Inside the US–China decoupling: What’s really at stake (AI, rare earths, Taiwan, trade)

In this episode, I speak with Jordan Schneider, creator of Chinatalk, to explore the new phase of US–China competition. Both countries are using trade policy, export controls and industrial strategy to shift the balance of global power. Yet, their economies remain tightly bound.

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

• 0:00Azeem Azhar?

  Hello everyone and welcome to this conversation. I'm Azeem Azhar, the founder of Exponential View. Please do introduce yourselves and tell us where you're from in the chat. I'm in London. I'm delighted to be with a legend of Substack, Jordan Schneider. Jordan, where are you?

• 0:17Speaker 01

  I am in New York City and I'm so glad to be here.

• 0:20Azeem Azhar?

  We have just partnered up in a new publishing project as well, which I've been finding pretty exciting, right? To have all of these new business partners. Why don't you say something about it for a minute?

• 0:31Speaker 01

  Sure. So if you care about AI, which if you are watching this right now, I think you make it into that set. And you perhaps work at a firm or an organization that would be interested in buying the one AI content bundle to rule them all. You should head down to ReadSale.com, which sells group AI subscriptions for teams. We got an incredible lineup, including myself, Azeem, Nathan Lambert, Jasmine, Kevin Shu, and I think that there's like eight in total of us. Substack doesn't let you bundle for whatever godforsaken reason.

• 1:15Speaker 01

  So we have taken it upon ourselves to save you the time and allow you to make yourself and your team smarter about what's coming down the pipe with artificial intelligence.

• 1:26Azeem Azhar?

  It's a great initiative. I'm super happy it started. We will, of course, talk about AI today, but you are best known for China talk. And there is so much going on between the US and China. And I just want to make sense of it. And hopefully you'll be able to help us do that. It seemed to me that we're watching the US and China do more than traditional trade wars. And we've moved from a phase where the US was trying to contain China, perhaps into something more, a decoupling. And what I want to argue that that decoupling is actually more interesting and perhaps more dangerous than things we've seen in the past.

• 2:06Azeem Azhar?

  It's not so much separation, but the emergence of these two parallel tech universes. But they remain deeply entangled. And the rub of all of this is that the tools we use to manage it, export controls, tariffs, sanctions, well, they're 200 years old. We're dealing with a 21st century problem, a 21st century economy and a 21st century technology. So are those traditional containment tools helping or harming? Or was I overstating the case in the first place?

• 2:39Speaker 01

  Oh, man, where to even start with that? I'll do a little personal history, I guess, because I'm introducing myself to you and the, and the audience as well. So I moved to China in 2017 and I was like, you know, played video games, like built PCs in like middle school, but my, I was a history major. My profession wasn't in, in working in or understanding technology. It was a policy analyst. And the reason I reoriented my professional life around technology was because I hit the thing that you just mentioned, Azim. This idea or this reality that living in China, you live in a similar but different technological ecosystem where the apps that you interact with on your phone are just

• 3:24Speaker 01

  different than the ones that the rest of the world uses. And that kind of trickles down into like literal, like UI changes of how WeChat works versus how Facebook works at the time, means you relate to your friends in a different way and just kind of understanding like how fundamental these products are to our lives nowadays. And it didn't sink into me until I, I, I lived in that separate ecosystem and everything that I kind of assumed was like baked in or took for granted, actually surfaced to me as like actual product managers or decisions that policymakers made to create a sort of like different way of being almost in mainland China versus the rest of the world.

• 4:09Speaker 01

  So that's like step one. Zooming way out from where did this decoupling come from and where is it going? It is really messy, man, because there are not easy.

• 4:23Speaker 01

  Takeaways, and there are not clean lines that I think either country really wants to draw. So from 1949 to 1973, there was basically no technological or commercial contact between the US and China. The US didn't even recognize China or mainland China until that time, you know, for, for American diplomatic purposes. Ching Hua Shaq and the KMT in Taiwan were like the rightful owners of mainland China. So-

• 4:56Azeem Azhar?

  That's where my daughter has just flown off to this today, in fact, to a, a school trip to, to Taiwan for 10 days.

• 5:03Speaker 01

  Oh, amazing. I hope she has a great time. Um, so, you know, 1973, we have the Sino-Soviet split where Mao decides that he's sick of Khrushchev's BS and sees an advantage in becoming better friends with America. And all of a sudden, we have this, I would say 50-year arc of actual, pretty dramatic US and Chinese economic, technological, and even up until the 1990s, military entanglement, where America had this idea that during the Cold War, that supporting Chinese development would help gain an edge over the Soviet Union. And then afterwards, that morphed into, oh, this is an important emerging economy.

