China Decode: The World Now Views China More Favorably Than the U.S. (ft. Selina Xu)

Alice Han and James Kynge start with Trump's claim that China ran an influence operation using voter files from over 220 million Americans, and why Beijing is calling it fabricated. They dig into what the underlying intelligence actually shows, how it lands just two months before Trump's planned visit to China, and what it means that global public opinion is now tilting toward Xi over Trump. Then, Selina Xu, head of China research for former Google CEO Eric Schmidt, joins to talk about her recent trip to China with Schmidt, where the U. S. and China each have the edge in the AI race, how culture and adoption differ between the two countries, and whether Beijing's pushback against emotional dependence on AI is a sign of things to come. Subscribe to China Decode on Substack for weekly analysis, livestreams, and deep dives into the biggest story shaping the global economy: chinadecode.profgmedia.com. 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.

• 0:00Speaker 00

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• 0:31Speaker 01

  Hogging seats on a crowded train, not saying excuse me, watching videos on your phone with no headphones in. Sometimes it feels like we don't know how to act anymore. What we have been seeing increasingly is people breaking rules. Why should I play by the rules if nobody else is going to do that for me? This week on Explain It To Me, how to mind your manners. New episodes Sundays, wherever you get your podcasts.

• 1:04Alice Han?

  Welcome to China Decode. I'm Alice Han.

• 1:07James Kynge?

  And I'm James King.

• 1:08Alice Han?

  In today's episode of China Decode, we are discussing Trump's claims that China interfered in US elections, and then we'll chat with Selina Shrew on the latest on the AI race. That's all coming up, but first, let's do a quick check in with how the Chinese markets are starting off the week. On Monday, markets were mixed. The Shanghai Composite rose 0.85%, while the tech-heavy Shenzhen component fell 0.71%. The CSI 300 was up 1.53%. Chinese banks performed well, with ICBC up 2.25% and the Agricultural Bank of China up 3.44%. The People's Bank of China kept rates unchanged, which have been at record lows for 14 consecutive months.

• 1:52Alice Han?

  All right, let's get right into it. President Donald Trump's new claims that China may have interfered in the 2020 US elections are causing backlash within China. China's Foreign Ministry called the claims, quote unquote, "entirely fabricated and aimed at vilifying China." It threatens to upset any advancements the world's powers have made with each other this year. The news also comes as Pew polling finds that China is now viewed more favorably around the world than the US is, and that more people have faith in Xi Jinping than Donald Trump. James, before I get into the startling polling data, which is its own kind of headline story, let's do a bit of an update in the Beijing-Washington relationship.

• 2:37Alice Han?

  Things look to be pretty smooth sailing from Trump's visit to Beijing in May, but I think we're starting to see some hiccups along the way, largely with this now allegation from Washington that China has been involved in election meddling, mainly political interference in the 2020 election. And Trump is saying that dozens of significant CIA and NSA records show that China was targeting voters during the election. And although this isn't seen as vote tampering, it's seen as vote influencing. Now, the Chinese Foreign Ministry has come out and said that this is basically a fabrication,

• 3:20Alice Han?

  and that China has not been involved in any kind of election interference. But I think the big question I'm still puzzling over is why is Trump picking up on this issue or relitigating an issue, you know, six years ago? Obviously, this is a sore topic for him because he lost that 2020 election, but I don't understand why he's bringing up this topic now, two months before Xi is supposed to go to the US.

• 3:45James Kynge?

  Well, that's a really good question, Alice. I mean, to me, this is more of a US story that concerns China than a China story per se. But I think, as you've already alluded to, the key point here for China is, will this allegation by Trump sink the superpower truce that has ensued after the summit between Trump and Chinese leader Xi Jinping in May this year? At that time, Xi and Trump agreed to build a, quote, "constructive China-US relationship of strategic stability."

• 4:23James Kynge?

  And that was really a key agreement because that meant that the two sides will have this as their guiding framework for the next three years and beyond, and move away from pretty much what was all-out suspicion and rivalry that characterized the relationship from probably about 2019 onwards. So that was a real moment, at least I regarded it as a real moment in May, and I think a lot of other people did too. So now Trump is coming up with this apparently very serious allegation of election meddling.

