Why China's AI Strategy Just Might Work — With Grace Shao

Grace Shao is a Hong Kong-based writer and analyst, and author of AI Proem on Substack newsletter. She joins Big Technology Podcast to discuss China's rise in artificial intelligence, and whether (and how) it can be a global player. Tune in to hear how China's AI startups are rapidly productizing cutting-edge tech, why it keeps developing open-source models, and why it's surging in robotics. We also cover AI agents like Manus, chip shortages, and the entrepreneurial resurgence transforming Chinese tech culture. Hit play for an essential conversation on China’s AI ambitions and their global implications. You can read more from Grace here: https://open.substack.com/pub/aiproem --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Want a discount for Big Technology on Substack? Here’s 40% off for the first year: https://tinyurl.com/bigtechnology Questions? Feedback? Write to: [email protected] Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:00Alex Kantrowitz?

  This episode is brought to you by Genesis. What does it actually take to put Agentic AI to work across an entire enterprise? I recently spoke with Genesis chairman and CEO Tony Bates about why orchestration is emerging as a competitive advantage in customer experience and what companies need to get right in the AI era. Then I sat down with Adam Mitchell, head of enterprise business solutions at Voya Financial, to go inside a large-scale Agentic CX transformation, including the business decisions, trade-offs, and lessons along the way. You can watch both conversations now on my YouTube channel today. It's never been more challenging to get frontier compute. How do you know where to look, who to trust, or how much to pay?

• 0:43Alex Kantrowitz?

  Akash is an open cloud that provides easy access, flexibility, and peace of mind. That's how companies like Razer were able to cut their inference cost by 15 times. Visit akash.network/alex for a free consultation. That's akash.network/alex for a free consultation.

• 1:03Alex Kantrowitz?

  Was DeepSeek an outlier or a sign that China's AI industry is a force to be reckoned with and a potential global leader in artificial intelligence? We'll talk about it with a leading China analyst right after this. Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. You asked for it, we're delivering a China episode all about China's AI positioning, how competitive the country is in AI, whether DeepSeek was an outlier and what might be coming next. It's a show that we've been looking forward to doing for a while and very happy to be bringing to you today. And we're joined by a great guest, Hong Kong-based writer and analyst Grace Xiao is here. She's the author of AI Proem on Substack

• 1:47Alex Kantrowitz?

  and is here to share with us everything that's going on in China and all the context that's been missing from the headlines. So Grace, great to see you. Welcome to the show.

• 1:57Speaker 01

  Thank you so much for having me, Alex. Great to meet everyone here online.

• 2:00Alex Kantrowitz?

  All right, let's start off with this question that we've been wondering about here, which is whether DeepSeek was an outlier, whether it was just a smart group of people who came up with a real AI innovation or the tip of the spear, showing that Chinese AI is really starting to be globally competitive and a force to be reckoned with on the worldwide stage. So I'm curious what you think about this. Was it an outlier or was it something bigger?

• 2:25Speaker 01

  I think definitely we're seeing that it's not an outlier, like to start off with like DeepSeek completely changed how the world viewed like our scaling laws, right? Like, and that implication isn't even just on that end, but also I think it's really helped um bring confidence to Chinese AI space and AI entrepreneur space. And I think now one by one, we're seeing more and more like high-profile AI entrepreneurs coming out, and a lot of them are quite young, they're born in the eighties and nineties, and this generation of entrepreneurs are very different. So first of all, to start off with, it's really interesting, like, a lot of you might have read, Liang Wenfeng, the CEO of DeepSeek and his whole team, they're actually educated in China.

• 3:06Speaker 01

  Um, so I think that's one aspect of where we're seeing people realizing this is a bigger trend, and we're seeing more talent really coming from these schools. And then I think another thing which was really interesting is, um, I was talking to friends about it in China, and they're saying, look, this is actually starting the rise of what is called the open source deal, like, you know, people are really excited to be quoted, to be, you know, recognized, and I think this is again a really, really stark difference from the last generation of entrepreneurs. Chinese entrepreneurs now no longer are just driven by money and making money, they're driven by recognition, influence, and power, and a lot of them are like visionary start off with and not businessmen to start off with. And that's a huge difference in, say, even the internet era, like, let's say Alibaba,

• 3:51Speaker 01

  Jack Ma, like, he talks about making money, making businesses easier, a lot of the businesses and products were actually driven by the desire to make money. And it was, there's no shame around, you know, I can copy, copy, copy, and then make it bigger, better, right? Or I can make a cheaper version, whatever is happening in the West, or a business product out in the West. But in China right now, a lot of these AI companies are driven by actually like missions. So I think then we're seeing a bigger trend of AI companies coming through. And I think last but not least is because of the last couple of years of geopolitical tensions, frankly, it's not made it easy for them. Um, and I think there's a stronger, even sense of nationalistic or patriotic desire

• 4:35Speaker 01

  to say, hey, we can do it, we can actually contribute to the global innovation scene, we can lead in innovation. So there's definitely a lot of that, and then I think that that's definitely something to continue to, we can continue to watch, and I expect that we will see more and more innovation in AI space coming out of China.

• 4:52Alex Kantrowitz?

  Grace, like I hear you, but I'm also surprised to hear you say that this is not driven by money, given that DeepSeek was created by a literal hedge fund. I mean, it seems like it would be the definition of chasing for money.

• 5:04Speaker 01

  But I think that's really interesting because we've seen, I actually have been reading a lot of the Chinese media or interviews or even coverage on him. And himself at least, like Liang Weifeng himself, I think for sure people are saying, he's, he's actually like quite an interesting figure. He came from an extremely frugal background. Like I'm talking about like bricks as a house, like bricks made house, like, you know, like a village. And he was hailed as a hero when he returned back for Chinese New Year recently, right? And I think he came from this humble beginning and he was just a really, really, really smart nerdy math guy essentially. And he went into quant trading. And it's really interesting that essentially he footed the bills himself to do this. He made this pivot into AI a couple of years ago and started training models.

• 5:48Speaker 01

  And so far right now, everything's for free. And that's another argument, like what topic we can talk about, which is this huge embrace of open source and this expectation within the Chinese AI space that LLMs are right now all going open source, right? Even Baidu, I think, announced that they're gonna go open source in June. Baba is a famous one that was always open source and free, basically in that sense. Obviously, DeepSeek's completely changed the narrative. Now making everyone expect that LLMs are just gonna be for free in China.

• 6:20Alex Kantrowitz?

  Why is the Chinese AI industry open sourcing all these models? Like, let me tell you, in the US, I think the view is that China is open sourcing these because they wanna mess with US research labs and show the open AIs of the world that the product that was supposed to be their moat is no longer a moat and take the US AI industry down a notch. Is our thinking on that line anywhere close to reality?

• 6:52Speaker 01

  I think honestly, there's a lot of politically charged narratives going around, given the last couple of years of where the trade war has led us and on a very personal level for someone like myself and friends around me who had a kind of like built their identity and business and everything on these two worlds and an assumption of their working together. That's not good. It's not a very productive or cohesive narrative going forward. Now, on a very business, I think very pragmatic way, let's just look at it. Um, China actually, I wrote about this extensively with a collaborator called JS and, you know, we, we really examined why China had to kind of go through um or go with a AI monetization strategy that's really heavily leaning to our consumer versus enterprise.

