China Decode: China Drops Its Jobs Target, Tencent Buys Back Manus, and the Rise of "Tier 3 City" Living

Alice Han and James Kynge look at why, for the first time in decades, China's new Five-Year Plan sets no numerical target for urban job creation. With unemployment at 5.1%, producer prices at a four-year high, and AI anxiety rippling through the labor market, what does it mean when Beijing, a government that treats jobs numbers as sacred, stops setting one? Then: Tencent is in talks to become the largest shareholder in Manus, the Chinese AI agent startup Meta tried to buy for $2 billion before Beijing forced the deal to unwind. Alice and James unpack why Chinese regulators intervened, what happened to Manus's founders, and what this all signals about Beijing's grip on its AI sector. Finally: Gen Z in China is skipping the megacities. Alice and James dig into why more young people are choosing Tier 3 and Tier 4 cities over Beijing and Shanghai, and whether it's a lifestyle choice or a symptom of a tougher economy. Subscribe to China Decode on Substack for weekly analysis, livestreams, and deep dives into the biggest story shaping the global economy: chinadecode.profgmedia.com Learn more about your ad choices. Visit podcastchoices.com/adchoices

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

• 0:00Speaker 00

  When you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs.

• 0:31Speaker 01

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra because it's not just a superior like beer. It's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 1:00Speaker 02

  Welcome to Sephora.

• 1:02Speaker 03

  I'm looking for a perfume that's not too perfumey.

• 1:06Speaker 02

  I got you.

• 1:06Speaker 04

  Serum moisturizer or moisturizer syrup.

• 1:10Speaker 02

  Let's get into layering.

• 1:11Speaker 03

  My concealer is making me look worse.

• 1:15Speaker 02

  Sounds like the wrong shade. Let's get you matched.

• 1:18Speaker 05

  There's only one store that really gets what you're going for. Get beauty from people who get beauty only at Sephora.

• 1:25Speaker 03

  Hi, I.

• 1:27Speaker 02

  Let's get you a basket.

• 1:30James Kynge?

  The number of people now in China in flexible employment is about 320 million workers this year. So this accounts for about 44% of China's workforce. That sounds to me like a very lopsided, very imbalanced economy that potentially could engender social stability issues.

• 2:01Alice Han?

  Welcome to China Decode. I'm Alice Han.

• 2:03James Kynge?

  And I'm James Kynge.

• 2:04Alice Han?

  In today's episode of China Decode, we're discussing economic indicators from unemployment to inflation raising flags. Tencent could buy Manus back from Meta and why Gen Z is moving to smaller cities across China, looking for a different lifestyle. That's all coming up, but first let's do a quick check in with how the Chinese markets are starting the week. Markets were down with Shanghai Composite falling around 2.06% and Shenzhen component dropping 3.48%, partially attributed to risk off sentiment surrounding escalating US-Iran tensions. The Hang Seng Index was up slightly at 0.16%. All right, let's get right into it.

• 2:47Alice Han?

  We'll start with the broader economic situation in China right now as it's facing a bit of an uphill battle. China's Ministry of Human Resources and Social Security released its 15th five-year plan just a few days ago. And for the first time in decades, it didn't set a numerical target for urban job creation over the next five years. This marks the first time since at least the 1990s that a headline number for new urban jobs has been left out of the country's medium term economic plan. It's being blamed in part on the uncertainty being created by the AI boom in China. The official target for new urban jobs over the past five years was just over 55 million.

• 3:31Alice Han?

  That's slightly higher than the target that was set in the late 1990s at about 40 million. But it's fitting, given that this is a country that really is driven by targets, economic, social and political targets. So the fact that we have had this change to the way that they think about the urban employment market, i.e. basically getting rid of this target, suggests, I think, a lot of what we've discussed previously, which is uncertainty about the job market, uncertainty about demographics, uncertainty about how AI could displace a lot of the jobs, especially the gig economy jobs, but not just gig economy, also increasingly white collar jobs, as we've seen elsewhere in the West.

• 4:16Alice Han?

  And I think that in general, we're starting to see a public consternation globally about the AI implications for the labor force. And the way that it manifests in China is quite interesting to me because on the one hand, you have the government trying to proactively set up guardrails, whether it's through the court rulings or through some of the policy statements that they made recently about how companies should not be displacing jobs on the grounds of AI disruption. But on the flip side, you know, you still see, I think, in general, a lot more enthusiasm for AI by the general public compared to, say, America and Europe. How do you see this decision to take away the target?