• 5:07James Kynge?

  And so it does raise the question, is this going to bring a premature end to the superpower truce that we saw agreed to in May? And my sense of this is, attentively, of course, because you never really know, but my sense of this is that Trump's statement is probably more about domestic politics in the US than it is about trying to torpedo the slightly better relationship that China now has with the US. And I reckon that, I can't really give any overwhelming supportive evidence to back

• 5:50James Kynge?

  that up, but I note that Xi Jinping is still invited to visit the US on September 24 this year, and Trump is still apparently considering attending the APEC summit in Shenzhen in November. So those two facts tend to me to suggest that, you know, the relationship is not headed for the deep freeze. And the other thing is that the White House has not yet given any words on why or what implications this allegation of election meddling has for the US-China relationship.

• 6:31James Kynge?

  And my guess is that if the White House really had been intending to torpedo the relationship with China, it would have come right out and said, this shows XYZ and should have the following consequences for the relationship. But the fact that they were pretty much mum about the relationship itself suggests to me that Trump is focused more on domestic politics in this regard, rather than China per se. I don't know, Alice, what do you think? It isn't that clear, I have to admit.

• 7:03Alice Han?

  Yeah, but I think you're right. I think that Trump is ultimately blaming the deep state, what he calls deep state, the intelligence community, for failing to inform him, it seems, that the Chinese seem to have hacked 200 million US voter records. And it's, I think, part of a calculated move, maybe I'm reading too much into it, ahead of the midterm, saying, you know, hey, there are these bad actors out there that are also tampering with information going to voters, largely through social media, I would say. And this is what the White House is also saying. And it's designed to, again, show that, you know, he feels that domestically, things aren't great.

• 7:45Alice Han?

  And I want to add to this domestic, I think, uncertainty, the fact that the latest polling data, I know we shouldn't read too much into it from Pew, is pretty astonishing. And it shows just the both domestic and global decline in faith in regard for Donald Trump, but also for the US compared to China. So now, just the latest Pew polling shows that 46% of people worldwide have a more favorable view of China versus the US. But even when you break down into countries, and your country is one of them, James, the UK, just the countries that have more confidence in Xi than Trump, or have more confidence

• 8:26Alice Han?

  in China versus the US, there's a much larger pool of 36 polled countries that say that they have more favorable views of China. I remember- You know, back in 2023 and hot off the heels of of the COVID outbreak and China being blamed for it, that people were saying, you know, China is never going to come back from this. Everyone's hating on China. The world is anti-China. But fast forward three, four years, what a world's, you know, what a difference those years have made. And it seems like through a mix of the US's own goals, but also, you know, China's pretty good soft power campaign,

• 9:08Alice Han?

  we're at a stage now where China has more favorable views versus the US.

• 9:12James Kynge?

  Yeah, absolutely. I mean, I found this really quite shocking. And to your point, Alice, look at the difference between now and 2023. In 2023, the Pew data showed that 58% of people in in in countries, this is across 20 countries, polled had a more favorable opinion of the US versus 32% having a more favorable opinion of China. And then going down to the list of nations now that have a more favorable view of China, Germany, the UK, France. But let's

• 9:53James Kynge?

  just pause for a minute to think about the relative relationship between those several European countries and the US relative to China. I mean, it's well known that the US is the UK's longest standing ally and friend. The amount of trade, people to people relations, investment relations, financial relations, political relations, not to mention the fact that the UK depends on NATO, which is led by the US entirely for its national defense. And yet, people in the UK still, according to this poll, have a more favorable opinion

• 10:34James Kynge?

  of China than they do towards the US. And you could say the same thing about Germany. But with Germany, there's an added ingredient here, which is that Chinese competition is wiping out a great big chunk of German industry right now. And yet, Germany on average, or German people on average, have a more favorable opinion of China than they do the US. And I could go on. So the real question to me is, you know, what is the key variable here? And I have to be blunt. I think it's Trump. I think that China is presenting a more positive

• 11:15James Kynge?

  picture to the world. But I think, living here in Europe and traveling around Europe, I think people across this continent are deeply unsettled by many of the statements coming out of the White House. And they just don't know in what direction Trump is taking the United States with regard to its relationship with Europe. So I think the big swing factor is Trump. And then China's relative stability is playing to China's advantage, probably.