• 5:46Speaker 01

  There's a lot of economic opportunities sort of couched in this like liberalization thesis that the more we engage with China, the more kind of open, democratic, friendly it will feel to our small L-liberal sensibilities. That may have ended up being the case had 1989 turned out differently, but that's not the world we're in. And I would put our third periodization, starting around, I don't know, 2013, 2014, where the Obama administration, followed by Trump I, really started to reframe China as more of an enemy, or I would say a competitor. And in that, we've had a lot of different permutations of the thing we're

• 6:29Speaker 01

  seeing today, from Trump I's trade war to COVID- To Biden putting on all these export controls and banning stuff like Chinese electric vehicles to now Trump too, where we're now like, you know, six months into a saga of we had liberation day and now we're escalating on this and that front. But the fact of the matter is it's a big mess because these are the two largest economies in the world and they're not separate. And there's a lot of sort of pieces of both systems that see advantages in keeping connections.

• 7:04Azeem Azhar?

  Right. And we've seen that a little bit with these new rare earth tariffs or controls, rather, that were announced a couple of weeks ago, where it's the heavy rare earths that you can find in missile control systems that have fallen under this new control. But the lighter rare earths that live in things that the Chinese export, like wind turbines, don't fall into that control. There's some pragmatism that's going on. But I guess the thing that I thought felt like it might look different is a sense that every attempt at control creates an unintended resilience, a greater capability to be independent.

• 7:45Azeem Azhar?

  I think of the quote, it's a misquote of Fontaine, but it's in Kung Fu Panda. And Master Oogway says to Master Shifu, "One often meets one's fate on the path one takes to avoid it." And if the path you want to take is to have more control in this case, what you may end up doing is making the other side much, much more resilient. And we've known from China's various five-year plans that they wanted greater independence in semiconductors. They wanted greater independence in a range of other products. They do lean more heavily on open source for their softer infrastructure than we do in the West.

• 8:26Azeem Azhar?

  If there is any coherence to this big mess that you described, does it actually just lead to a control illusion rather than a, you know, a real sense of control? And I feel, I mean, one of the reasons I wanted to talk to you today was that it starts with those October the 9th rare earth rules. You know, what breaks first in that environment?

• 8:50Speaker 01

  It's a fascinating question. I'm going to start with a history analogy. You know, there was a big Autarky fetishization in the late 20s and 1930s as well. And you had this idea of sort of Nazi Germany and Imperial Japan that, you know, the equivalent of chips or rare earths in that age was, you know, stuff like access to oil or other minerals. Or there were all these like, you know, ball bearings, all these like critical inputs that if you didn't have control in a literal colony of yours, you didn't have factories in your country, then you were sort of subject to the whims of another country.

• 9:35Speaker 01

  And if you think the world is fine and we're going to keep trading, then like, that's great. That's like, you know, this is like Ricardian trade and like, we're all richer for it. If you come at it from a perspective that they did in the, in the 1920s and 30s with, you know, Mussolini and Stalin and Hirohito, that like, this is a vulnerability. We are bound to get screwed, so we need to act first and, you know, get what's ours because it's all gonna, you know, come to shit sooner or later. Then you end up in these very dangerous dynamics. And look, I, I don't think that we are like the, the fetishization of doing everything

• 10:20Speaker 01

  in a way which is entirely like on your land and controlled by you. And, you know, you can feed your country with like the, the farms that are in your landmass, like, we're not entirely there yet. But it has been fascinating that, I think China was very early to this. You know, there is like a deep aspect of like PRC history where they feel like they've gotten screwed. And so even before the October, like far before the October 7th controls, like when Xi comes to, like, you can find Deng quote, you can find Mao quotes about this, you can find Deng quotes about this. One of the first speeches she gives is all talking about sort of self-reliance and not

• 11:02Speaker 01

  being vulnerable to having the, the other world, like other countries like bully us. Around be that sort of economically, culturally, what have you.

• 11:10Azeem Azhar?

  Let me just dig into this question, which is, we have got these leaders. And you know, when you talk about self reliance and you bring up these examples from the 1920s, we we can also think about Ju Che, right? The North Korean theory of of self reliance. But what really are the politics of the leaders? Because it does feel that China and Chinese communism looks very different today to how it looked in the the era of the bicycle or just at the moment that Nixon started that rapprochement. I mean, there was something changed. So what are their their politics and their influences around this particular question?