• 7:35Speaker 01

  And it fundamentally starts with a really, really low SaaS adoption. So in China, there's, we, we all know enterprise software just never really took off, right? Like, like, this is based on many, many different things. Number one, let's just start off with, let's just look at economic structure. Um, China's still not a very heavily depend, is not heavily dependent on knowledge workers compared to the US where it's like sixty percent GDP is driven by knowledge workers. Actually, if you think about China's vast like significant economic growth over the last three decades, it's very much driven by labor. So it's still in manufacturing sectors, it's still in, you know, um, even domestic consumption, but like it's not really what we think of as white collar jobs.

• 8:16Speaker 01

  And because of that, um, it's just not had that really strong um structured ecosystem for enterprise to kind of flourish, to start off with. Number two, I think, we also looked at, you know, just the, the, that because there was such a frankly poor um protection of IP laws and everything, we saw that, you know, a lot of the uh softwares that came into China were actually kind of operating in this gray area of like pseudo legal space where you can actually just buy pirated Microsoft and like even mega legitimate companies would just use pirated like word dot, word and Excel, whatever. All of this laid the foundation to now where then we look at the internet conglomerates.

• 9:01Speaker 01

  Because there's no massive enterprise companies, right? Even the companies that have enterprise software, like Alibaba or ByteDance. Those products are their minor businesses. So it's the whole internet economy is so dependent and reliant on consumer facing applications. And everyone knows about the super apps, right? The massive touchpoints and like the one billion people DAU kind of um figures. So now for China, on top of all of that, and then Deepsea completely broke the moat where like said. And told everyone like, look, you don't actually need to pay for L L M's. Go and get your free L L M's. And the real innovation and use cases are in application. So everyone in China right now is like, okay, why should I pay for this?

• 9:44Speaker 01

  And um you know, why why should why should wouldn't I just like try to innovate on top of it? Essentially create like L M wrappers, right? Um I think so that that's like one aspect of why we think China just went into consumer straight head on. Like, you know, they never really tried to really go enterprise direction. Except for Alibaba, they kind of they still are trying to leveraging the cloud.

• 10:05Alex Kantrowitz?

  So can I can I just follow up here? So is is what you're saying that we're seeing all these open source A I companies come or open source A I models? Come out of China because they're being developed by consumer facing companies? And so the plan for them is instead of let's sell our A I models to other businesses. The plan for them is we're going to build consumer apps uh that are based on top of the large language models that we are developing. And if we open source them, we might get developers in there, we might speed this technology. And then we'll basically play in our area of expertise and try to win that way. Is that why we're seeing so much open source? Is that what you're saying?

• 10:47Speaker 01

  A hundred percent. I think I think I think you put it in a very succinct way. I like for me, like I was thinking about the macro and then the micro, right? Like and but like the way you put it exactly what it is. And I think even in during Alibaba's recent earnings call, Eddie Wu, like the current C E O, even said something like, look. We're gonna be like. The provider of basically everything as in the infrastructure layer, where the grid. But in the future, we don't know what monetization is. We're gonna complete, we're gonna continue to do our cloud thing, like our cloud business, which they're leading in China and actually in Asia. We're gonna continue to enhance and um make sure our model is frontier level, like their Q in. And then we're gonna push out all these AI empowered products, um applications like their Quake and etc, right?

• 11:33Speaker 01

  So, so I think really the monetization strategy is all an application and they're hoping that one day, whether it's your plugging ads or whatever, you know, charging at friction points, that's where it's gonna make the money.

• 11:45Alex Kantrowitz?

  It is interesting because I had a conversation with Kai-Fu Li once uh for my book and he had, I think maybe in one of his books about AI, called Mark Zuckerberg the most Chinese uh of all like American C I CEOs. And the reason why he said that is because there is an environment in China where people see apps come up and then immediately copy them. And it's accepted that copycat apps are just the law of the land there and you better be ready to move and adapt and copy quickly. And that's clearly what Zuckerberg has done with him copying stories with Snapchat and copying reels, uh copying TikTok with reels.

• 12:25Alex Kantrowitz?

  And it just totally makes sense that he's also using this now Chinese strategy of open source AI to help develop consumer apps with Facebook, because that is there, that is effectively, I think if I'm getting what you're saying right, in terms of why, you know, Alibaba is uh developing AI, open source AI and Tencent is uh developing uh open source AI. Facebook is doing the same thing where they're basically saying, we wanna lead the direction of where AI goes, we want everything to be compatible with our systems. And that will in turn lead to growth in our products and we're gonna put it everywhere, uh including, you know, within Messenger and

• 13:06Alex Kantrowitz?

  within WhatsApp and within Instagram and that's how we're gonna grow. And I think I was just speaking with Yan La Kun, the chief AI scientist at Meta, and he said there's six hundred million people using their their AI assistant within their apps compared to four hundred million uh of of OpenAI's ChatGPT. Now they use it less, uh but the parallels in that strategy is just uncanny.

• 13:27Speaker 01

  No, a hundred percent. I think you completely nailed it on that. Like, I think Zuckerberg is the only one so far out of the American big tech that actually openly said, I think in that recent earnings call as well, he said something like, we're gonna have a one billion people serving AI agent, right? Like, that is his like vision. And that's exactly what you said the Babas and the ByteDance are um imagining to do. What's interesting is, I I do wanna point out is Tencent actually has not really been leading in their LLM development at all. In fact, they're the only and first one that have actually integrated DeepSeek into their products, um into their WeChat, which which obviously um all of you know about. It's like the super app of China, right?

• 14:08Alex Kantrowitz?

  Yeah, but for those who don't, right? The leading messenger, you can do everything there, payments. So they've they've put DeepSeek within.

• 14:15Speaker 01

  Yeah, and I think I wrote a lot about this, and then I do wanna highlight how significant this is and why that's a completely also change in mentality of Chinese AI players. Before Tencent integrated DeepSeek, which is, I think they did about a month ago, um everyone's still kinda trying to like close up their doors, like like Doble of ByteDance. They were still being like, okay, we're gonna do our own apps, we're gonna spend a ton of marketing, we're gonna try to get people onto our app, new app, right? But the issue with that is you actually need to spend a lot of time and effort to convert new users, exactly to your point. Where if you already have an existing app, like Facebook, and in this case WeChat for Tencent, you have the really, really strong strength of distribution and reach already.

• 15:00Speaker 01

  And I think this is something they did really well. So they basically said, you know what, we have a pretty crap LLM, we're not even gonna try to compete on this right now. DeepSeek is um great, we're gonna just inter uh integrate it. So they first did that. And then I think another thing that, like you said, Meta is doing completely the same is. They have these walled garden or proprietary data per se. Where if you think about it, um, like you said, WeChat is a messaging app, right? But beyond that, you pay utilities on it, you call for your taxi on it. You actually write blogs and essentially there's a built in Substack on it. So all of this information is your proprietary information that no one else can scrape. Cause if you go on China's Google, which is Baidu. And you wanna look up an article that you know, like Alex wrote, right?

