abolished term limits and purged his own generals. The man across the table isn't asking for market access.

• 3:32Speaker 03

  He dominates many key markets. For example, in renewables, China produces 70% to 80% of the world's EVs, solar panels, and batteries. Xi has built an AI ecosystem, closing in fast on the frontier of artificial general intelligence and processes 90% of the world's rare earth minerals. Trump is not negotiating from the same position he was in 2017. And neither is Xi. Today, we're sharing a recent episode of China Decode, hosted by Alice Han and James King.

• 4:19Alice Han?

  Welcome to China Decode. I'm Alice Han.

• 4:22Speaker 05

  And I'm James Kynge.

• 4:23Alice Han?

  In today's episode of China Decode, we're discussing the most consequential Trump-Xi meeting yet, how China's quietly absorbing Western innovation, and why Xi keeps purging China's top military leadership. That's all coming up, but first, let's do a quick check-in with how the markets are starting the week. On Monday, Chinese stocks rallied, with the Shanghai Composite Index breaking above 4,200 points to hit its highest level in over a decade. Across the Shanghai, Shenzhen, and Beijing exchanges, nearly 2,900 stocks were up. AI and related tech sectors led the rally, with memory chip stocks Jiangbo Long and Tongyou Technology jumping over 10%. China's government bond futures fell

• 5:08Alice Han?

  across the board, with the 30-year main contract dropping 0.39%, the 10-year falling 0.06%, and the 5-year falling 0.03%. The 10-year government bond yield has been hovering around 1.75%, edging lower ahead of the Trump-Xi summit. All right, let's get into it. This week, Trump heads to Beijing for one of the high-stakes meetings of his presidency, sitting down with Xi Jinping as the world's two biggest powers try to steady a relationship strained by tariffs, technological conflict, Taiwan tensions, and now the fallout from the Iran crisis. The meeting is set to begin this Thursday, and on Friday, James and I will be going live on Substack to talk all about it.

• 5:53Alice Han?

  We'll analyze day one of the talks, outlining what's at stake and making sense of what comes next. We'll be joined by the wonderful Kevin Shrew, founder of the technology fund Interconnected Capital, who writes the popular blog Interconnected. Now, join us live this Friday, May 15, at 10 a.m. Eastern Time on Prof G+. If you go subscribe now, you'll get notified before we go live on Friday. You'll get the China Decode newsletter in your inbox every week, and you'll also be the first to know about future live streams. James and I plan on doing more in the future. Go to chindecode.profgmedia.com to sign up. But let's talk about what we know before the meeting.

• 6:35Alice Han?

  On paper, the Trump-Xiu meeting agenda concerns trade, rare earths, semiconductors, Boeing jets, American ag, and a possible new board of trade framework to manage economic competition. But hanging over every conversation is a much bigger question, whether Washington and Beijing are drifting toward managed rivalry or outright confrontation. The timing couldn't be more complicated. The Iran crisis, which remains unresolved, is looming over talks. And at the same time, Xi is reportedly pushing for softer US language on Taiwan in exchange for economic concessions. Beneath all of this is a growing reality. Both sides now openly acknowledge that the US and China no longer see trade and technology

• 7:19Alice Han?

  as economic issues alone. They see them increasingly as national security weapons. James, this is kind of like the Super Bowl for people like us who follow US-China relations. Whenever, you know, the big giants, the heads of state meet, there's a lot of analysis that happens before, during, and after. What is, if you were to look at it, what are your top predictions for what comes out of this summit?

• 7:46Speaker 05

  That's right, Alice. It really is like the Super Bowl for us. It's a time when all the emotions collect together and we get a chance to talk about the state of the superpower relationship. I tell you, to me, the big thing for this meeting, and I believe this is unprecedented, is that I think, for the first time ever, it is the Chinese president, more than the US president, that is the person with the upper hand. I think that President Trump goes into this meeting relatively weakened, at least compared to when he took power in January last year. And I think correspondingly, Xi Jinping, China's president, is relatively strong.