• 11:47Speaker 01

  Yeah, see, this is the problem with self reliance is it is expensive. It is uneconomical to do things. Because if it wasn't, then your country would already have it, right? So after the disaster of Mao, lots of Chinese leaders made what I think is like the correct strategic decision that, yeah, we are going to need to get more dependent on exports, to get more dependent on sort of foreign technology. Because if we're not like, yeah, you can be self reliant like North Korea, and you can be really, really poor. That is basically the experience that you had in Mao era China. We're like, yeah, they weren't importing a ton of technology because they were too worried about starving every seven years because of like, you know, terrible.

• 12:31Azeem Azhar?

  The sparrows and the locusts and the four plagues and these types of things.

• 12:35Speaker 01

  Exactly. What I think is kind of really interesting is over the past five years, you've seen this mindset start to come home to roost in the West, right? Like you have EU leaders talking about strategic autonomy. You have Trump talking about reindustrialization. And a lot of people, I think, over the past few years have made the argument, oh, like, America cutting off ships to China, that's only going to make them like industrialize, you know, build build ships faster. Like, well, we're about to run that experiment in the opposite direction. Because I think the rare earth stuff has gotten a lot of people very focused and concerned. In the West, and then we're going to have this very fascinating sort of like

• 13:20Speaker 01

  system competition where like, is the fact that America still like, I guess, kind of a little bit has friends around the world who are also worried about Chinese rare earth export controls? Like, will that cut against the advantages that the Chinese system has of being able to keep their eye on the ball for a longer period of time and being able to sort of boss companies and countries around? Like, that's a whole different ballgame.

• 13:45Azeem Azhar?

  Well, I think there's something else that has changed in the international environment over the last 10 or 15 years, which has been the explicit weaponization of dependency. In this Ricardian trade world, we always have dependencies on each other. You know, famously, the Airbus passenger jet is manufactured in, you know, 100 countries, and the wings cross borders 20 times. And you do that because of the gains of trade. You could do that because of the gains of specialization. But underpinning trade is that sense of dependency. And countries have generally been a little bit wary of doing that. I suspect the OPEC cartel is a good example, where the dependency on oil was used as a

• 14:29Azeem Azhar?

  manifest as a tool. But in the past five or six years, that weaponization has become increasingly manifest, and it's becoming perhaps part of the geopolitical landscape. And so I'm just curious about whether you see that as a phase change as well? Or is it a rerun of the tape that you so eloquently described of the 20s and 30s?

• 14:51Speaker 01

  Well, rerunning the tape of the 20s and 30s, that would be a real phase change, right? I mean, I think it's somewhere in between, right? Because I agree with the thesis. So during the Cold War, you did not have these dynamics between the US and any kind of non-Warsaw Pact country, right? You know, and then we had this really nice 25 years from 1990 to, you know, 2013, 2014 or so, where like, as long as you weren't Iran or North Korea, you kind of got to play the same game. Everyone was kind of on the same side. And The benefits to the Ricardian version of international commerce outweighed any

• 15:32Speaker 01

  sort of latent concerns that weird history nerds had about the return to a world where you had great powers kind of competing much more directly than they did in the past.

• 15:42Azeem Azhar?

  But do you think that what we see specifically between the US and China today has a grand plan to it, or is it a bit incoherent? I mean, I look at things like 100% tariffs, but carve outs for Nvidia's H20 chips. You know, with the Chinese response to their domestic industry, saying you've got to use domestic chips. It doesn't look like either side is fully proactive and escalating in a consistent way. And it certainly looks from the US side that there's a little bit of shooting from the hip.

• 16:16Speaker 01

  Look, like, we now have policy that's basically driven by three people, and that is new.

• 16:24Azeem Azhar?

  I'm trying to work out which three you're talking about.