• 15:44Speaker 01

  In Chinese, you're not gonna find it on Baidu easily. But you gotta search it within WeChat. And then last but not least, I think it's also the um, the point on functional adjacency. Because I said WeChat has a built in search kind of engine or search function, similarly to Facebook, right? Like we go on Facebook, we search for events, things around us. Uh, people, we creep on people, creep on companies, whatnot, right? There is a search engine built into it. So there's a very natural way for people to kinda say, hey, maybe I'll just try the AI function, right? Versus if you think about TikTok, which is ByteDance, like main business. I'm not gonna be like watching people dancing and buying cosmetics, all of a sudden like, hey, let me search. You know, something using AI, there's no functional adjacency.

• 16:28Speaker 01

  So even though ByteDance shelled out so much money on marketing and brought in, I think. Uh, I would have a fine number, but like. Couple like, like here, twenty million DAU, um, which was quite impressive in the beginning. They were the leading kind of do- um, product for, for the GPT like chatbot in China called Douba. They, they never really took off. Once Tencent integrated um, DeepSeek into their WeChat product, it was like game over for them.

• 16:55Alex Kantrowitz?

  So I, I wanna, I don't wanna let my original question go without. Going a little bit deeper into it, asking whether DeepSeek was an outlier. Whether there's more uh, that China is doing, so, okay. I'm trying to like think through our conversation. You've definitely said that China is quite good at productizing AI. Because there's this culture of open sourcing, getting it into the product. And building with consumer. But then I'm thinking through like, alright, so we have the DeepSeek breakthrough. Uh, we know that Alibaba has a pretty solid LLM or yeah, LLM and it's called Qwen. Um, but.

• 17:36Alex Kantrowitz?

  Where, what gives you the confidence to say that China is positioned to be a global force in AI beyond the DeepSeek breakthrough? Because I'm trying to think through like, I mean, I'm looking at the US, we've got OpenAI, we have Anthropic, we have Google working on this stuff, we have Meta working on this stuff. The innovations that have sort of been central to this entire generative AI moment have been developed within these research houses. There is a widely cited AI paper that did come out of China that Yan mentioned on the show a couple of weeks ago. But yeah, I just am curious to hear your perspective on like, what am I missing?

• 18:19Alex Kantrowitz?

  Like, what else is happening within China that should lead us to believe that it's going to be this global competitive force in AI?

• 18:27Speaker 01

  I think on a high level, first, I just want to address, there's like this point where people are like, it's a binary thing. You got a US and way to China win, right? And I think for where I sit in Hong Kong, where really best, we get best of both worlds. We have access to both the West and the talent and the kind of information in China beyond the great firewall, right? Is that there could be innovation in, in parallel in these worlds and they might not be actually directly competing each other. In some ways, like you said, I think for sure in terms of frontier models, the US companies, like you mentioned, the OpenAI and Anthropics of the world have definitely led China's LLM development by far for a long time until DeepSeek made a breakthrough, right?

• 19:11Speaker 01

  And, and this is something I've not shied away from writing about where everyone just assumed China's LLM was lagging. Now, that conversation now is kind of changed and it goes to a point where like, we've now reached a point where if your LLM is just good enough per se, then we can see people build on top of it. And now we're seeing a lot of the, I think, strategy by businesses pivot into products. And the products can be two kinds, like you mentioned. One is what we just discussed, a lot of it is in consumer application and leaning on the reach, the distribution, the, you know, just the walled garden kind of proprietary information, et cetera, right? That we just discussed.

• 19:53Speaker 01

  And then the other part, I think China is really leading on and is being underappreciated, I think people are picking up now, is the physical AI aspect. And this actually, again, it goes back to if your LM is good enough. It the competition there is not really in can you innovate better in in the LM. But it's actually in can you produce products in a cost efficient way and bring together the software and hardware. And now, because given that China, we just talked about as well.

• 20:21Alex Kantrowitz?

  This is robotics.

• 20:22Speaker 01

  Robotics.

• 20:22Alex Kantrowitz?

  Physical AI is robotics.

• 20:24Speaker 01

  Embodied AI, physical AI, and we're seeing this, right, where. Um. It's not even like it's it's it's like given that actually people in the industry are knowing know that China is definitely leading this, just given that, you know. We've had thirty years in China here where all the manufacturing is done here. All like I'm talking about not just like thinking about your clothes, right, not your cotton T shirts or whatnot. It's like all manufacturing. This is like your um your scanners, your your batteries, your TVs, whatnot, anything and everything, right? All of these things, the the the mechanics of it, the engineering of it, the cheap labor, frankly, the cheaper product, the supply chain.

• 21:04Speaker 01

  It all kind of brings it together. So we're seeing companies like Unitree taking up, I think, like forty percent global share on quad- quadruplet, quad qua. I can never say this word, right? Uh, quad triplet um robots and like something like thirty percent in humanoid robots. And they're like one third, one fourth of the price of Boston Dynamics. Um, so if you're looking at things like this, it's quite interesting. And a lot of people are asking me, actually, even on my own newsletter or um while I get interviewed, is what about embodied AI? And this is something where we're seeing um companies like Chinese leading EV companies. Bring in the deep sea LM. And again, because it's good enough, we don't need it to like it's right now, nothing is significantly better, right?

• 21:45Speaker 01

  It's good enough. You're actually advancing your intelligence um empowered cockpits. So if you have, again, renewable energy available, abundance of energy, frankly, which the US right now is facing a shortage. You have manufacturing prowess, you have cheap products, and you have existing pretty strong, like these like uh EVs. And you embody them with AI, they're really, really strong. So like I said, AI competition per se is not really just like in LM. I think in a very business and pragmatic way, it's actually in the product layer. And China has a lot of strength in the product sense. Now, if say in another year, like LLMs develop into a completely different thing,

• 22:28Speaker 01

  where like we cannot even envision what it might be able to do, then maybe the US again will have the advantage of having the know-how, right? Having the most advanced models to kind of be the foundation of these products. And China will just be at this level, right? But if we've reached a point where everything is kind of just good enough, then I think commercialization is also going to be in product layer.

• 22:52Alex Kantrowitz?

  Yeah, and I just want to say something about the nature of the of the questioning here. Look, I'm not coming out and like attacking China or anything like that. I'm just trying to represent the conventional wisdom in the US. And to have somebody who's an expert like you be able to like

• 23:10Speaker 01

  Oh, no, for sure.

• 23:11Alex Kantrowitz?

  give us give us that perspective, just for the listeners also. Like, you know, nothing against the Chinese AI industry. So I just think it's good to get these questions out there and like start to address them. Couple other things. First of all, we have a conversation on this podcast a couple of times a month, if not more, about whether it's the product or the models that matter. So it's very interesting to hear you say that China's perspective is it's basically the products and these companies are putting the product, the the model innovation into play in the products in in various ways. Because we've seen very little consumer AI in the US, very little. And so they're actually putting it into play, which is interesting.