• 8:28Speaker 05

  But just let me try to elaborate why I think this is the first summit between the US and China in history where the Chinese side has more power. The first sitting president to visit China. Was Richard Nixon in nineteen seventy two. At that point, there was no comparison between US and Chinese power in the world. The US GDP, I believe, was about eleven times that of China. Just as a little trip down memory lane, the first president of the US to visit China was in fact Ulysses S. Grant, who went in eighteen seventy nine. But that doesn't count because he was a former US president at that time, though he did spend six weeks

• 9:12Speaker 05

  in China. The last president to visit China was Trump himself back in two thousand and seventeen. And at that point, I think we can all agree that the US was definitely the more powerful of the two countries. But where we stand now, and I, you know, if you disagree with me, please say, Alice. I mean, this is quite a big call I'm making. But where we stand now is the following. In nominal terms, the US economy is still bigger than China. But adjusted for purchasing power parity, China is already a bigger economy than the US. China is at least a peer competitor when it comes to technological advancement compared

• 9:56Speaker 05

  to the US. China is, of course, by far the world's biggest trading nation. It's a much bigger industrial power than the US. It commands about one third of the world's manufacturing output compared to about one sixth for the US. And of course, on the other side, the US has a much bigger and more impressive military than China. But my argument would be unless you're at war, military strength doesn't really count for that much. I think that the key inflection point came last year when Trump had to roll back on the Liberation Day tariffs that he imposed on China. Now, at that point, for a brief period of time,

• 10:41Speaker 05

  the US levies on Chinese imports into the US was about a hundred and forty five percent. Then China hit back, and it said that it was issuing On exports of critical minerals that US technology companies and its weapons manufacturers were dependent on, and within months, the White House had backed down. It had lowered those tariffs from about one hundred and forty five percent to what is currently an average of forty seven point five percent. And I think that, you know, to my mind at least, this shows that when it comes to economic power,

• 11:21Speaker 05

  China is able to weaponize much more persuasive, well, not much more, but somewhat more persuasive power than the US. We've seen it in the critical minerals, but China could also do it in other chokehold industries, active pharmaceutical ingredients, batteries, legacy semiconductors and other items where China controls a massive amount of global production, typically hovering around seventy to eighty percent. So I'm not saying that this upper hand that China has will last forever. Maybe Trump will pull something out of the hat at the summit, but at the moment, that's how I see it. I think this is historic in terms of US-China relations for this, for, for this shifting

• 12:06Speaker 05

  power balance between the two. What are you seeing, Alice? What do you reckon to, to that call?

• 12:11Alice Han?

  Well, I, I love a big call and I, I do agree with elements of it, although I think I'd probably come out with it being somewhat even in terms of the playing field. And my framework for this summit is the question for both sides, what are your asks? And what can you both agree on in terms of concessions? And on the China side, my sense, having just been there for a month, is that the Chinese care about three main issues and then two somewhat secondary issues. The three big issues are tariffs. They probably will want some minor reduction of the current effective tariff rate of, of a little bit above thirty percent. They probably want the section three oh one investigation to go away. Remember that was put into place as a response to SCOTUS striking down AIP.

• 12:57Alice Han?

  So there's a tariff issue. Number two, they will probably, I think, want more clarity on the freeze to export controls. And although I don't think there will be an announcement of loosening of some of the export restrictions on, say, chips, I think the Chinese will be pushing for a continued freeze on both ends, you know, on export restrictions for chips and return for continued export restrictions for rare earths, which, remember, they remain in place according to the current framework until November. And number three, there is a strong push for the so-called Board of Investment Strategy, meaning that the Chinese are probably going to ask for Chinese factories like your BYDs or CATLs, battery makers,

• 13:42Alice Han?

  manufacturers, carmakers, to set up plants in a JV structure, a wholly owned Chinese structure in the US. That, I think, has been signaled quite strongly from Beijing in the last few months. And then the secondary issues, I think, about really the geopolitical ones. Number one is Iran. Some kind of dialogue over how Iran is resolved, although, again, I think the Chinese would rather sit in the backseat and let the other players like Pakistan, the Americans, the Iranians, take the driver's seat. And then number two is Taiwan, although I sense, as we spoke about this previously, James, there will be less pressure on the

• 14:23Alice Han?