• 11:47Alice Han?

  But it's pretty shocking. You look to the US's closest neighbors, Canada and Mexico. So Mexico is a 19 percentage point swing in favor of China, where 59% people have a more favorable opinion of China versus the US. In Canada, there's an 11 percentage point swing in favor of China. I mean, it seemed like only yesterday where we had scandals involving the two Michaels in Canada, you know, putting on sanctions on China, et cetera, et cetera. It's astounding to me that the two closest neighbors and most of Latin America have a more favorable view of China versus the US. And it speaks to potentially a failure in

• 12:28Alice Han?

  the Western Hemisphere approach that was codified, remember, in the November Defense Report by Washington. How much of this is, yeah, I mean, at the heart of it is how much of this is is Trump and and the administration's undoing versus the Chinese playing a pretty cool hand?

• 12:46James Kynge?

  Yeah, I mean, the other thing I think to say about this is that public opinion is fickle. It does really depend on the headlines of the day. But but I think what you're referring to there, Alice, is a much longer term structural issue here. You know, as we've discussed many times on China Decode, China is becoming the world's leading technological power. In this episode, we're talking a lot about China and AI and the success that China's experienced in that regard. And throughout much of the developing world, China has been bankrolling much of their infrastructural investment and construction. And so China is beginning

• 13:30James Kynge?

  to get a reputation as the country that can get things done. I think that's really quite important. So even though I do recognize the fickle nature of public opinion and polls like this, I also think that there are bigger structural changes underway.

• 13:48Alice Han?

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

• 13:59Scott Galloway?

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• 17:34Alice Han?

  Welcome back. We're joined now by an expert in all things AI, Selina Xu, a writer and head of China research for former Google CEO Eric Schmidt. Selina, we're so excited to have you on the show.

• 17:46Speaker 05

  Thank you for having me. I'm so excited to be here.

• 17:49Alice Han?

  You know, you and I have been talking a little bit, and I know you've been in and out of China. So I really want to get your fresh take on what's happening. Obviously, we've seen the recent announcement from Kimi in terms of their capabilities catching up to some parts of the Anthropic suite. It seems like every other week we hear this, James and I talk about this quite a lot, these new announcements, these DeepSeek 2.0s that are coming out of China. How should we be reading these announcements? And what is the broad takeaway from them when it comes to US versus Chinese capabilities?

• 18:20Speaker 05

  Yeah, that's a great question. I actually visited Moonshot and also Z.ai in Beijing end of May. So I think it's really interesting just how fast things are moving. If you look at the pace of releases, right, like, think about it. DeepSeek V4 came out in April, and then we had the whole Fable mythos saga. And then Fable came out after the bans were lifted. And then in June, we had essentially GLM 5.2 from JPOZ.ai. And then now July Kimi. So the frontier of intelligence is moving so fast that any lead you have is essentially perishable.

• 19:03Speaker 05

  It's just you might hold on to it for a max a month, and then it's the next model. So I think this is kind of the pace here. And if you're thinking about the vibes on the ground and how people are talking about it, I felt the biggest takeaway in terms of vibes is that compared to last year, Chinese AI companies now are so much more motivated and they have a very clear goal in mind. I think last year was a bit of soul searching after DeepSeek R1, right? People are like, can we replicate that? What is the next paradigm? Do we have to figure out something after the transformer? And now it's like, okay, Anthropic has shown us the way. Coding agents is the way to go. We are going to all do this and we'll do it better. So I think that's kind of the very gung ho energy that I sensed in China

• 19:48Speaker 05

  and amongst talking to these AI founders. And I think, once they have this clarity, there are a lot of advantages that China has on their end. So I think one is that they're all planning to stick to open source for as long as it makes sense. I know there was a bit of a debate, you know, the past few weeks about whether China was going to restrict open source. And I think we've seen with the latest releases and with what Chinese President Xi Jinping said at World AI Conference, that they will continue to do open source. So I think one, that's open source will continue from Chinese AI companies. And then the second one is, you know, there's been a lot of efficiency techniques that these startups have done, which essentially means that they will try to extract