• 16:26Speaker 01

  I think we got, like, Trump, we got Lutnik, we got Besen, and then, you know, give JD, like, 25%. I don't know. We'll see how many group chats he ends up being on. But like, there was a mode of policymaking that I think America really recoiled from. FDR, he was president for three and a half terms, basically shot from the hip. And it was what he said goes, and all of his buds just like listened to what he did. And there was an understanding at the start of the Truman administration that there needed to be institutionalization, that you needed sort of more people thinking about these things, more planning. The world's a really complicated place. We got to trade off all these different dynamics and interests and think about the military

• 17:08Speaker 01

  and the economic and the diplomatic and the social components, so that you need bureaucracies to like move paper, make sure all these opinions are heard, such that when you start making these very consequential decisions, it's not just like, you know, FDR vibing it out. And we have now returned to a president vibing it out with the world immensely more complicated than it even was in 1946, right? Um, yeah, it's totally incoherent. It is not just that Trump is a very unique historical figure, which is making it incoherent. I think you could also look at the Biden administration, which much, which was a lot more process forward,

• 17:50Speaker 01

  as having a sort of Janus faced, like confused version, you know, collab. They literally call it like, we're going to compete and collaborate. It's like talking about AI, like, we gotta like, use the benefits and mitigate the risks. It's like, okay, well, you know, you gotta square that circle somehow. And if you stop trade with China tomorrow, the US economy stops working. Like, like, like GDP just goes away, right?

• 18:13Azeem Azhar?

  So maybe you don't, you don't stop trade with China, but maybe it is that any kind of systems change is necessarily messy, feels incoherent at a tactical level, because what you need to do is generate momentum, generate force in order to, to change the system. The, the White House, the administration has been reasonably clear about the, the gushed out that they, they want, which is sort of make America great again, have fewer dependencies, have a greater, more transactional control over relationships with other nations rather than alliances that are, that are writ on, writ on paper.

• 18:51Azeem Azhar?

  So perhaps, yeah, tactically, that will always need to have that, that sense of frivolity and friction rather than, you know, people in suits walking down a, walking down a checklist. I wonder whether what's really going on here is system building, that we tend to talk about the components or the minerals, we tend to talk about the, the bandwidth of the memory in the chips, or whether the battery can come out, or we are, whether, whether a particular rare earth is, is allowed. But perhaps it's as much about creating these innovation and technology systems that are not dependent at a fundamental and strategic level on your great rival, right?

• 19:34Azeem Azhar?

  You can compete in other areas, but you want to be soup to nuts in that area. And if you want to have systems change, it's going to be messy, especially given that there were all these interrelationships that you're, you're working from.

• 19:47Speaker 01

  Yeah, I mean, look, she has this great line, I think he said it in a 2020 speech, where he is like, "We want to not be dependent on other countries, and we want other countries to be dependent on us." I think, you know, when you see Lutnik talking about how he wants to get China addicted to H20s, like, it's the same dynamic playing out on both sides. And yeah, that is super messy. And that means that sort of there are two systems which are really wrestling with each other. Like, I think that, look, I honestly don't feel like the Trump administration deserves to earn as much sort of like cognitive coherence, as you may have put it so eloquently, Azeem.

• 20:32Speaker 01

  But there is, I think, a new instinct to the melange of like, things you care about, of not wanting to be reliant on China, because you can't trust them, because they're scary, and oh, by the way, they can, you know, shut down Ford plants in a week if they feel like it.

• 20:50Azeem Azhar?

  And vice versa, right?

• 20:51Speaker 01

  Sure. That understanding, I think, has been in the Chinese system for much longer. And there was an understanding in the 70s, 80s, 90s, 2000s, even early 2010s, that it's just like, we're just gonna have to live with it because we're too poor to kind of break out of the interdependence. But now that China is richer, and I think maybe also she is more ambitious, he is more excited to develop a higher degree of resilience, as well as to weaponize the interdependence that China has vis a vis the rest of the world.

• 21:27Azeem Azhar?

  There is this word that goes around, which is sovereignty. And it's appeared in Google Trends far more in the last two years than it did in the previous 50. And of course, there's a very legalistic, formal term meaning for the word sovereignty. But there's also vibe-based sovereignty, which kind of means we can sort of make our own decisions. And of course, lots of countries are talking about sovereign AI and sovereign energy and sovereign this and sovereign that. In truth, there are only two countries in the world that have the Depth and the capacity, the dynamism to achieve that vibe based sovereignty in any real way. But even they, it seems, are quite dependent on each other.

• 22:09Speaker 01

  Totally. Okay, so now we get to talk about chips and AI. You saw the EU this week talking about semiconductor sovereignty. Like, I'm sorry, no, like, this is not happening. Are you really going to try to spend like, what, $50 billion, $75 billion to build a competitor to Intel? Or TSMC or Samsung? It is an interesting fact to me that that is even a, a kind of like, a worry that I think Europe, you know, maybe 10 years ago would not feel. The fact that you even have plans about that today is interesting, but like, the reality is like, no, you're still going to get all of your advanced chips for decades to come from Asia or from the US.