• 5:01Alice Han?

  And do you think, you know, do you agree rather with my intuition that it has a lot to do with uncertainty about how AI is going to pan out for the labor market?

• 5:10James Kynge?

  Absolutely agree, Alice, and I think it's a really important topic. I'm really glad that we're focusing on this one today. I would say that if there's one area in which the wheels might come off China's extraordinary economic advances over the past few decades, it has to be employment. And what you've already explained, the spreading adoption of artificial intelligence over the past year and the older adoption of factory automation over probably the last decade or 15 years. I think this makes China a guinea pig for the rest of the world to watch. I don't say that in any pejorative way about China.

• 5:53James Kynge?

  What I mean is that China is simply moving ahead so quickly on all of these topics that it now becomes an experiment for what happens to employment and social stability when you have hyper rapid AI adoption and automation adoption throughout the economy. I did witness some aspects of this when I was last in China a few months ago. The first thing is I took a train journey from Shenzhen, right in the south of China to Beijing, 24 hours on the train. Of course, I got to chat to a lot of fellow passengers and I have to say, I think every

• 6:33James Kynge?

  single one of them voiced this concern about AI taking away people's jobs. So it came over to me really, in a really concrete way in that regard. And then reading around the subject, doing a bit of research for today, a couple of examples really stood out to me. The first is an example of embodied AI, which is physical AI. So AI being used to power machines, robots and things like that. And in this regard, I would go to the example of the Xiaomi car factory in Beijing, which has 100% automation on its production lines.

• 7:17James Kynge?

  That means that not a single person is on those production lines. There are people in the factory doing things like quality control, checking that the machines are not breaking down, et cetera, but not a single human being is making, actually making those cars. And those production lines produce a new car every 76 seconds. 700 robots were employed. This has got to be probably, I think, one of the most advanced factories in the world. So that's one example. Another would be the Robot Expo that I went to in southern Beijing.

• 7:58James Kynge?

  And when I got there, I found robots able to do just about everything. There were scores of these robots, robot surgeons, robot shop assistants, robot waiters, robot basketball players, robot bartenders, robot like wise people, like encyclopedias, you could ask them any question under the sun, robot vacuum cleaners, et cetera, et cetera, et cetera. So the Chinese job market is being pinched by AI taking away, as you just mentioned, a lot of white collar jobs. And then you've got a lot of blue collar jobs, which are going to this embodied AI, where you've got effectively robots taking away the jobs of the blue collar workers.

• 8:40James Kynge?

  And this comes on the back of about a decade of the most intensive automation drive in China's factories that we've seen anywhere in the world. And so all of this leads to one of the most stunning statistics that I think I've read about China in a very long time. And that is that at the moment, the number of people in flexible employment, so another word for that would be the gig economy, the number of people now in China in flexible employment is about 320 million workers this year.

• 9:20James Kynge?

  That is an increase from about 280 million workers in the gig economy last year. So this accounts for about 44% of China's workforce, which to me is just an incredible number. This does seem to be a really big issue. How do you perceive all of this? How do you put this in China's context?

• 9:44Alice Han?

  I mean, I agree with everything you've said in terms of the labor market side of things. I think another dimension of it that we haven't touched yet is the demography dimension and the uncertainty about how quickly the, not just the labor force will shrink, but the population itself. And if you think about that level of uncertainty, then it becomes clear that the government also is unsure how many new jobs that they can try to target in the next five-year plan because it remains to be seen how quickly the population is shrinking. Now China has one of the lowest replacement rates now, about one in the world. I think only really South Korea is slightly lower than this at around 0.75 to 0.8.

• 10:28Alice Han?