• 20:28Speaker 05

  the maximum amount, you know, of training efficiency from every unit of compute. So because of the chip constraints that they have, they've been forced to do this. And as a result, their models are so much more capital efficient and compute efficient compared to, you know, OpenAI and Anthropic. So I think they will continue to do this. And then the turning point, I think, with Kimi K3 is that it is a huge model. It's the largest open source model. It has 2.8 trillion parameters. So this is huge. And they're not really trying to, you know, compare themselves to DeepSeek V4, which is super cheap. Instead, I think they're trying to show that, hey, open source doesn't just have to be cheap and efficient. We can also be at the very cutting edge. So they're trying to like toss that away.

• 21:11Speaker 05

  And I think their president, Zhang Yutong, had this post on social media. And she's saying like, open source doesn't have to just go the cheap route. We're trying to do something else. So I think this is kind of a turning point for Chinese open source.

• 21:22James Kynge?

  Terrific, Selina. It's so great to have you on. Maybe I could drill a little bit deeper into the structural advantages that China has, because we hear about an inexhaustible supply of intellectual talent. We hear about very low electricity costs, some of the things you've already mentioned with regard to the efficiency of Chinese models. If you throw this race forward, the race for AI between the US and China, do you think that these structural advantages will begin to tell in China's favor?

• 21:57Speaker 05

  Yeah, I think that's kind of the big question when people are thinking about the US-China race. Like, what are the, you know, the chips that each of them have on their side? And I think for sure, China has huge structural advantages that you've mentioned. So one, energy. So energy is one of the main constraints on the US side. We've seen all the protests against data centers getting built and, you know, proposals of moratoriums on that. So I think the timeline of trying to build a data center and get it erected and have the right chips inside for it to come online is just way longer in the US compared to China. In China, the main thing is what they call Dongshu Xishuan, which is essentially like east data, west compute.

• 22:40Speaker 05

  So you have, you know, the major cities on the coast essentially using a lot of AI. And then you have the compute built out in, you know, far-fetched areas in the desert, you know, in Inner Mongolia and in Guizhou or other more far-flung places, where actually a lot of renewable built out has taken place. So that's kind of the strategy that China has been going with. I would say that, you know, beyond energy, I think one of the big things actually that people have taken less into account in this race is what you would call like domestic sentiment and societal transition. So I think this is one thing that nobody really anticipated. Because if you look at past technological cycles, you know, initially there is a bit of resistance.

• 23:23Speaker 05

  For instance, during the Industrial Revolution and you had the Luddite protests of people smashing, you know, the automated looms. But afterwards, when the benefits start showing, you have people adopt it. And it generally lifts, you know, everybody's boats and, you know, society adopts it and innovation is good. I think this time round with AI, it is a lot trickier because the whole pace and, you know, scope of automation will impact much larger swaths of people who will have a lot more political power compared to previous cycles of technological transition. And we see this playing out very acutely right now in the US. When you see huge anti-AI sentiment across the country,

• 24:03Speaker 05

  there was a poll in March when people disliked AI on net more than, you know, ICE and more than, you know, Iran. So I think this is something that's very hated, especially by younger people who tend to usually be more pro-tech. And then in China, there is that similar worry because so much rests on, you know, social and regime stability, but China really needs AI to drive its engine forward. So I think the common challenge in this race also beyond, you know, energy, talent, compute, and everything else, it's really which country can handle this transition better and, you know, balance both having a lot of AI growth for their economy and then being able to control it so that, you know, the whole system doesn't really collapse.

• 24:46Alice Han?

  Really interesting. On the subject of transitions, I have to alert everyone to your amazing op-ed with Eric Schmidt in The New York Times, in which you talk about your takeaways from your month, basically, in China over the summer. And what struck me as interesting in that piece is the fact that both the government in China and the entrepreneurs have this kind of slow-burn approach to AI, because they are mindful historically, as you've alluded to, to instances in the past where there has been, say, a Luddite backlash to technological innovation. So in a way, this explains why the government has been, I think, pretty alerted to the fact that there is a labor issue to too much AI transformation, that the gig economy of 320 million, 44% of the workforce is at risk.