  Americans to change their rhetoric or language. I think the Chinese are more interested, actually, in another secondary issue, which I think may come up again, which is North Korea. And so there may be some attempts on the sidelines to reconnect Pyongyang with Washington. You know, Trump may revive his conversations, have a phone call with Rocketman again very soon after this. On the US side, very strongly, you see this from some of the CEOs that are invited. Chen Zhenhuang has just pulled out, apparently. He's not going to be coming. But the Boeing CEO is going to be attending. This is going to be a lean team of CEOs, but I think Trump is signaling that he wants more Chinese ag and aviation purchases coming out of this summit or in a future summit.

• 15:07Alice Han?

  And then Greer is coming along with Besant from the USTR and Treasury Department, respectively. And they, I think, will be pushing, you know, for more, for more discussion about reducing the trade deficit. Although I qualify that this isn't, I think, fascinating that you cited the 1970s. The statistics is pretty startling. The bilateral trade volume, this accounts for both exports and imports, the bilateral trade volume in 2025 between the US and China saw the biggest drop since 1979. That was the year in which the US and China officially declared formal diplomatic relations. So, you know, this is coming at a time where, at least on the bilateral statistics front,

• 15:48Alice Han?

  we're seeing in our contemporary memory, the lowest levels of bilateral trade between the US and China. I think the US share of total Chinese exports to the world has halved since Trump last came to China in 2017. So it's interesting to see how, you know, really since over the last decade, trade has become reduced. Although, you know, if you look into the numbers, actually, it's just being rerouted through these third-party countries, mainly in Southeast Asia, Mexico and whatnot. But what has become, I think, more prevalent since 2017, and I'm curious about your thoughts,

• 16:27Alice Han?

  James, is the dual-use nature of pretty much everything, you know, autonomous weapons, AI, even biotech and pharma. I think increasingly that basket of dual-use technologies has increased from both sides. And you see that in the export restriction programs that they put into place. But the backdrop to this summit, I think, is very much going to be somewhat different to 2017, where I don't think it's going to be as much about trade. I think it's going to be more about some of these dual-use technologies. They do not get resolved, I think, from this summit alone. There will be more to come. And I think she will go to the US at the end of the year.

• 17:07Alice Han?

  But my, you know, one liner takeaway is that this is all about vibes. The Chinese understand this very, very well. And they are willing to play the positive mood music for Trump coming in because he needs to score a real foreign policy gain and he will try to do that in Beijing with nothing really substantive. Maybe a Chinese promise to increase ag purchases and Boeing purchases coming out of the summit. But James, what's your, how do you think about the differences between twenty seventeen and today?

• 17:38Speaker 05

  Well, I mean, I, I, I was just gonna say, I, I completely agree with your point of view that, you know, the rhetoric around this summit is going to be fairly positive, I believe. Uh, but in my, to, to my way of thinking, there is gonna be a disconnect between what the rhetoric says, the mood music, the vibes, as you put it, um, and, uh, and really what the security state in each country is thinking about the other. I don't think there's been the slightest change in that regard. I think both the security state in China and the, uh, the security state in the US views the other as an implacable adversary. Um, and so I think, you know, we're gonna have another replay of this disconnect between positive vibes

• 18:23Speaker 05

  and then the deep state in both countries grinding away, undermining the relationship, sowing suspicion. And that's where, you know, the issue of dual, dual use that you mentioned really comes in because technology is dual use these days. It is hard to get away from. The way in which technology has changed has meant that, you know, the internet, your computer, your phone, all of these things become, well, not exactly dual use, but they could be used for cyber snooping. They could be used by the deep state of the other side. And that's just some of the most commonplace, um, technologies we have when you're talking about, you know, this five G or five point five G, uh, telecoms cables that you lay under the ground.