• 22:49Azeem Azhar?

  Absolutely. So let's talk about AI then, because of course AI is running on the chips. Let's give the received wisdom right now. So the received wisdom is that the US leads in the frontier, that the US Foundation Model Labs are by and large chasing after the machine god that is AGI or ASI. And that the US is highly constrained by some of its physical infrastructure. So the power systems and so on. And on the other hand, China is doing really well with open source models. It has abundant power capacity and the open source models are getting better and better. But critically, the Chinese state civil enterprise fusion is all about deployment.

• 23:33Azeem Azhar?

  And that these are two entirely different approaches to AI. I think that's the received wisdom. Is that right? Is that wrong?

• 23:41Speaker 01

  Can I stay on the sort of like, can anyone be sovereign in AI for a second? Before we get to the tail of the tape stuff? Because I think it's really interesting, like, at what level different countries want to be sovereign? Because as you said, like, Azim, there's only two countries in the world that can go from sort of chips to cloud, to labs, to, you know, to models, to like, companies and have that whole. AI stack be something that they can like roughly indigenize. I mean, we'll, we'll round out the fact that like China still needs a lot of sort of foreign SME and the US is still buying its chips primarily from Taiwan.

• 24:21Speaker 01

  But like every other country in the world is going to have to make a decision or try to plead their case to China, you know, to Huawei or to the White House and Nvidia. That like, oh, please like, I would like to buy the chips, please. And then I'm going to have a local kind of like cloud provider. And then I'm going to fund an AI lab to train a model and build companies on that. Or, you know, other companies will say like, I just want some data centers here. If they're AWS, that's fine. Or you say, I don't really care. Like, just give me access to open AI, you know, Claude and, and, and open AI. And that'll be, that'll be it, right? And coming back to my first discussion for the, the sort of internet boom of the 2000s and 2010s.

• 25:06Speaker 01

  You basically had, you know, a little bit of this like data localization stuff. But for all intensive purposes, it was American companies on American chips by American cloud providers that like run, ran the world ex China. So, you know, Google, Facebook, Uber, Amazon, whatever. It was like, oh, it was just like the US.

• 25:26Azeem Azhar?

  But you know, what started to change, I think, was in the mid 2010s, when the strategic importance and national importance of data, and particularly data about citizens, started to emerge amongst policymakers. And you get to the stage that by 2020, more than a hundred countries have got their own data privacy frameworks. We always think about GDPR, but you know, Kenya had one and Brazil had one. They were expressing some desire of classic Westphalian sovereignty in this new domain against the backdrop of essentially having been happy for the Americans to do the running for 30 years.

• 26:03Speaker 01

  Yeah. And also you, you had this time period where no one was pushing back all that much about the sort of censorship decisions of, of Twitter and Facebook. But like, that started to change once governments all around the world. World realized how important this was. And then, you know, you have the Indian government like throwing Google employees in jail until they like take links on YouTube down because they're worried about, you know, X, Y, or Z things. So like, I think it is inevitable that countries will end up wanting to put their spin on this.

• 26:38Speaker 01

  But sort of what is, what is also interesting to me is like, right now, it's still early enough that the incumbents aren't so entrenched that you can't imagine a new cloud provider emerging, or imagine a new model developer existing, or imagine, you know, a new company that's being built on top of these models, right? And so it seems much more fluid than like, oh, I guess we're stuck with Facebook and YouTube. We're going to have to work these American companies. Like now we can still maybe try to squeeze the Americans into, into building sort of higher value stuff.

• 27:13Azeem Azhar?

  I just returned from Abu Dhabi this, this morning and of course, the UAE has gone all in on AI as a technology for the nation, as a technology for its industry and economy. It's building huge data centers. But critically, to your point about new model providers, they have released in the last two or three weeks, a really performant, open source reasoning model that is extremely light, measured by billions of parameters. And, you know, it is interesting to see that, to your point, nothing's yet locked down. There are certain things that feel rather more locked down. So Nvidia's chips and TSMC's fabrication and ASML's lasers.

• 27:56Azeem Azhar?

  But above that layer, there is still quite a lot to play for and quite a lot of space then for countries to think about what does sovereignty mean in this environment?