• 25:30Alice Han?

  You see that in terms of them slow-rolling autonomous vehicle licenses in China. And also more recently, in a piece you may have seen in terms of AI companions, trying to set regulations in terms of making sure that they're not too personalized or anthropomorphized so that people don't have too much of an emotional or romantic connection to these AI bots or agents. Can you speak to us more about this relationship that governments and entrepreneurs in China have to AI and how that's quite distinct from what we see in the US? Because it seems to me that at the heart of it, these two countries see AI in very, very different ways.

• 26:09Speaker 05

  Yeah, it's definitely a different relationship between the companies and entrepreneurs with the government, as we all know, in China versus the US. I think in China, the interesting dynamic is, and you've talked about this before, Alice, like, the entrepreneurs in the tech industry were basically reined in during COVID under, you know, a sweeping crackdown. And then now, after COVID ended, the government realized, actually, we really need the private industry and we need tech and AI specifically as this new engine of growth. So there is this, you know, almost reluctant but pragmatic, like concession, like, we need you. And this is mutual. But I, so I think having that way on the minds of the entrepreneurs, it really...

• 26:55Speaker 05

  Really, I think, shapes how they see their relationship with the government. It's not just like, let us run complete deregulation, we got it. It's more of like, okay, we want to negotiate some amount of room for growth, and we will have this constant feedback with the government. But at the same time, we know if there is any hint of instability or things getting out of control in a place like China, this will be quite, I think it will be a direct trigger for the government to step in and to basically re-regulate and crack down on the industry again, something that I think nobody in the tech industry wants in China. So I think that's very alive in their heads. And the interesting thing about AI companions is that this is like a global issue.

• 27:38Speaker 05

  We see a lot of debates about this in the US as well, with, you know, very high-profile cases of teenagers committing suicide. In China, I think the worry is that, but also romantic relationships being formed between especially young women and AI companions and the refusal to then get married, have babies, and that impacts China's fertility rate. So I think it is a very complicated issue at the heart of, you know, China's whole debate on what do we do with AI? And I think the best thing to take away from this example of how the guidelines and then subsequent regulation got formed was they released draft guidelines on restricting AI companions in the end of December last year.

• 28:21Speaker 05

  And then they opened it to feedback from society and industry. And actually, the current regulation that we've seen take in effect as of last week is very much watered down and a lot more narrow than the December guidelines, which had pretty strict restrictions on, for example, you have mandatory human takeover. In case of any triggering words, the platform has to step in and bring in a human. That's like a pretty, you know, high burden for a tech company to have like 24/7 staff being, you know, constantly monitoring. So that probably got industry pushback. And then now it's not mandatory, but you have to give like an emergency contact or like a guardian, and it's only mandatory for specific groups of people. And then the other thing that got watered down mainly was training data.

• 29:06Speaker 05

  So the initial draft guideline said that all training data from these kinds of anthropomorphized interactions needed user consent before a company can train on it. But in the new current regulation that's taken effect, this essentially only pertains to, you know, specific personally sensitive information and other things are good for, like it's good for a company to train on. So I think that's an example of how the government and the industry are basically negotiating with each other on what kinds of regulations will make sense to protect some of the government's priorities while allowing industry to continue to drive AI development forward.

• 29:53Speaker 00

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• 30:23Scott Galloway?

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• 31:31Alice Han?

  And to follow up on this, Selena, you know, we've seen some interesting data from Stanford more recently about Chinese versus American users' attitudes towards AI. Eighty-four percent, this is a shocking number, eighty-four percent of Chinese surveyed respondents said that they were more excited than worried about AI. Versus in the US, 10% said that they were more excited rather than worried, meaning that a higher number potentially could be worried in the US about AI. But it speaks to how there is quite a dichotomy in sentiment between Americans and Chinese. Can you explain that? And to what extent is that related to what you've just alluded to and talked about? The differing approaches? On the one hand, this kind of fast-paced, unregulated,

• 32:14Alice Han?