• 19:07Speaker 05

  Uh, that issue of dual use becomes magnified. So I think that, um, we're gonna get a positive vibe from this summit. Both sides are gonna try and do. That but in the background, the suspicion is going to maintain itself. The two areas that I think the two sides need each other the most at the moment is on the US side. It needs China to try to get to some kind of solution in the war in Iran. And obviously to unblock the Strait of Hormuz. That is a critical interest that I think Washington feels right now. And it needs China to use its agency to get Pakistan back back again to energize, to lead the negotiations

• 19:51Speaker 05

  that might lead to some kind of resolution. And on the Chinese side, you've mentioned it already, Alice. They're always looking for something on Taiwan. Taiwan is so front and center for Chinese policy. Exactly what they might get is really not clear at the moment. They might be looking for some kind of positive statement by the White House. But I think they might probably they'll be pushing for something a bit more concrete. Maybe a severe cut in US arms sales to Taiwan, something like that. This is speculation on my behalf.

• 20:25Alice Han?

  That would be huge.

• 20:26Speaker 05

  I don't have sources on that at the moment, but I think China realizes that it has the upper hand. And it's pushing hard for something more concrete. Whether they get it or not, that's another question. You think that would be too too big to ask, right?

• 20:40Alice Han?

  Well, I think it's a pretty big concession for the Americans to make. They still haven't formalized, in so far as I understand, James, right? They haven't actually delivered on those sales yet to Taiwan. I think that probably is significant because they didn't want to rock the boat ahead of the Trump Xi meeting. But that would be unprecedented, at least from my understanding. Or do you not agree?

• 21:00Speaker 05

  No, I I I think it would be a big call, but I I think China's playing for big stakes this time. You know, it realizes that it is much more powerful than it was in the past. And Taiwan is always its first ask in US-China summits. So they're probably going big. I mean, in terms of their hopes or expectations, whether the US will give it, I I that's another question entirely. And as I said, I I'm not speaking from sources. I'm just, you know, speaking from experience on this.

• 21:31Alice Han?

  Okay, we'll be back with more after a quick break. Stay with us.

• 21:40Alice Han?

  Welcome back. China's economic rise may not have just been powered by cheap manufacturing and exports. It may also have been fueled by a major global effort to absorb Western technology from the inside out. A new study by American, European and Chinese economists tracks trillions in hidden Chinese corporate ownership, finding that Chinese investors heavily targeted research-intensive firms across Europe and North America. But after those investments, innovation didn't spike at the foreign companies themselves. Instead, patent filings surged back home in mainland China. The findings add fuel to a growing fear in Washington that while the West thought globalization

• 22:21Alice Han?

  would change China, Beijing may have been using globalization to systemically accelerate its own technological rise. And now, as the US and China battle over AI, chips and industrial dominance, the question is whether America helped build the competitor it is now trying to contain. James, as a historian, my first reaction to reading this paper, which is published by both mainland Chinese and American economists, I highly recommend, is this sort of 18th century allusion to Slater the trader. For people who don't know who this is, this is an Anglo-American industrialist, he was born British, he went to America, he stole the, or rather memorized the blueprints for

• 23:05Alice Han?

  textile mills from the UK and brought it over to the US, the east coast of America, to set up his own textile empire. And the Brits call him Slater the trader. The Americans see him as a big, Andrew Jackson called him a huge hero and the father of modern American industrialism. The reason I cite this is because it really is a question of perspective, right? And in the game of technological and economic competition, all is fair, at least from my perspective. And this reminded me so much of that example because in some ways, it is, you know, pretty much the same deal. You know, you buy up or you try to memorize the R and D of other companies.