• 28:06Speaker 01

  We'll have to see. I don't know. It's kind of fun and also depressing if you're like working the Abu Dhabi, like, I don't know, tech policy department or whatever. Cause on the one hand, yeah, there's room to play where there really wasn't if you're talking about this from 2018. But it's also like, you're competing against these companies which are valued in. The trillions of dollars at this point.

• 28:29Azeem Azhar?

  But, you know, we don't know. I mean, I think this goes back to the question I asked you about about AI that you so neatly dodged, which is that we we don't know how the industry structure will play out. We're full of surprises. The internet had provided a ton of surprises. Remember, it was always going to be about decentralization and it ended up being incredibly centralized. It was going to be about the Arab Spring and people speaking with one voice and it ended up being anything but that. So one of the things that I've got some experience and some scar tissue from is trying to understand exactly the path that a technology takes from from here to there. And as I said, you know, China seems to have a

• 29:10Azeem Azhar?

  different approach to AI, which seems to focus on deployment rather than really, really breaking the the frontier. I mean, is that a is that a fair way of characterizing it?

• 29:21Speaker 01

  I'm not sure. I think like it's harder to push the frontier when you don't have as many chips. So if you don't have as many chips, you'll do some other stuff. I mean, the amount of like hand wringing I've read from Chinese CEOs saying, we need to do more like basic research, like we can't just let the let the foreigners like steal a march on us. I mean, there is angst about this fact that all of the breakthroughs seem to come out of California as opposed to, you know, Zhejiang province, that I think the the sort of tech leaders as well as,

• 30:00Speaker 01

  you know, Xi himself and and the heads of sort of Chinese science bureaucracies aren't necessarily comfortable with. I mean, I think there are some unique dynamics in China in terms of like the fact that it is a protected market, right? Like OpenAI and Anthropic, their models, like you cannot have like, well, I mean, people are like fucking around and trying to get around it. But like ostensibly, the Chinese government has banned them from having direct access to consumers in China. So you can't build a domestic business in China off of a Claude API, which just like this wouldn't work for Abu Dhabi, right? But like it's big enough that that opens up the Chinese ecosystem. System to have another round of what you just had in the US where you went from like having the straw

• 30:43Speaker 01

  or whatever be a player to like, you know, consolidating down to a few. So all of that to say, like, when you see all these open source models coming out of China, I think that is less like designed than that is like market dynamics of like, look, if you have a worse model and you try to sell it and get people interested in around the world, like they're not going to pay for it, right? Because you have stuff which is cheaper and more performant coming out of the closed labs in the US. So in order to gain a sort of relevance or market share, you're going to have to go in a different direction.

• 31:12Azeem Azhar?

  Well, I mean, there is that necessity because ultimately they don't have the chips and Huawei is starting to produce chips that can be suitable for for training high end L L Ms, but they are way, way behind where Nvidia sits right now. But there is also this question about what actually drives the economic success of a technology like this. So I'm sure you know Jeff Ding well. Jeff had his book recently and he made the case that it's less about breakthrough innovation and more about broad diffusion and deployment. And, you know, one of the things that we we see are state pronouncements, you know, the state council in China saying we want 70% deployment for

• 31:54Azeem Azhar?

  everything from industrial applications to philosophy by 2027 and that to be 90% by 2030. So a focus on deployment. How do you, how do you interpret that melange of of messages?

• 32:08Speaker 01

  I think Jeff's right, but it's also nice to have the thing first too. So I don't necessarily think these, these two things are mutually incompatible. And, you know, when it comes to like diffusion, this stuff will diffuse if it is economical and useful, right? And I think the sort of really interesting question to me is how and at what point and to what level are different? Countries in the world going to try to, going to start to put the brakes on stuff.

• 32:45Azeem Azhar?

  That's really important because it feels to me that there are different versions of techno-accelerationism. There is a techno-accelerationism that comes out of Silicon Valley, which is really about building AGI, then ASI, then ASI that builds itself. But there's also a policy techno-accelerationism. And, you know, as a slightly distant observer of China, what I see is a type of techno-acceleration on the deployment side. Get it out there, get it used, an acknowledgement that there's going to be job losses and labor market eruptions, but a willingness to push past that. And perhaps that type of techno-accelerationism can occur in a society with the political controls that China has.

• 33:28Azeem Azhar?

  And to your point, the politics, if not the permitting for power, might slow things down in the US or other parts of the West.