  I would say almost hair-like, in the tortoise and hare analogy, approach to AI versus this kind of slower, slightly more regulated tortoise approach to AI in China?

• 32:22Speaker 05

  I think this statistic took a lot of people by surprise. There were a few other surveys by like Edelman and others that people started paying attention to. But I think as negativity in the US towards AI grew to quite a feverish pitch this year, people are suddenly like, oh, my God, why is China so much more positive? And obviously, you know, the surveys are not fully representative of sentiment on the ground, which is often not monolithic. But being in China a few times this past few months, I think the main thing, the main attitude difference that I sense between, you know, Chinese and Americans is that in China, people are very pragmatic. They don't see AI as this, you know, in general, this machine god.

• 33:07Speaker 05

  Talk of AGI or artificial general intelligence is pretty much absent from most convos other than if you're talking to a very specific minority of westernized, you know, policy elites. And for the average Chinese person, AI is either a tool where maybe they have to learn because they are mandated to by their bosses in their jobs. It is like an entertainment thing, similar to, you know, doing and ret note before. Now they're like, hey, I get to play these like virtual script games with my AI boyfriend, who is very hot and looks like an anime character. And this is basically a continuation of all these like love and deep space automated games where you have romantic storylines, right? It's just like a natural continuation of that.

• 33:50Speaker 05

  And then for some people, it's like, if you're elderly, you're like, oh, great, AI allows me to like Photoshop or like ask for medical advice. So it's like very pragmatic tool-like ways, and people don't imbue with it all these very doomsday, what people now call doom trolling in the US of like, AI will make us extinct. AI machine god's gonna come. It would be like the Terminator. It's terrible. There's none of that, even with all the humanoid craze in China, which actually is another structural advantage on hardware side for the US-China AI race for China. The humanoids in China, a lot of them are, you know, billed now as AI companions. So UBTAC released a bunch of these anime gorgeous-looking humanoids

• 34:33Speaker 05

  that are supposed to be like, you're a friend or you're a helper. And then there are these very cute, smaller humanoid robots. And also AI-enabled toys that are fluffy and like soft toys that are all about, you know, how do you integrate AI into your everyday entertainment? So I think the way people interact with AI in China just feels very much more grounded, a lot more for entertainment and pleasure, and then also much more pragmatic compared to the US. And I think that goes back to, you know, the broader question that you brought up about the differences in broader approaches. I think China, by necessity, because of chip export controls and then also because of just the structural advantages it has in hardware,

• 35:17Speaker 05

  has allowed AI to be diffused in a way that feels a lot more palpable, a lot more, you know, spread out across industries. And people are not, you know, are seeing many different visions of AI emerging compared to in the US, where it's very much dominated by one Silicon Valley narrative that's all been about AGI. And now has only recently realized, oh, people don't like this, so we're gonna change our narrative, so.

• 35:43James Kynge?

  Selena, I was recently in China, well, a few months ago, and you mentioned humanoids there. I became absolutely fascinated by the humanoids. What's the situation these days? Are we seeing diffusion of humanoid robots into the workplace much in China? I mean, some of the people I said to say, well, they could be in like nursing homes, helping to care for old people or helping to care for patients in hospital or helping with other kinds of tasks, you know, everyday tasks. Are we seeing that? Or is it just a little bit too early for that? And then I suppose an allied question is,

• 36:28James Kynge?

  people talk about the ChatGPT moment for humanoid robots, which is supposedly the moment where a humanoid kind of becomes almost as good as a person. In other words, you can just ask it to do something and the humanoid will work out how to do it. Did you pick up much of that? Is China getting close to this potential moment, do you think?