• 23:49Alice Han?

  You then take that home and you boost the productivity and innovation in the mainland. Even if those foreign companies that you originally invested in see profits fall, all that really matters is the technological transfer that you achieve back home. But James, do you agree or disagree?

• 24:05Speaker 05

  To be frank, I'd never heard of Slater the traitor, but that's a great story. First of all, I just want to echo what you said about this study. This really is a groundbreaking study and we're going to be linking to that study in the show notes. Just let me call out the name of the lead author, Luke Leaven, who is Director General of the European Central Bank's Research Department. And he's connected with Jenny Bai from Georgetown and Hong Ru and Yao Junke from the Nanyang Technological University. And they have gone into 160,000 odd cases. It's a data set that big of firms that have done acquisitions in 159 countries. So this is why I think we're highlighting this.

• 24:50Speaker 05

  It's truly comprehensive. And what they discovered is that Chinese investors, these are Chinese companies acquiring other companies, mostly in Europe or the US. They have amassed about 3.3 trillion US dollars in global corporate assets. So first of all, the size of China's acquisition of tech companies all over the world has been a lot bigger than we previously knew. 3.3 trillion is a massive number. And then the second really extraordinary thing about this study is that what the way they managed to do this was to look into the operations

• 25:34Speaker 05

  of Chinese companies that are registered in tax havens, like the Cayman Islands, for instance. And normally, the thing about tax havens is that they're all secret. You can't get the information that you need. When I was a journalist at the FT, we used to try and do this a lot. I don't know how these guys did it, but they managed it and they. Found for instance that about eight hundred billion US dollars in Chinese ownership of companies abroad is held by Cayman Island subsidiaries of those Chinese companies. So this is a massive kind of backdoor, I suppose, to acquisitions all over the world.

• 26:13Speaker 05

  And then the revelation is after that, that these Chinese companies, these Cayman Island companies have been buying primarily tech companies. And they've been buying them apparently because of the pre-patent intellectual property that these companies held. So they're doing that because then they get hold of the intellectual property. And as you said, Alice, that allows them to climb the technology ladder and to take China with them. So what this paper to me has discovered is this extraordinarily vibrant route through the tax havens to the budding tech tech companies in the US and Europe and elsewhere.

• 26:56Speaker 05

  That have helped China ascend the technology ladder to a degree that, well, certainly I had no idea about before. So I think it's a big, I think it's a really big contribution to our understanding of of how the world works. Then the last finding is that once these companies in the US and Europe have been bought by a Chinese company, held in the Cayman Islands or in one of the other tax havens. The the intellectual property is then taken back to the Chinese company and then registered as a patent. And that's one of the reasons why we see China owning so many of the patents in the world these days.

• 27:38Speaker 05

  At the moment, the applications by Chinese companies for patents at the World Intellectual Property Organization at the United Nations is far greater than any other country. From memory, I think it's about one point eight million patents pending, you know, applications pending. And that compares to about five hundred thousand for the US. So I I I think this paper has discovered a crucial kind of backdoor that China used to vault itself higher up the technological ladder. So I thought it was really a fascinating insight.

• 28:15Alice Han?

  But my other takeaway from that, which I found very fascinating beyond the fact that it shows how official data sets. Really underestimate or understate the level, to your point, James, of tech transfers or Chinese companies even buying up through M and A activity, foreign firms via these Cayman Islands tax havens, so to speak. What was also interesting to me was the fact that these companies are doing it by themselves out of their own naked interests, as opposed to it being a narrative that you often hear about it being state-led technological transfer. And what was so interesting to me to see is that you just have these, a ton of private and state-owned enterprises that are going out, finding really interesting technological

• 29:00Alice Han?

  companies in their R and D and investing in them and then bringing that technology back home and filing patents. I think that that somewhat changes the narrative that a lot of people have of it being very top-down. In this instantiation, it feels very much like a bottom-up initiative. If you think about the story of China joining the WTO onwards, it's a story of a lot of companies going out there and finding interesting innovation and technology and bringing it back home. So that, I found that super interesting. And then just, I don't even know how they did it. I was curious, given your background in journalism, James, I was very curious to ask you, how on earth did they go about finding the, you know, the parent companies, the OG parent

• 29:43Alice Han?

  companies of these shell companies that were domiciled in the Cayman Islands and BVI? I have no idea.