• 33:36Speaker 01

  Yeah, I mean, that question of like, which societies will hold up better in a time of sort of rapid employment turnover? Is one that I find fascinating and one that I think is a very open question. Look, in the 1980s, there was a lot of growth in China. There was a lot of inflation. There was also a lot of unemployment and that sort of like mix of things led to the protests in 1989. And that lesson has been internalized. And I think one of the sort of other things that happened with the COVID controls is like, there was this very ideological decision by Xi to like lock stuff down. And this is the right policy.

• 34:20Speaker 01

  And at a certain point, you started getting protests and people being frustrated. And there was enough of economic pain that one day he was just like, all right, fuck it. Like, let's, we'll let them get COVID and we'll figure it out as we go along. So with any of these sort of big political decisions, there are competing interests. And it's not like one is going to go away just because you are sort of marginally more inclined to rely on software innovations to power productivity growth. So I'm talking less about the sort of. Energy permitting than just like, at what point is a system going to feel like change is coming too fast? And then the sort of like anesthesiologist lobby like locks it off from coming into their ecosystem.

• 35:03Speaker 01

  The teachers say, no, we don't want AI in our schools. I mean, that that sort of thing to me is going to be the more relevant variable of which country is going to gain the most from this and be able to diffuse the technology. Because if it is so economically relevant and useful, like both countries are capitalist enough, you know, there will be people trying to make money by bringing into their systems or out competing other firms based on their ability to be 10 times more efficient.

• 35:32Azeem Azhar?

  I love the way you describe that as systems' ability to deal with the speed of change. Because that of course absolutely allows us to say there's an American system and a British one and a Chinese one. And they all face challenges when change is accelerated rapidly. And that gets expressed in different ways and their control mechanisms are different. But it's still a deep, deep problem. Now, earlier today, actually, before I was prepping to talk to you, I read this great essay by Kaiser Kuo. I don't know if you've you've seen it in the last day or two. This is relevant for for the question of systems. So he's an analyst, he's a podcaster as well. In a summary, he says, China has become a principal architect of modernity, perhaps even the principal architect of it.

• 36:16Azeem Azhar?

  So, you know, Western states need to replace a denial of that with an honest assessment and learn from China's performance legitimacy. And he says that, you know, what's happening now, and you touched on this with the Biden administration, this notion that legitimacy came from procedure. And Kuo argues that legitimacy is actually moving from procedure to performance and that the Chinese track record of the last 30 years is really about that performance. And given what's happening with the build outs of solar and high speed rail and other things, it might continue for a little bit longer.

• 36:54Speaker 01

  If we're calling China the sort of like archangel of modernity, we also have to under. Understand that there are parts of that modernity, which I hope listeners of this are very uncomfortable with. Like modernity, if you are a Muslim in Xinjiang in 2018, 2019 feels pretty uncomfortable. Then, uh, yeah, if you happen to own some shares in a EV company, right? One thing I'll say is like the trend of having, I think, more deliberate state involvement in strategic industries.

• 37:32Speaker 01

  On the one hand is like something I think is something that, you know, a lot of, a lot of Asian developing countries have done to various levels of success. Like, I don't want to give all the credit to the Chinese policymakers for manifesting this stuff. Like the fact that it is like a country that is large enough to have a protected market, which is relevant, is a very special and unique part of China. And one of the reasons why it can cultivate these industries to a, to an extent which like Europe hasn't figured out how to do, or America hasn't really figured out how to do is, is relevant. But it's very funny because I remember writing articles about golden shares in China for a, in a, in a past job in 2011,

• 38:15Speaker 01

  in 2021, 2022, being like, oh, this is kind of like cute and clever. And now we have the Trump administration doing the exact same thing. Like there clearly is something to this whole industrial policy thing. Um, and I don't think it is a surprise that a lot of the moves that you see the current White House doing are sort of queuing off of or pattern matching headlines in the Financial Times. That Scott Besant read and vaguely remembered being like, oh, China did this thing. So like, yeah, we could do it too. It's like kind of fun to be a portfolio manager at the same time as your, as your cabinet secretary.

• 38:53Azeem Azhar?

  But there's, there is a deeper question there, which is how well can anyone ever understand it? And, and you know, it's famously a difficult system to, to get your head, head around. And there's lots of misperception. I, I went to Tianjin for the, and to China. For the first time in in many years and you know, I came away with the same experience that I think many people do. Which is first of all, things are similar but different. So all the apps are very different. But the second thing is a lot of things work and they work really well. I mean, I was in the most stunning electric vehicles and there were all these other automated gadgets that were running around, uh, making life quite, quite interesting.

• 39:35Azeem Azhar?