• 36:51Speaker 05

  So I think China and the US are both trying to figure out what are the use cases for humanoids. So in China, the closest thing I've actually seen to actual deployment, instead of just, oh, display for hype, is having them do some very routine tasks in a controlled setting, like a factory. So mostly, some EV companies have been doing this on their factory floors. And most of the EV companies in China have highly automated factories that already have very few humans who are on the grounds. So plucking a humanoid inside to do one very tiny segment of the overall automation, for instance, like checking, doing, checking this thing and moving it across like 10 meters

• 37:36Speaker 05

  away into a box. So those kinds of very simple, mundane tasks. So that has been, I think, the most deployment I've seen in a factory setting. And this, I think, is a bit more for data collection, it's not really for the factory to be better, because most of the factories have really great industrial robots, like arms or like AMRs that are transporting materials. So it's really about data collection, which goes to your second question about when is the chat GPT moment coming for robots? And I think the biggest kind of bottleneck here is in data. So you can have a humanoid be in a very controlled setting, doing a regular task. But the moment you set them into the real world right now, say, the angle of the cup

• 38:21Speaker 05

  is different, or the height changes slightly, or something is different in everybody's household, the humanoid doesn't know what to do. And they are, the hardware currently is there, and when you see these gorgeous, like impressive Unitree robot performances of them doing like Kung Fu or like parkour, those are mostly locomotion and it shows that, and you can program them, and it just shows how good the hardware is in China. But the main problem of having a robot brain be, being able to autonomously figure out what to do in a very wild, irregular setting that's unpredictable, currently doesn't exist. And that brain question is kind of the big question that you need for a chat GPT moment to happen.

• 39:04Speaker 05

  And there are many different approaches here that people have argued for. So some people are saying, hey, you can have this as an extension of multimodality. So if you continue on the LLM route of large language models, and you just make multimodal LLMs are so much better, they can allow us to get to that autonomous robot brain. Some people are like, no, we need a totally new paradigm that's not LLMs, we need world models. So there's what people like Fei-Fei Li or Yann Le Cun are talking about. They think you need the, basically the robot to understand how, you know, the physical rules of the world before it can start to navigate that. And then there are obviously some other approaches that are emerging, but there's no really a clear consensus. And I think so much of it really depends on people now trying to do massive data collection

• 39:48Speaker 05

  so that the robots can get smarter by being trained as many contexts as possible. And in China, this has manifested in these data factories for robots. And I think Xiaomi's founder, Lei Jun, recently posted one such example of a humanoid doing something like this in his EV factory, where you have humanoids being, you know, tested out in different settings. And then there are also people who are going down the simulation route, which is to simulate a lot of data, but the quality of that is, you know, up for debate.

• 40:17James Kynge?

  That's absolutely fascinating. I mean, it's just so tantalizing to think of a world in which humanoids are roaming around, doing, doing work and apparently sort of being able to respond to real time cues and instructions. But I guess from what you're saying, it sounds like that's a few years away. Would you, would you say that?

• 40:38Speaker 05

  Yeah, I would say that. There are people in the industry, like Wang Xingxing, who is the founder of Unitree, who basically thinks general purpose humanoids are three to five years away. But obviously, he's a believer. Some people think the timeline is a lot longer.

• 40:52Alice Han?

  All right, Selena, this might be an unfair question, but I see this a lot in my feed as to whether or not China is just cheating the exam by distilling US models. You know, it's in the vested interests of Daria Amaday and OpenAI to be saying this. But based on your best understanding, because you, you know, you're very much plugged into what's happening in the US and China on the LLM front, how true is this and how true will this be when we have a conversation about this in a year's or two years' time?

• 41:21Speaker 05

  Yeah, I mean, distillation definitely happens. And I've seen, you know, what Anthropic has published. Some of those are like very small number of instances, some are huge, like a more egregious like minimax. But I think, my personal take is distillation is a very widespread industry practice. Someone like Elon has said that as well, XAI distills from OpenAI. Like, everyone does it, and it's generally a widespread academic practice for people who don't have the right resources to be able to still be able to catch up and contribute breakthroughs, right? So having that demonized right now in the US-China geopolitical framework, I think more of it is about, you know, the commodity of intelligence.

• 42:05Speaker 05

  Like, open source models from China very obviously undermines US labs who have closed models, and they're charging a lot of, a lot for those. So I think that there is a clear conflict of interest. So I do see why they are against that. And it is, Anthropic's, you know, prerogative to say, hey, we want to clamp down on these practices to protect our profit margins, right? I think that's very valid. But on, you know, the broader argument that seems more ethical here on like, oh my God, our Chinese labs cheating, they have been copying us. I think it's like, it kind of flies against the whole state of the landscape, which is that these Chinese companies are pushing out amazing open source models and openly, publicly publishing their techniques.