• 29:49Speaker 05

  That's a mystery to me, complete mystery. I've tried to do this on many occasions. I mean, I think every China journalist under the sun has tried to do this. This is, we've all known for decades that many Chinese companies go to the Cayman Islands, register themselves there, and then effectively get kind of carte blanche. Nobody knows who they are in reality, because they go under the name of a Cayman Islands subsidiary. And then they use that subsidiary as a camouflage to then do whatever they want to do in the world, sometimes buying a company, sometimes, you know, registering stocks or whatever it may be. But we have, at least in my experience, it's very difficult or nigh on impossible to get

• 30:33Speaker 05

  any kind of information on who those companies actually are and then what they did afterwards. So kudos to these researchers. You know, this seems to be quite groundbreaking to me.

• 30:47Alice Han?

  And what was also interesting in the data set is the huge jump compared to the all the other sectors. So they look at different industries, the top 10 industries in terms of assets owned by China, from manufacturing to energy to mining, information, technology, construction. And manufacturing saw the biggest rise from 2012 to 2014 to 2019 to 2021. So even although we had this argument of decoupling that we started to hear in 2017, 18, you know, in 2019 to 2021, we saw a three times rise effectively in Chinese ownership of foreign manufacturing related companies. That I think is fascinating to me.

• 31:28Alice Han?

  And it kind of chimes with the sequencing, if you think about it, of China really doubling out, doubling down on manufacturing as a share of GDP. You know, as somebody who covers the economy a lot, what was interesting from the 2020 period onwards is this massive decline in the real estate sector and more lending given to the manufacturing sector. And yeah, manufacturing share of GDP increasing as a result. So I found that really interesting is that China actually benefited even more from overseas M and A in manufacturing in 2019 onwards as opposed to before that. Okay, let's take one last quick break and stay with us.

• 32:11Alice Han?

  Welcome back. China has handed suspended death sentences to two former defense ministers as Xi Jinping's sweeping military purge continues. Officially, it is an anti-corruption campaign. But with nearly 100 senior officers reportedly removed or investigated in recent years, the crackdown increasingly looks tied to something bigger. Loyalty, control, and preparing China's military for the potential of a more dangerous geopolitical era ahead. Many of the officials targeted oversaw missile forces, weapons deployment, and nuclear modernization, raising new questions about instability inside the Chinese military. At the exact moment, tensions with the US and Taiwan are rising.

• 32:56Alice Han?

  Xi is trying to build a world-class fighting force, but he's also hollowing out large parts of its top leadership in the process. James, this is fascinating for anyone who is deep in the weeds of China politics. But I sense that a lot of other people are also interested in the internal machinations. Just to summarize, two of the most senior people in the PLA, that's the People's Liberation Army, and remember, this is a party apparatus that is designed to be the military forces of the party. These are the two guys, Li Shangfu, who was the Minister of Defence, and Wei Fenghe, who was the commander of the PLA Rocket Force, which is effectively the artillery service.

• 33:41Alice Han?

  So he's in charge of all the missiles, including intercontinental ballistic missiles. These are the two guys who just recently have been given a death sentence, although there is a two-year reprieve. And as you and I were talking earlier, James, it is likely that they will have the death sentence commuted and have instead life imprisonment. But James, how do you see the importance of these recent moves in historical context? And what do you think this means for the PLA's battle readiness? Just two really easy questions.