• 23:56Alex Kantrowitz?

  And not only that, they also have now built cutting-edge models. So you have both. Now, look, there's there's definitely competition between China and the US. I won't, you know, say that there isn't, but it is. It is really interesting to to hear more about this strategy. So Grace, I'm actually curious if you could share. Oh, go ahead.

• 24:15Speaker 01

  I just want to add one point, like actually to my point on the that China is really focused on product, they have a strength in product. But this only changed after DeepSeek. Pre-DeepSeek, frankly, there was like no really like global frontier leading model, right? Like even the QN series from Baba were doing okay, but there were nothing com- like compared to the benchmarks, you know, ag- against the benchmarks um with American leading models. Like, I don't think anyone was like, oh, I'm having a better experience using QN or Kimi um compared to like, you know, OpenAI ChatGPT. I do think DeepSeek was, of going back to your initial question, DeepSeek was a huge milestone, turning point for China. And I will use one example to prove this point is, again, going back to ByteDance.

• 24:59Speaker 01

  They didn't have a very strong LLM. They put a lot of money into converting people into their Doble consumer app. It didn't do well because the experience was just average and the hallucination was madness. It was like going off trails, right? But when DeepSeek came out and that complete change of foundation of it became it, setting the bar for everyone having access to good enough model, then I think the pro- product uh product advantage could really come through. I do think there is that. So the first two years of since GPT's uh release, it's since November twenty twenty two, the US for sure, by I mean, US companies a hundred percent had a lead and no matter how you compared it. But I do think once we start um um shifting our focus into product,

• 25:45Speaker 01

  maybe Chinese big tech will have certain advantages.

• 25:49Alex Kantrowitz?

  So what are they building in China? Like, what are the products that are coming out with AI baked in?

• 25:53Speaker 01

  Um, like I mentioned, you know, obviously there's ChatGPT style chatbots. We have Kimi, we have Doble, we have like, you know, we have uh like obviously DeepSeek directly, et cetera. And then we have the um, we have a lot of like video editing tools. There's a lot of video editing tools like um CapCut. There's um even though itself the interesting bit is multi-modular so you can actually like chat within the app having multiple conversations open and a lot of them will be thematic. So you can have like a love guru, you can ask them about like your dating life. You can have someone be like your therapy and you can be like there's like a fake Elon Musk built into it. You can like pretend you're having a conversation with Musk like the the consumer entertainment aspect is very different.

• 26:38Speaker 01

  Versus like I think the US chat chatbot um products are very efficiency productivity focused. Like you know you help with the research. Again, it goes back to like are you knowledge based worker? Or are you like a you know um blue collar worker who actually wants to use this for entertainment purposes? I think the vision of it was quite different in the beginning um.

• 26:59Alex Kantrowitz?

  So yeah, I'm pulling up I'm pulling up this rest of world article and they have uh all these great examples um. So for automotive, they say twenty Chinese automobile brands have announced plans to embed uh deep seek models that adoption appears to be focused on improving AI features, including voice control, high precision mapping, smartphone like access to music, web search and messaging. Uh it's also going into smartphones. China's top five smartphone sellers, I think you mentioned this, have all adopted deep seek in their system updates. Huawei used the R one model to upgrade its Siri like ex uh assistant.

• 27:36Speaker 01

  Harmony.

• 27:37Alex Kantrowitz?

  I don't know, maybe Apple could use that because Apple Intelligence has been a mess. It's also in uh home appliances. So this uh this uh the article says China's biggest home appliance company uh Mydea has launched a series of deep seek enhanced air conditioners. The product is an understanding friend who can catch your thoughts accurately and it can respond to your verbal expressions such as I am feeling cold. It's also in healthcare. Near nearly one hundred hospitals around China have announced they will adopt deep seek in their operations. The applications include uh supporting diagnostic and treatment processes, analysis of medical imaging, quality control for medical records and research on new drug uses.

• 28:21Alex Kantrowitz?

  Now, US companies are doing some variation of this uh but not as bold and not definitely not as quick. And there's there's a care, I think, or a. A caution in US companies that you wouldn't see this stuff get adopted so quickly. So what is it about Chinese consumer tech and I guess Chinese companies in general that would create the conditions that you would see such mass adoption in such short amount of time?

• 28:51Speaker 01

  I think it's it's really twofold. On a very high level, the government has really been encouraging this. So honestly, in a very top-down driven economy, when the government is pushing incentives and encouraging various industries to really uh embrace this technology, I think there is like more of a preference for companies say, hey, like we should be part of this macro countries movement, right? Like countries trend, whatever, there's that. But then on the other end, actually, um, in general, I don't wanna like, I don't wanna say China doesn't have strong data protection, but I'm just saying in general, China's data protection

• 29:32Speaker 01

  kind of regulations and awareness is definitely not as sophisticated or or alert, people aren't as alert about it. Um, when compared to the Western markets, obviously you is a most, most, most cautious maybe market for um data privacy issues and the US may be second. And then if you compare it to China, people are a lot more open to just kind of like sharing their data online. And I think because of there's less of a concern of backlash on that front, companies are more able to just say, I'll adopt these uh these technology, new technology. And there might not be a lot of pushback by consumers. Now, the third aspect is like a bit more nuanced and cultural is,

• 30:13Speaker 01

  I think when you look at China and adoption of internet and smartphones, um, it is wild, like I'm talking about like ninety-five year old, my ninety-five year old grandma on WeChat sending me stickers twenty-four seven, like, you know, they're so sophisticated. And it's it's like a war, it's like a completely like countrywide kind of sophistication just because people didn't really have PCs. So like a very small elite circle had PCs basically. And then everyone just adopted cheap smartphones. And now obviously everyone has iPhones and Androids and whatnot and. Because of that internet savviness, I think trying out new technology just has a less of a

• 30:53Speaker 01

  like barrier in that sense. So I remember even a year and a half ago, I was visiting Beijing for a work trip and I just popped into TCM doctor's office for like a acupuncture, just as in like generic shoulder pains, right? And I was like, this wasn't a big deal. And then the little, like the young doctor, she was maybe like, you know, in her late twenties, she was quite new. And she started asking me, she's like, I know that you like you're a tech reporter before, like tell, do you know anything about this thing called AI? She's like, I now use it for my diagnosis. I was, this is crazy. Cause in my head, I'm like, first of all, this is like, you know, like TCM is, you know, what we think of it is pretty traditional. It's literally called traditional Chinese medicine. It's not a high-tech industry.

• 31:34Speaker 01

  But even like practitioners in the TCM industry are adopting AI to enhance their diagnosis and their their workflow. And I think it's really interesting because they almost use it as like a fun entertainment tool, cause they're like, I'll chat with them and they'll tell me maybe it's right, maybe it's not right, then I'll assess again. And and I think just that, that sense of adapt, like um, that sense of acceptance, new technology is something quite different where I find even my friends in the US right now, who actually even there's one who works in self-founding, we were talking about it recently. And he was so reluctant to try out AI. He's like, I don't need someone to write my emails for me. I can do that myself. I'm like, dude, you literally work in tech. How are you not using this to enhance your productivity? He's like, no, no, no, no, no. Like, are they just like polishing my emails for me?