  So this could move quite quickly and again, throw a lot of uncertainty into the future projection models of job growth, right? So if I think about it as these twin problems, the demographic challenge, the AI displacement challenge, it makes sense that the government is deciding, hey, we're not going to issue targets, we're going to see how this actually plays out over time. But it's very clear in all the anecdotes that you've just raised, as well as the stats, James, that China is in a way more exposed than some of the other countries that we're familiar with in the West, because it has a huge portion of the labour market that

• 11:10Alice Han?

  is in this flexible gig employment situation, right? You just said 44%, that's a huge amount, that's much larger than Europe, the UK and the US. On the flip side, this is an argument that I've heard, household debt levels are pretty low in China, the cost of living is much lower in China now, even rental prices have been cut substantially because of the property bust that really started in 2021. So there is an argument that if the government can try to cushion the blow to the labour market through more support for the social security system, more buffering through some kind of a universal basic income to support everyday citizens, then maybe they can try

• 11:55Alice Han?

  to weather the storm. But I think that the biggest takeaway from me in this decision to cut targets, and remember, this is a system, political system that loves targets, is that Beijing doesn't really know what the future pathway is for jobs, for population growth, for fertility.

• 12:11James Kynge?

  Right, absolutely, Alice. I think Beijing is hurtling into an unknown future and an untested future in this regard. Far be it from me to sort of be overly pessimistic about the abilities of China's economic planners. We've got at least four decades of this Chinese economic miracle that burnishes those people's reputation, they've been proved right again and again and again, even when the commentary in the West has been pointing out various problems. But on this topic, honestly, I am concerned that China may be hurtling ahead too fast into this uncertain future.

• 12:53James Kynge?

  320 million people in the gig economy, that sounds to me like a very lopsided, very imbalanced economy that potentially could engender social stability issues.

• 13:09Alice Han?

  That number that you decided, that's just a little bit under the total US population, just so that people get a sense of the scale, 320 million compared to 350 million US populations. That's a huge amount of people. But James, one question I do have for you, and this is going back to China in the 1990s, when China was going through, in a way, its own kind of technological economic cycle. And that was really trying to get rid of the overcapacity and overbuild in the state-owned enterprise sector. Remember, Zhu Dongji talked about capturing the big and letting go of the small, and you had hundreds of millions of SOE workers in the industrial sectors losing their jobs.

• 13:50Alice Han?

  There was the introduction of the Iron Rice Bowl, basically creating subsidies for employment, housing and other benefits. Don't you think that in this AI revolution, if something of the same, in the same vein were to happen, that the government in China would be a lot more responsive, just compared to the US or Europe, just as they have been historically, and then say in 1990s?

• 14:15James Kynge?

  Well, I mean, actually, I think it's a really good analogy that you've drawn, because at the time of smashing the Iron Rice Bowl and letting go of tens of millions of state-owned enterprise workers around the end of the 1990s, early 2000s, I mean, that was a huge social experiment, as well as an economic reform programme. And a lot of people in China were unsure whether that would work. And of course, it worked tremendously well in terms of building up the efficiency of Chinese industry, but it was very bruising for, as I said, tens of millions of state-owned enterprise workers who were let go, or their factories were sold for, like, I remember

• 15:00James Kynge?

  in some cases, a single renminbi. They were just put on the chopping block and sold off. So what we may be going into now is, in some senses, an equivalent of that. We're going into a potentially a bruising period of economic reform, in which China pushes automation and AI at the expense of the interests of the workers. So from that perspective, I would draw that analogy, we just don't know how it's going to pan out. As I said previously, at the time, around the turn of the millennium, a lot of commentators were saying, this isn't going to work, China's social stability is going to be impinged upon.

• 15:44James Kynge?

  But with hindsight, it obviously did work, certainly from an economic efficiency perspective. Therefore, I don't want to gainsay this, I don't want to say this is going to bring the Chinese economy down, but I certainly think that a lot of gig economy workers in China now are leading very tough lives.

• 16:06Alice Han?

  Yeah, and I think you're right, because the scale is slightly different. The 1990s, around 35 million SOE workers that were laid off and had their benefits, pensions, housing, subsidies, as part of the Iron Rice Bowl smashed, as you say. But then, as you know, you fast forward a couple of years, you go into 2001, China joins WTO, you see a big boost in China being a manufacturer for the rest of the world. You also then see a big boost in the property sector, which becomes a bubble, a problematic bubble for the next two decades. The big question is, will AI be enough of a productivity growth boost, as the property sector and manufacturing were in the early 2000s, to help transition this workforce

• 16:50Alice Han?

  into a new growth trajectory, into new jobs, right? That is, I think, the trillion dollar question that we don't yet know. But I think it's helpful to think about the 90s in the sense that, historically, we have been through a similar period of labour disruption and dislocation. In that instance, you did have strong leadership in Beijing that said that the SOEs and the employees had to basically carry the burden of that cost. But they were lucky in terms of the timing, too, because there was obviously WTO and the property sector boom.