• 34:14Speaker 05

  Yeah. Well, first of all, I think these two guys, Wei Fenghe and Li Shangfu, as you said, they are currently, now that they've been sentenced, the most senior Chinese Communist Party officials to be put in prison. This is a big thing in itself. And as you rightly say, Alice, although the sentence is death, there is this reprieve for two years. And in almost all cases, this is then commuted to life in prison. But I wanted to look at this also to discuss China's penal system. It may not be a very light topic, but it is a fascinating topic. Or at least to look at the highest echelon of that system.

• 34:57Speaker 05

  And that is to focus on the jail, the prison, that these two former leaders of the Chinese People's Liberation Army will be going. In all likelihood, that prison is called Xinjiang. It's on the outskirts of Beijing. I I remember I've when I was a journalist based in Beijing, like many other journalists, you kind of go there, you're obviously not allowed in, but you can sort of go to the perimeter and see if you can see anything interesting happening. Of course, you can't, but this is a fascinating place. If we look at who is in this prison Xinjiang, we can see some interesting things about how the Chinese Communist Party works.

• 35:40Speaker 05

  The first is that if you are a former official of considerable status, you get better treatment in the prison than normal people who are sentenced there. So there is a famous inmate in the prison right now called Bo Xilai. He is a former Politburo member, and at one point in Chinese politics, people were wondering whether Bo Xilai would be the successor as president. In other words, he was a rival of Xi Jinping in some people's minds for the top job. According to reports, Bo Xilai is held in fairly comfortable conditions in Xinjiang prison. He's got a cell of around twenty square meters.

• 36:24Speaker 05

  It's got an en suite toilet. Unlike typical inmates who have to wear standard prison fatigues, as a high ranking official, he's often permitted to wear his own clothing, including like a western style suit. He can watch TV normally between, you know, specific times of the day, like two o'clock in the afternoon till nine in the evening. Apparently, senior Chinese Communist Party officials also have access to better quality food. They can have milk at breakfast, and they're allowed to walk in the prison grounds, sometimes alone. They're allowed to receive visits from family members.

• 37:07Speaker 05

  So, you know, it's not, it's not so draconian. That's if you're a very senior official. I do wanna. I do want to make it clear that I'm not making light of being a prisoner in China. I've known three people, all of them foreigners, who've spent time in Chinese prisons. And I must say that in the testimony of all three of them, it is a uniquely harrowing experience. Two of these cases I'm not, I'm not allowed to talk about because they were private conversations. But the one that I, I think resonates with me is that of a man called Sidney Rittenberg, who's now passed away.

• 37:48Speaker 05

  He was an American. He was senior in the Chinese Communist Party during the time of Chairman Mao and was sentenced to 16 years in solitary confinement during two separate prison terms. And I remember talking to Sidney when he was, he was still alive. And he actually wrote a book about this called The Man Who Stayed Behind. That was written in 2001. So a lot of this is described in his book. But I remember him saying that the first 12 months that he was held in prison, he was held in a completely dark cell. And he was in solitary confinement for the entirety of his 16-year duration.

• 38:31Speaker 05

  And, and, and his book and, and what he, what he spoke to me and, and other people about was his, the self-disciplined regime that he decided he had to evolve to survive, mainly to maintain his sanity. And it involved a lot of reading and learning poetry by heart and then reciting those poems so that he didn't lose his mind. What's your reflection either on, either on the prisons or, or, or these two that have been sentenced, Alice? You mentioned the elite rocket force. I mean, this is an extraordinary thing that the head of the rocket force of China, the guy in charge of the nuclear missiles is now in prison.

• 39:13Alice Han?

  Yeah, well, I had no idea about this, the prison side of things. So James, thank you so much for elucidating that. It's fascinating. Just to backtrack a little bit in terms of why these guys were taken out. Now, there's speculation and reporting that the PLA rocket force scandal, which really erupted in 2023.

• 39:33Alice Han?