• 32:20Speaker 01

  I'm like, you're not trying the deep research like products, you're not trying a lot of the products that can actually help you cut like one-third of your time. Um, and and I think there's that definitely mentality difference.

• 32:32Alex Kantrowitz?

  I think you're hitting on a good point here, uh, which is that I think the conventional wisdom in the US has been like, why can't China compete before DeepSeek? The mentality was why can't China compete on AI? And I think that everybody in the US knew that the data protection was not anywhere close to um, uh, what it is in the United States. I also think that there was an awareness that Chinese companies were getting around export controls from the US. Uh, but definitely not to this extent that. People in the US are aware now, like clearly there's a lot of GPUs that have gone through Singapore and then go right to China.

• 33:09Alex Kantrowitz?

  And that is, that might be tougher to get to. So data, so they, they, the Chinese companies had more data, they had the compute. But I think the thing that people in the US underrated was the entrepreneurialism of China. I think that China was basically looked at as like, you know, a more collectivist society that has less entrepreneurialism. But clearly there is a lot of entrepreneurialism and maybe that was due to the fact that China clamped down a little bit on entrepreneurialism for a while. And now it seems like it's, it's back in style. But clearly I think that's something that was underrated by West, by West, yeah, people in the West.

• 33:48Speaker 01

  I think definitely, I think, you know, look, um, I actually was working in Alibaba during the clampdown. It was quite a like wild ride. In the sense of, you know, like the stock market just, you know, and we saw a lot of US capital pulling out of China. And to your point, actually, I think entrepreneurialism or entrepreneurship in China was always quite vibrant. But it was seen in a different way because the last generation of entrepreneurs were very different. And it goes back to the ones born in the 60s, 70s, a lot of them, and I'm not saying it's bad, it's just that their business model was this happened in the US.

• 34:31Speaker 01

  Like there's Amazon, let's create Amazon China, but make it like more Chinese, right? There's a whatever, there's a, there's a WhatsApp, let's make a WhatsApp in China, but make it better or right? So the mentality was like, can we copy, copy and then innovate, right? And I think the Uber founder said this on Alden podcast even quite recently, like a couple of months ago. He was like, when he was trying to fight Dee Dee in China back in, I think the early 2010s. He's like, he was madness, the copying culture is madness. He's like, we'll come out with a new product. And the Chinese comp- uh competitor will just come out in another week and they're very proud, they're like, we just did it better. And then like they'll come out with a new product and they spent all their R and D on it. And obviously, US engineers extremely expensive and Chinese talent, especially then was just frankly cheaper. And there was compassion on anyone.

• 35:14Speaker 01

  And at one point, he's like, actually, we just couldn't keep up because they were able to churn out a copycat version within a week or two. But then it at one point just turns innovation. So that was the last generation of entrepreneurship. And we actually, if you look back at it, whether it's Baba or Tencent or any of these big tech companies. Their initial big pot of gold per se were all American or at least Western. Okay, actually, like US investing in China was extremely, extremely, super vibrant. All private equities had presence there, like the war breaks, the Hikar or whatnot. Okay, like, and then all hedge funds had public, like publicly listed companies of ADRs, they had positions in them. It's just that during twenty twenty and to twenty twenty three.

• 35:58Speaker 01

  China's internet um industry had a bit of a, went a little detour, okay? And that was caused by domestic regulatory issues. Where there was a lot of anti-monopoly probes and kind of investigation went to the doings of Alibaba and Tencent, et cetera. And there was a bit and and the rise of kind of, I guess, geopolitical tension kind of came to the forefront of even business narratives. I think there was an understanding before where politics was politics, but business went on as usual before that. But during that period, China-US geopolitical tensions actually became the front and center of even business relationships. And we saw a lot of US capital pull out.

• 36:42Speaker 01

  And therefore, we actually did see a huge dip in just the confidence in the Chinese economy and honestly, the Chinese internet space for a little bit. Now, AI has definitely, definitely powered it again. And even like you mentioned when we were chatting, you know, like, um. Like Baba's stock prices went shot up again, like, you know, like now people are discussing is Baidu a good buy? I think they become kind of like the weather wing of Chinese economy and Chinese tech. Because the assumption is these big tech companies can actually leverage whatever AI innovation that comes through. Given the certain restrictions, US private equity firms and VC firms still cannot invest in Chinese AI companies directly.

• 37:22Speaker 01

  The best way to get exposure to this innovation is through public investment into these Chinese big tech right now.

• 37:30Alex Kantrowitz?

  Yeah, it has been interesting to see the the culture shift. And you mentioned you were at Alibaba during the clampdown. I mean, Jack Ma, basically, as far as we know, disappeared for a while, but he just made his way back into Chinese public life. So

• 37:43Speaker 01

  That was a good sign, I think, for everyone.

• 37:45Alex Kantrowitz?

  Seems like that's

• 37:46Speaker 01

  I don't have him on my speech. He's not my best friend or anything, but

• 37:49Alex Kantrowitz?

  Can you call, bring Jack into the podcast?

• 37:51Speaker 01

  Just bring him in, yeah.

• 37:52Alex Kantrowitz?

  We gotta get him in to tell us what happened. But, okay, but it is interesting because, you know, it is, it does seem to me, and I think this is important to talk about, that there has been a, after DeepSeek, like, you know, people saw DeepSeek, and then we started talking about a US context. Within China, there has been a, a big change in terms of the way that the government thinks about tech, entrepreneurialism, and artificial intelligence. And it was really interesting to read some of the coverage when China has this annual meeting, the National People's Congress, and it was all about tech and AI this year. This is from Bloomberg. AI fever sweeps China's political huddle, fueling tech optimism.

• 38:37Alex Kantrowitz?

  For some years now, China's annual gathering of its national legislature has been an increasingly disciplined and choreographed affair. Its muted vibes particularly an echo of deepening concern about domestic stagnation. Not this time. The National People's Congress's seven-day gathering came on the heels of a breakthrough in artificial intelligence by China's homegrown startup, DeepSeek, that's fired up investors, politicians, and even regulators. It also followed President Xi Jinping's high-profile meeting with business chiefs, including Jack Ma. In this meeting, Communist Party cadres from different regions competed to market their locales as China's next AI hub. Lawmakers made a raft of proposals from promoting AI-related education and scaling up

• 39:22Alex Kantrowitz?

  the technology's application to boosting research and regulating the social impact. I mean, I think people outside of China need to pay attention to this. That is a major, major shift for the government.

• 39:35Speaker 01

  Yeah, definitely. I think there was um, well, there's been a lot of like municipal level or provincial level policies throughout the country. That's really been boosting AI per se. And like I said, physical AI, especially in areas like Zhejiang province or Guangdong province. Where they're strong on manufacturing, they're traditionally manufacturing hubs. And they're actually home to the overlooked kind of um, the tech companies like. Zhejiang is home to Alibaba, Geely, EV company, well, leading EV owner as well. And Guangdong, where it's like DJI, uh, Sense Time, a lot of them are all in this area, the GBA area, Greater Bay Area, what they call. Um, so there was that, but this time with with the AI policy push at the two sessions.