• 42:49Speaker 05

  So if you think about the recent, so Thinking Machine, which Mira Murati started, recently released their own open source model, and they publicly said, we use techniques and use and trained it on models like Kimi K2.5. So when a Chinese lab opensources their models, it actually gets adapted by US companies who can use it as a base layer, and it actually honestly boosts American innovation in some way. So I'm very pro open source, and I think there is this extensive co-opting of each other's knowledge that's happening. That's not one way, especially now with, you know, Chinese AI companies dominating open source. I think it's very simplistic and almost too reductive to be like, hey, it's Chinese companies

• 43:33Speaker 05

  copying American innovation. Right now, it's obviously two-way, and some can even argue that, you know, most of the American startups nowadays in AI are actually building on top of Chinese open source models. So there is, I think there's a total reversal of what we used to see in, you know, the internet era, where we're like, oh, Chinese tech industry is just copying Silicon Valley. I think now it's a lot more of mutual co-opting.

• 43:56Alice Han?

  Is it safe to say that open source has really revived? I mean, two years ago, it was all about closed source, it was about the frontier labs excelling and accelerating. And now Nvidia's doing it, Mira Murati, you've said, is doing it, that more players in the US are going into open source. Is it fair to say that when we talk in a year's time, we'll have a stronger open source ecosystem than even today?

• 44:19Speaker 05

  Yeah, I hope so. And I think American, a lot of American AI companies are trying to build, you know, the American open source model, like Nimotron from Nvidia, Thinking Machine, there's a company called Reflection AI. So a lot of people are trying to do this, and I think it's better for the ecosystem if you have more stronger American open source alternatives to Chinese ones, right? Like, when people complain about Chinese open source models, I'm like, just build your own then, if like, if you're so unhappy with, you know, the ones coming out of, from China. So I think my prediction is that in a year's time, we'll see a lot more very competitive American open source models. But whether they can beat China and, you know, not just at home, but also in the global

• 45:01Speaker 05

  market, really just depends on a lot more things like cost, like efficiency, and also, you know, whether they're able to bring in the users who are now very entrenched in a very different ecosystem.

• 45:12Alice Han?

  Amazing. Thank you so much, Selena. I've learned so much from this conversation, really appreciate it.

• 45:17Speaker 05

  Thank you for having me.

• 45:18Alice Han?

  All right, James, you know what time it is. It's prediction time. As you look into the future this week, what do you see?

• 45:24James Kynge?

  I'm going to talk about an economic issue for my prediction. We saw in the first half of the year, retail sales in China climb a meager 0.3%. And of course, consumer spending and retail sales in China are absolutely crucial determinant of broader economic growth. And so my prediction is that we will see in the second half of the year, a slight improvement in overall retail sales. But I'm going to say that for the full year, China's retail sales will grow at less than 3%.

• 46:08James Kynge?

  And I think that this is rather significant, because it means that China will not be able to resuscitate consumer demand very much. They will do a little bit, but not very much over the course of the year. So we'll see overall on the GDP register, sub-fuss growth continuing for the rest of the year.

• 46:31Alice Han?

  Very interesting. So mine is in the economics meets technology space, and it's really about chips. I don't know if anyone's seen the figures, but in H1, the first half of this year, basically semiconductor exports from China to the rest of the world by value doubled relative to last year. I think when we look at the second half of the year and the year as a whole, we're going to see record exports of, and a growing amount in the next two quarters, I think, of Chinese chips, especially in the DRAM and memory spaces, where China is injecting more supply at cheaper costs. Look at CXMT, for instance, it's competing with Samsung and ASK Heidex.

• 47:11Alice Han?

  I think that's going to be a huge story when we think about China's export machine for the whole of the year, is the big chip and AI hardware export story.

• 47:20James Kynge?

  That's so fascinating. I'm really, really looking forward to seeing how that one pans out, Alice. This is such a big shift for China to be exporting so many chips in, as you say, record numbers.

• 47:33Alice Han?

  Yeah, who would have thought? 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, and talk to you again next week.