• 17:24James Kynge?

  But at the time, I mean, I was a reporter in China, I used to go to a lot of those factories where all of the workers had been laid off and the buildings had been sold for a few renminbi. And there were demonstrations in a lot of places in northern China. And these demonstrations would go on for weeks, sometimes months. It was a period of social instability, and some of the stories that you heard from these state-owned enterprise factory workers who'd spent their whole life, as you said, in the Iron Rice Bowl, working for a pittance of a wage, because the trade-off was that their healthcare and their pension, et cetera, would be taken care of, and suddenly their

• 18:07James Kynge?

  Iron Rice Bowl was smashed, and they had no way to support their family or their grandkids or anything like that. Some of those stories were heartrending in the extreme. So the idea, I think, that sometimes the outside world has of China as a sort of managed communist state, has always been vastly wrong, because a lot of people in China have had to sacrifice masses and live very difficult lives to build what we see now. And China has, in many cases, not been communist in the sense of taking care of its workers in any way at all. It's been much less communist than the societies that we have built up in the West at the moment.

• 18:52James Kynge?

  And right now, with 320 million gig workers, I think that's just the latest example of the real nature of the Chinese economy, how hard scrabble it is, how difficult it is for a lot of people to get by.

• 19:06Alice Han?

  We'll be back with more after a quick break. Stay with us.

• 19:17Scott Galloway?

  Support for the show comes from Built. Most of us work hard to earn our keep, but usually there's no one around to hand you a cookie when you successfully pay your monthly housing bill. No one except Built, that is. Built has expanded from their original rental rewards program, and they have a lot more going on for members now. For example, members can earn points on mortgage payments, too. Every housing payment gets you points that get you a lot more than baked goods, such as flights with top travel partners, including United and Hyatt, Lyft rides, Amazon.com purchases, and much, much more. Here's another benefit of Built membership. You also get access to what they call a neighborhood concierge. You can make restaurant reservations, book fitness classes, and find new local spots, all while rewarding you at more than 45,000 merchant partners. It's simple.

• 20:00Scott Galloway?

  Being a renter and now owning a home feels a lot better with Built. You can download the Built app and join the membership for where you live at joinbuilt.com/propg. That's J-O-I-N-B-I-L-T.com/propg. Use our link so they know we sent you. Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. Their Agentic Trust platform is built to scale with you, not slow you down.

• 20:44Scott Galloway?

  With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof? Over 16,000 fast-growing companies like Ramp, Ryder, and Harvey save time and resources while scaling fast with Vanta. Learn more at vanta.com/propg and get $1,000 off. That's spelled V-A-N-T-A.com/propg for $1,000 off. Support for the show comes from Vanta.

• 21:26Scott Galloway?

  As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. Their Agentic Trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?

• 22:09Scott Galloway?

  Over 16,000 fast-growing companies like Ramp, Ryder, and Harvey save time and resources while scaling fast with Vanta. Learn more at vanta.com/propg and get $1,000 off. That's spelled V-A-N-T-A.com/propg for $1,000 off.

• 22:31Alice Han?

  Welcome back. Looking more closely at one particular AI company in China now, Tencent Holdings is in discussions to become the largest shareholder in Manus, a Chinese-founded agentic AI startup that builds general-purpose AI agents. Now, you'll remember that in December of last year, US company Meta announced plans to acquire Manus for roughly $2 billion to bolster its agentic AI efforts. But Beijing rejected this on regulatory national security grounds and ordered the deal be unwound. Tencent was already among Manus' early-round investors. Now, James, this is again another story that shows how tech companies are increasingly

• 23:13Alice Han?

  victim to geopolitical conflict and the nationalization of technology issues. So in this case, Beijing got ahead of Washington in trying to block this, because remember, Washington was also upset with the idea that this US company, Meta, would be spending $2 billion and effectively a Chinese AI company. But Beijing has gone ahead and said, actually, this is not in line with our regulations when it comes to purchasing Chinese technology IP. And so effectively, they have strong-armed the Manus founders. So the two founders are now stuck in mainland China.

• 23:54Alice Han?