• 40:20Speaker 01

  It's something I think is a really positive signal to everyone because it just means that actually. Um, on a macro level, the government is very supportive of AI entrepreneurship, like you said. And it wasn't ever like explicit that the government did not support entrepreneurship. It's just that the last couple of years, coupled with COVID frankly, was quite tough on the domestic economy. And I think, you know, when the world was so used to double-digit growth for like so long. All of a sudden, when it came down to like five percent GDP growth was. There was a bit of a readjustment of expectations, whether it's domestic or internationally. So I think this just boosts that confidence a little bit. And I think again, coupled with what I said earlier.

• 41:03Speaker 01

  That this generation entrepreneurs have are a lot more mission-driven than money-driven, I find, when when I read about them. It it's it's it's quite different, like the the whole atmosphere is quite quite positive.

• 41:18Alex Kantrowitz?

  And it's really amazing to, um, speaking of the entrepreneurs and sort of the celebration of them. It's kind of amazing to see what's happening uh, with the DeepSeek founder. Uh, Ling Ling Wenfeng, am I pronouncing it?

• 41:33Alex Kantrowitz?

  Yeah, I mean, you have to like, we have to talk about what's going on in his hometown, which you mentioned, this small village. This is from the Times. The village where his parents moved was was small and now sees his fame as their opportunity. The village has become a shrine to the man they call top scholar. He was a star pupil who was the top of his class and finished the high school math curriculums three years early. The street leading to his house has been renamed Top Scholar Road. To serve the tour parties that visit, they are now selling top scholar biscuits, top scholar hot dogs, and deep sea baseball hats. That's pretty amazing.

• 42:13Speaker 01

  It's it's really funny from a Western perspective, but I think if you if you actually look back at Chinese like more like recent history and last even couple hundred years, I mean, except the Cultural Revolution, like scholars were actually a really celebrated and recognized way to pick even like politicians and like leaders in the government way back, you know. And it's like, the Chinese society really, really values, and they call this the zhuangyuan. So you can be the zhuangyuan, which means you are the number one scored person of your city or your province, whatnot. And these people will go on to go to the, like you said, the Beidatinhu, which is a

• 42:55Speaker 01

  Peking University, Tsinghua University, Zhejiang University, etc. And even to this day, you know, like, it's so very celebrated if you were like the number one of your city or your province, and you definitely wear with a badge of honor wherever you go.

• 43:13Speaker 01

  It's not that different from like, you know, scoring number one in your high school in the US, like, have like, you know, we all had a valle d'orian, you know, in that sense. But I think there's more societal recognition and praise. And because of his frugal beginning, because like you said, it's literally like a village. I think it just contrasts like the kind of success he had. It's it's a bit more. Um, it's widely celebrated because China also celebrates this idea of like upward mobility. Because you know, there's still such a huge um actual um. Income disparity within China, like if you think about China of the modern China, you think of Beijing, Shanghai. The quality of life is no different from New York or LA, right?

• 43:55Speaker 01

  But if you think about actually the vast majority of China out in the third, fourth year cities. You're you're actually looking at, you know, like like still a developing nation, you know? Um, so so he came from that kind of background and now to be one of. The most like celebrated entrepreneur in the world even, right? Like for this for this innovation. It's a huge pride for the for the for the family and the folks back home.

• 44:19Alex Kantrowitz?

  Yeah, you and I spoke before uh before this recording and I mentioned that. I spent a day in China uh on a stopover, but did leave the airport and that does not qualify me to speak at all. On China, although it was a lovely visit, but as we left Beijing and went to the Great Wall. Uh, it I saw some, I think I saw some of those villages and it was pretty, pretty astounding to see. Sort of, yeah, it's it's undeveloped and it's it's very different from. You know, the big cities where that that's a lot of people's picture of China today.

• 44:51Speaker 01

  Yeah, for sure. I think so. I spent um the last nine years across Asia, so now I'm in Hong Kong, but I've spent time in Singapore, Beijing and Shanghai as well. And when I so for context, my parents are from Beijing, so I did grow up visiting Beijing here and there. But even then, I never actually lived in Beijing as an adult or really understood this country. And when I was a journalist, traveling around the country, I was astounded by. The income disparity, the the awareness of the outside world. If you talk to people on the streets in Beijing, Shanghai, especially like college educated kids. Um, people are quite fluent in English, you know, you can. Talk about Obama, you can talk about whoever and they know about it really well, like if anything, Chinese s- uh school system actually really.

• 45:35Speaker 01

  Focus on what's happening in the world, outside in the world as well, like that's part of their. Education, but then you go to like a third year city and because my Chinese wasn't that good, especially when I first moved to China, um. And they're just like, people just come up to me because I had a slight accent and they're like, are you Korean, are you Mongolian? And I've had crazy questions like, are you Arabic? And I was like, that I'm definitely not any of those, but like, but it's just like this, um, this very like siloed world of these like little cities. They don't actually even travel to other cities within the country and they definitely not seen foreigners. Um, and they have a very small like lack of awareness what's happening out in the world. So when we think of China, sometimes you need to think there's the Beijing, Shanghai and Shenzhen's. And then there's really the rest of the country.

• 46:20Alex Kantrowitz?

  Definitely. And I guess from what I saw, if you drive outside of Beijing, uh, maybe not even that far. You can be in that countryside.

• 46:28Speaker 01

  Definitely.

• 46:30Alex Kantrowitz?

  I want to take a break because, um, well, we do need to take a break unfortunately, but I, I want to come back and talk about three topics. And then, uh, Grace, we can let you get on with the rest of your day. But I want to talk about robotics quickly. I want to talk about development, uh, some other developments, including this one area that has what you call these six dragons. And then if we can get it in a minute about Manus and agents. So we're going to take a quick break and come back right after this. This episode is brought to you by App Point. Everyone's racing to roll out AI right now. Co-pilots, chatbots, agents doing real work. But here's the part nobody loves talking about. All that AI runs on your data and most teams have no single way to see it, secure it,

• 47:15Alex Kantrowitz?

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• 47:59Alex Kantrowitz?

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• 48:44Alex Kantrowitz?

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• 48:59Alex Kantrowitz?

  And we're back here on Big Technology Podcast with Grace Xiao. She is a Hong Kong-based writer and analyst. You can get her newsletter, AI Proem, on Substack. It's A-I-P-R-O-E-M dot substack dot com. And Grace, it's great having you here. Thank you again for fielding all these questions. You've mentioned robotics a couple of times. So let's just go there and spend a little bit more time. The videos I see on Twitter of Chinese robotics are insane. They have a level of adeptness, flexibility, awareness that is above and beyond, I think, anything I've seen from coming from Western companies.

• 49:42Alex Kantrowitz?

  Of course, you've had Elon Musk with a person in a robot suit. Okay, maybe they've had some other people piloting the Optimus. But the stuff that we're seeing from China has been pretty impressive. So give us the state of humanoid robotics in China in particular. And where can we expect this to go?