  Was a series of investigations in response to high-level procurement corruption. And this was in particular related to evidence that had been uncovered at the time that missiles had been filled with water rather than rocket fuel and that missile solos had not been properly built. So in general, the takeaway from that is that there was this feeling that the PLA not only wasn't battle-ready, but there was a level of corruption that was impinging upon military preparedness and ability to compete with, say, America in the future. And on top of that, you know, officially, these two former military high-level officials

• 40:16Alice Han?

  have been accused of accepting and giving bribes. Now, I think in some of the cases that have come out recently, this is related to the anti-corruption side of things, there have been announcements that these high-level officials in the military, in the PLA, have not only been accepting and giving bribes, but they've been promoting their own people. And now, as you know, James, in Chinese political history, there is this system of, you know, high-level officials promoting or bringing up their秘书, their assistants, their secretaries, their chiefs of staff for loyalty reasons. And I think part of the concern, and this is my speculation,

• 40:57Alice Han?

  is that not only has there been graft and procurement corruption, but there could be these sort of rival power bases or factions that have been created within the PLA because of internal, effectively, internal promotion and hiring via these, you know, top-level senior officials in the military. And right now, as we talked previously, James, it's startling to note that the Central Military Commission, which is really the top state and party organ governing the PLA and the combined military forces.

• 41:33Alice Han?

  Is actually carved out such that there are only two members left, Xi Jinping and the Anti Corruption Minister. And so was effectively a seven man team is now a two man team. And that will need to be filled out, I suspect, in the next October 2027 Party Congress. But my takeaway from this, you know, and I think this is the TLDR, is that the Chinese elite leadership has been hollowed out and is not yet ready to do anything significant over Taiwan. And this is why I don't subscribe to the view that in the next year or two, we'll see some kind of Taiwan showdown, because effectively, you know, having elite military leadership is extremely important.

• 42:16Alice Han?

  And I do not think that the government, that Xi Jinping, will take that risk before trying to replenish the ranks. All right, James, you know what time it is? It is prediction time. As you look into your crystal ball for the future this week, what do you see?

• 42:28Speaker 05

  Well, I'm looking at Chinese renewable energy exports. And the reason I'm looking at this is, of course, because of the crisis in the Strait of Hormuz, meaning that getting oil is more difficult and the price of oil has gone through the roof. And so this, of course, has been a boon to Chinese exporters of renewable energy such as solar power, batteries and electric vehicles. So my prediction is that the exports of these items will rise this year by at least 30% compared to last year, 2025.

• 43:08Speaker 05

  This comes after a jump in the exports of these three items by an average of 70% in March. Now, obviously, I think that at some point, the crisis in the Strait of Hormuz is resolved and tensions die down, and therefore the impetus to buy these renewable energies, renewable energy technologies from China will subside a little bit. So we might see the average increase this year go from 70% in March down to at least 30% for the whole year. So that's my, that's my call, Alice. What are you seeing?

• 43:45Alice Han?

  So this segues with the summit that we're about to see between Trappichin Beijing this week. It's just been announced that CEO of Nvidia Jensen Huang, who was originally, I think, supposed to be part of the delegation of CEOs, small delegation going to Beijing, will not be going. And I think that portends that, you know, the H200s that have been formally approved by the Americans for sale to China will probably not be announced by the Chinese in terms of accepted imports. And I think this will be a setback for Jensen Huang, who's still really keen to have a foothold in the China market and not lose out on it.

• 44:26Alice Han?

  I just see so much momentum in the public and private markets for Chinese chip competitors. And I think that the bit government will continue to flex this muscle of saying that it won't need H200s and continue to really bolster the domestic chip industry. As a result, I think there's still a lot of upside in Chinese semiconductor stocks. So watch that space. All right, that's all for this episode. Thank you for listening to China Decode. This is a production of Prof G Media. Make sure to follow us wherever you get your podcasts so you don't miss an episode. Talk to you again next week.

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