  From your perspective and what you see and you read about in in the US and you talk to people. What is the the thing that they most get wrong in trying to understand China?

• 39:46Speaker 01

  Whoa, um, you know, I actually think China is a lot more legible than you may have alluded to. On the one hand, I think there are things that we can't know and that frankly, no one really knows. Particularly when it comes to Chinese elite politics. There's a great quote from Hu Yaobang, who was a a prominent politician in the 1980s. At one point, he says, I was in these rooms in these meetings and even I didn't know, you know, who was advocating for what and why. So like you can be the like the premier of China and kind of not understand the machinations. The idea that we can get a vision into it by reading Wall Street Journal articles, I think is silly.

• 40:28Speaker 01

  But if you're talking about something like trying to get a better handle on the question of why has the Chinese EV market succeeded? For those sorts of questions, it's a pretty transparent system. And you know, these are companies, right, that like have to raise money and they put documents out and you know, I watch YouTube videos of like car reviews on Billy Billy all the time for fun. The government policies around subsidies and, uh, you know, charging stations and whatever, all that stuff, I think is is very transparent. And I I I agree with Kaiser from the perspective of there are really lessons that the US and other countries around the world should learn about when it comes to cultivating strategic industries and

• 41:11Speaker 01

  giving policy support and knowing when to pull that policy support away and let the companies sort of run on their own. So what's my one sentence conclusion for you, Azim? Yeah, like it is a very complicated, weird artifact, but it's not a fool's errand to try to learn things about it, even if you don't speak Chinese. I think there's a lot of good writing and analysis out there.

• 41:33Azeem Azhar?

  Yeah, I was certainly not suggesting it's a fool's errand. I think it's more one needs some humility about understanding what you're seeing. I mean, it doesn't feel like a communist country in the five or six days I was there. Right. It felt like, you know, a rich capitalist Asian country with nearly as many CCTV cameras as some parts of London. I wanted just maybe to finish on this. I noticed you've got a poster of the Manhattan Project behind you on your wall. Tell me about that. And is there anything that we can learn from that project as we think about public policy today?

• 42:06Speaker 01

  I'm so glad you asked. No one ever asks. So, you know, I was in Los Alamos. I think this is like deep pandemic. We did like, I spent a few weeks with my wife, like driving around New Mexico and Texas. And like, it's there to remind me that this stuff is really serious and this stuff matters. And as much as I try to like, make light of these dynamics between the US and China, like, things can go incredibly poorly. I would very presumptuously say that the point of China talk and the work I've been doing for the past eight years is actually aimed at avoiding great power war.

• 42:48Speaker 01

  I don't know, that's a lot to put on a podcast and newsletter.

• 42:53Azeem Azhar?

  I love the ambition. I love the ambition. So with my last question there for that, if in 2030, things are getting better, rather than getting worse as they have been for the past couple of years, what are the one or two things that either side will have done between now and then to get us to a place that you would consider better?

• 43:13Speaker 01

  I think that America.

• 43:16Speaker 01

  Needs to make it really clear, both from a diplomatic and from a sort of military hardware perspective, that a war in Taiwan is a war that China would lose. And then this is the harder one, is that in order for the two countries to like, really get to a different phase than the phase that we've been in since 2015, of my little periodization of these are two countries that are competing. I think there needs to be a different understanding of, from Chinese leadership, that they can play a role in the world, which is not a sort of inherently sort of threatened and confrontational one.

• 43:57Speaker 01

  There is like, deep psychological trauma and wounds that has led, not just one generation, but multiple generations of of PRC leadership to that conclusion. So I don't know what it takes to get there. And you know, you have this tension of, on the one hand, the things that I think are most important to preserving the balance of power between America and its liberal allies and China, that would deter that war in Taiwan, are also the things that are sort of reinforcing the view among Chinese leadership that these guys are out to get us, and we need to, you know, push back every, every which way. But hope springs eternal.

• 44:40Speaker 01

  There have been many moments in Chinese history where the trajectory has been different than the one we've been on since, I don't know, 2010. And I'm hopeful that the dynamics will change.

• 44:50Azeem Azhar?

  Given this complex scenario, I'm glad you're hopeful. The legend Jordan Snyder from China Talk. I'm Aziz Mazhar, Exponential View. Thank you, everybody, for listening in. Thanks for listening all the way to the end. If you want to know when the next conversation is released, just hit subscribe wherever you're listening. That's all for now, and I'll catch you next time.