• 50:02Speaker 01

  Yeah, I think um to start with, I think in the start of the year at CES, you know, they were, people were saying they were like more than half the exhibitors were Chinese. And majority of them were actually robotic companies. And you know, like you said, there's humanoid robots, like the, the one that kind of went viral, which is like the dog, the robotic dogs from Unitree. And then, you know, you have um obviously the other vari- variations of embodied AI products. I think in China, industrial robots not been new. And that demand for industrial robots not been new, right? Like we've uh, you know, like everyone's talking about, you know, the aging population, the urbanization, the reluctance to work in

• 50:45Speaker 01

  uh manufacturing labors, et cetera, and even, you know, the cost increase of human labor that's been happening in China. All of these have driven a lot of companies find industrial robot solutions. And that's been around for at least the last five, ten years, right? But now, I think human robots in China is really interesting right now is because um it, it's very rare for, I think, a place where you can have engineers to actually have, understand the software and then the hardware. And that's where China's kind of, I think, strength in the last couple decades of being a manufacturing hub really plays into it now. Um because it's been the manufacturing hub for basically all appliances we can think of under the sun, like any home appliance we can think of, right?

• 51:29Speaker 01

  There's a lot of know-how of hardware um building, it is in layman terms, right, in that sense. And I think beyond that, now we had embed this kind of um, embed AI into a software into it. What was the word for it? Me- me- can, let me find it.

• 51:51Speaker 01

  Uh, mechatronics? So the, the, the understanding of mechatronics is something that, you know, really China's had a huge advantage in. And even Jensen Huang himself, he was at HKSD, Hong Kong University of Science and Technology in November last year for a fireside chat. And he was saying, look, this GBA area, which is the Greater Bay Area, has all the talent in the world to lead in this technology because you got the um headquarters of DJI. You got the headquarters of Sense Time. And this, those companies, kind of like the last generation AI companies, they really trained up a whole generation of Um engineers and me- mechanical engineers who are able to really embed software into hardware.

• 52:34Speaker 01

  Um. So there's definitely that. And then on top of that, because it's been a manufacturing hub, it's just frankly cheaper like the supply chain is just here locally. You can source everything here. So we're seeing that, um, you know, you you need three robotics currently account for about seventy percent of global sales of humanoid robots. Forty percent of market share of Quatripet um robots. And that's just like a solid leader in in the industry. And I think their cheapest model goes for something like sixteen thousand dollars. So it's crazy that you can just have that. We're seeing other robot companies like Galbot, etc., like all of these coming out as well. They're selling them as like nanny robots, you know, they can help you. You know, clean your dishes and and throw your garbage out whatnot.

• 53:17Speaker 01

  Um. It's really crazy how advanced these technologies are in terms of their abilities of movement. My concern is right now, actually, the lack of regulation or safety um kind of standard for them. Um. As a mother of a young kid, I would never ever bring in a robot to my household because you just don't know if it can go rogue, right? And I think that's kind of the current discussion around this um globally as well as in China, really, why it's not really gone to mass consumer market yet.

• 53:47Alex Kantrowitz?

  That is fascinating. I think just the advantage that you're talking about is, you know, it's you've elucidated so well. It's just the fact that China has the hardware and the software. And being able to be so intimately familiar with both just gives you a massive leg up when it comes to humanoid robotics. That's that's fascinating. I wanna go now to a, we talked a little bit, we had people who are interested in like, where is uh some of the other innovation within China coming from outside of um outside of DeepSeek. And we've talked a little bit about the productization, we've talked a little bit about what Alibaba is doing. And I think it would be instructive to go through this example of the six dragons, which are all coming out of

• 54:30Alex Kantrowitz?

  this area called Guangzhou. And Grace, if you could tell us a little bit about what's happening there and what these six dragons are, that would be great.

• 54:40Speaker 01

  Yeah, I think to first to understand is Hangzhou is considered a second-tier city for again China standards. But the population is like nine million people or something like that. It's nowhere like.

• 54:53Alex Kantrowitz?

  It would be the biggest city in the US, just FYI.

• 54:56Speaker 01

  It's it's not a small city, you know. So in that sense, it's not, it it's quite well-known in China and I think, oh, sorry. It has actually nearly twelve million people, including its suburban area. So so yeah, it's not a small city.

• 55:08Alex Kantrowitz?

  It'd be a hundred fifty percent the biggest city in the US. Okay, no big deal.

• 55:12Speaker 01

  So i- in that sense, Hangzhou is, it's quite fascinating. So I wanna start in a cultural context. Hangzhou is a really, really, really pretty city, actually. It's named the paradise, paradise on earth, um, city of silk. It has a west lake. So in hi- historical times, Hangzhou, the whole area is kinda where the scholars used to kinda come together. You know, they would like admire the beauty of like nature and write poetry and you know, it's also known as where like the prettiest girls came from. It's it's it's really kinda well documented in Chinese traditional history. Um, modern days, why is it relevant? Well, it actually is the home to Alibaba, as you mentioned, home to Zili.

• 55:56Speaker 01

  Um, you know, the conglomerate of Cargill, that also owns a lot of the EV brands like E, uh, like Ziger. Um, it is also home to NaE's, the massive gaming platform. So itself is like actually like a home to like some of the biggest public listed companies in China, okay? And then on top of that, it's been traditionally a manufacturing hub because I think the um the proximity to Alibaba and obviously then the ra- like the rampant and vibrant e-commerce space. We have a lot of home businesses around the whole area where they're the manufacturers of like the clothing, the textile, the toys and whatnot that you know of, okay?

• 56:35Speaker 01

  Um, even near like the fake bag places and the the toy factories and all those things. So so it's a really vibrant economy. Now, couple now on top of that is, I think, a really special thing. I was kind of thinking about it that day is. It's about a two-hour drive from Shanghai, so meaning it has access to international talent, capital. Um, the, you know, the most vibrant culture and like art, art scene in, in China. And then it's kind of far from Beijing. It's like a three-hour flight, two, three-hour flight. So you're kind of away from the regulations, you know, like Beijing is and Shanghai are very different vibe. Like, think about New York and DC, right? You go to DC, people dressed in suits and, and, and it's different vibe, right?

• 57:17Speaker 01

  And people are more serious. You go on New York streets, everyone's wild, right? They're in their own world. And kind of like Shanghai and Beijing is a bit like that, okay? Right? Like, I, I remember when I first moved from New York to Singapore, I was like, oh my god, where are the crazies? I, I don't see anyone crazy anymore. I miss that energy. But my point is, um, I think, if you think about that, Hangzhou is so strategically located to actually help entrepreneurs flourish, especially smaller businesses. So it's not as expensive as Shanghai, Beijing. It's not as regulated, and it still has all the talent because of the, all the big companies that's been there. It's brought in this whole ecosystem of people that they can, people lean on. So now, because of that, the local government is also very, very pro businesses.

• 58:00Speaker 01

  Um, and they've really pushed out a lot of policies, incentivized AI development. You've really seen a lot of, um, AI companies really flourish there. To start off with, DeepSeek himself, right? Like, DeepSeek itself is actually from Hangzhou. And Unitree, what I just mentioned, the, the, the leading robotics company, also in base in Hangzhou. And it's really interesting, actually, out of the six small dragons, three of the CEOs were educated at Zhejiang University, which again, I just mentioned, is a very, very strong, uh, has a very, very strong STEM education. Um, so this whole ecosystem has really served well. Um, and now beyond Unitree, DeepSeek, there's a company called Game Science, Many, uh, Many Core, which just went public in Hong Kong, and, uh, BrainCo and Deep Robotics.

• 58:45Speaker 01

  So they, they each kind of work in different realms of AI, but supporting the whole layer, like the whole full stack and, and infrastructure in the ecosystem of, of the AI development. And I don't think we need to go into details of each of them, but I just think it's really interesting that people are kind of overlooking this whole area of development. Um, and I think ten years ago, if you ask where is China's startup hub, it would have been Shenzhen, which I mentioned was like the hub of, uh, the headquarters of Tencent, DJI, Sense Time. Now it's actually up there in Hangzhou and it's really interesting because that hustle culture, entrepreneurial culture also really feeds into each other and I think it's making it more and more vibrant.

• 59:22Alex Kantrowitz?

  Yeah, I looked at a photo of it as you were talking and we'll confirm to our audience, it is beautiful. So.

• 59:28Speaker 01

  It's a very pretty city, yeah.

• 59:30Alex Kantrowitz?

  My next trip to China, I think we have to add it for sure. Alright, we're running out of time. Oh, go ahead.

• 59:36Speaker 01

  Oh, it's actually also the famous tea plantation. So if you ever see China's like tea plantation pictures, it's out in Hangzhou suburbs.

• 59:43Alex Kantrowitz?

  Okay, alright, so definitely adding it to the list. Uh, we are running out of time, but I don't want to leave here without getting your perspective on Manus, which is this AI agent that has sort of taken, I don't know, taken the world by storm. Maybe that's a little bit too strong. Uh, but it is another agent outside of China, uh, or coming out of China that people are paying attention to. Some people said, is this the next deep seek? Uh, do you think, is China all, all about the AI agents now, speaking of putting the stuff into products? And what did you think about Manus?

• 1:00:18Speaker 01

  Um, so full disclosure, I haven't actually tried it. So it's all secondhand information.

• 1:00:23Alex Kantrowitz?

  It's like the most exclusive product. There's like, you know, one percent of people being let out and I think invites to Manus are going for a thousand dollars on the black market. So, yeah.

• 1:00:34Speaker 01

  It's crazy. We were paying like ten thousand USD for this right now, apparently.

• 1:00:38Alex Kantrowitz?

  Whoa, alright.

• 1:00:39Speaker 01

  Even my like, a lot of my like media friends and tech friends out, it like based in mainland, they're not being, they're not able to access. It's a bit secretive. So I don't have a really strong take on it because I don't think it's a deep seek moment for China. Um, because I think it did not fundamentally change how we believe AI is being developed, right? Like in the sense that DC completely challenged the scaling law and what we believed in. More capital is better, training, better model, because better AI, like this kind of mentality. Um, I don't think Manus has disrupted anything we already believe in, which is. AI will one day become like an assistant or a s- extension of our our capabilities.

• 1:01:23Speaker 01

  And I think if you've used like OpenAI's operator, et cetera, like it's not that different. And frankly, what I've heard from people that have tried it, it's so glitchier than a demo. I think it's an interesting thing because it does show that means if like, you know, inference becomes cheaper and usage becomes cheap, usage of AI becomes cheaper. More and more smaller businesses, like people with what less money can actually jump into this game and compete and innovate on top. Uh, we talked about innovating the product and application layer. But does it really change fundamentally how we believe AI is developing? I think it just actually um reinforces what we've been talking about.

• 1:02:05Speaker 01

  The mainstream narrative, which is AI is gonna take over junior staff jobs, um essentially that way, right? Or a lot of administrative work, um and that's really scary. Um, and so how do we train our next generation of young talent to be AI native, right? That's something where like the conversation might lead to. Um, but yeah, I don't think it's deep sea moment, but again, I've never tried it myself, so maybe I'm wrong. Maybe this thing is just like crazy.

• 1:02:28Alex Kantrowitz?

  Okay, um, last thing that's been coming up as we've been talking. Uh, people that we haven't really talked about the export controls and the shortages of GPUs within China. And, you know, we could get into the advisability of the policy, but I think that'll be for a different show. Uh, to me, the question is something like Manus, right? We just talked about it, one percent off the waitlist is probably compute heavy. Uh, something like DeepSeek, right? They had to cut off access, I think, for to either access to the API or access to the product. Um, because there was such high demand. Uh, so I'm curious from your perspective, can Chinese companies keep like really become global forces? If they're gonna be limited uh by the effectively, I guess, the chip shortages.

• 1:03:11Alex Kantrowitz?

  Uh, we have, everybody has the chip shortages, but I think they have them more acutely. And that might limit people's ability to, you know, effectively use the products. So what do you think about that?

• 1:03:20Speaker 01

  It's definitely not gonna be easy and with DeepSea rolled out, everyone's using it. I don't know if you you tried it, but the server would always say like it was like busy or like it couldn't.

• 1:03:29Alex Kantrowitz?

  Oh, yes.

• 1:03:29Speaker 01

  Essentially, the server couldn't actually serve the amount of interest coming in. Um, so I think it's not easy and DeepSea trained on the H eight hundreds, right? So that that was designed to circumvent the the chip bands in twenty twenty two, I believe. So so all of these things, basically, if we can say like it forced DeepSea to innovate beyond using the best top tier kind of newest chips. But right now, it's definitely also hindering Chinese like, you know, AI development. For sure, that's probably its biggest bottleneck because we talked about it. It has innovation, it has data, it has energy, it doesn't have chips. So unless domestically, you know, we see like Huawei or Baba or any of the other chip

• 1:04:14Speaker 01

  um players really make a breakthrough, this is gonna be their biggest hindrance, I think for sure.

• 1:04:21Alex Kantrowitz?

  All right, Grace. Look, it's late my time, it's early your time. I was like, uh, am I gonna be able to stay up for this interview? Folks, we're pushing uh past ten P M. now. I I have not felt tired for a moment. This has been fascinating. Thank you so much for coming on and sharing all this fascinating perspective on AI in China. Can't thank you enough, Grace.

• 1:04:45Speaker 01

  For sure. Thank you so much, Alex, and thank you for staying up late for this.

• 1:04:48Alex Kantrowitz?

  Yeah, thank you for uh starting your day with this as well. I know, yeah, beginning of the day with a podcast is not always the easiest, so thank you for that. The uh Substack, we'd be remiss if we didn't call it out one more time. It's A I Pro M uh on Substack, A I P R O E M dot Substack dot com. Many of the stories that Grace talked about today are on her Substack, so do encourage you to go check it out. Thank you, Grace. Thank you, everybody, for listening, and we'll see you next time on Big Technology Podcast.

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