  This is supposed to be a shot across the bow for any companies that are looking to domicile in Singapore and hopefully be treated as non-Chinese Chinese companies. But the biggest story here that's just emerged is the Tencent story. Now Tencent seems to be really keen to get into agentic AI. Thus far, I think it hasn't really been a leader in the space, hence the desire to increase its shareholding within Manus. Now, Manus reached a recurring annual revenue of $500 million earlier this year, just to first sense of size. Tencent's revenue last year was $100 billion. So Manus is still very early stage, but there are interesting use cases that Tencent

• 24:36Alice Han?

  is pushing to try to put the embedded AI engine inside the WeChat app, which services about 1.4 billion people. This could be a huge upgrade to WeChat, which hasn't really changed that much in my use of it over the last couple of years. So I'm very excited to see how that space shifts. But there seems to be a lot of synergies between these two companies. It completely makes sense to me that Tencent wants to get in on the Manus action. Do you think that moving forward, we're just going to have to see what we've discussed previously, this iron curtain when it comes to foreign stakes in Chinese companies, that

• 25:17Alice Han?

  effectively Beijing and Washington are both going to draw the line and not allow foreign ownership or stakeholders in their homegrown AI talent?

• 25:27James Kynge?

  Yeah, I'm glad you asked that, Alice. That's exactly the kind of conclusion that I was coming to as well. I sort of think that this example, this case, really shows that the idea that the US is the leading party in the tech war between China and the US, putting in lots of restrictions on entity lists and semiconductor sales to China, et cetera, et cetera, is certainly not quite right. It might not be right at all. Here, we've got a clear example, as you put it, of the Chinese regulator jumping in before the US regulator to prevent one of America's biggest companies getting hold of this very

• 26:11James Kynge?

  smart tech, in this case, the Manus Agentic AI. I think that is absolutely the right lens to look at through this. You mentioned the iron curtain idea. Yeah, I mean, I would not be in the least bit surprised if this is just the first of many examples that we see of China trying to hold tight its crucial AI technology and prevent foreign actors from getting control of it or buying it or any of that. And the other thing that I would highlight is, of course, that in this case Tencent is the big mover, and Tencent is China's biggest company by market capitalization.

• 26:56James Kynge?

  Market capitalization of Tencent at the moment is about $533 billion, which, according to my research, makes it the biggest Chinese-listed company. It's listed in Hong Kong. And you've already pointed out WeChat, which is used by 1.4 billion people. This is the messaging app. Well, basically, you can live your whole life through WeChat if you live in China. So the idea that Manus will be used to develop an agentic AI tool that can be used within WeChat makes this doubly important from a tech perspective.

• 27:37James Kynge?

  You know, if Manus' agentic AI is going to be put to the service of China's biggest app, then this has obvious implications for WeChat going forward. Now, I'd just add one other, and that was the co-founders of Manus were summoned to Beijing for a meeting with the National Development and Reform Commission. That's China's big kind of ministry that controls most of the big decisions that relate to the Chinese economy. And they were questioned about potential violations of the foreign direct investment rules tied to Manus' onshore Chinese entities.

• 28:21James Kynge?

  So we also get a version here of how China can exercise its regulatory authority. It goes through the people involved. In other words, in this case, the co-founders of Manus. They're summoned back to Beijing, they're questioned, and then a lot of pressure is put upon them. And it seems that there is an investigation into the foreign direct investment disclosure requirements of Chinese law related to this Manus deal with Meta. So it seems to me that the Chinese authorities are using Chinese law applied to individuals

• 29:06James Kynge?

  to frustrate the flow of Chinese technology into foreign hands.

• 29:13Alice Han?

  Yeah. And maybe people won't realize this, but I think it's pretty significant that it's the NDRC that are doing the disciplining. Because I would have expected, as happened to DD a couple of years ago, to some of these tech companies that were trying to list overseas without paging approval, that it was a lot of the CAC, so the Cyber Space Administration of China, doing a lot of the disciplining and talking. But the fact that this is the N D S C, which sits under the State Council, it's a really important body when it comes to the administration of Chinese industrial policy and economic policymaking at a high level. That says to me that this is the central government trying to get a bigger say

• 29:58Alice Han?

  over the technology issues, over these AI issues, right? Am I reading that correctly? I think that that's quite significant, and I was quite surprised that it was the N D R C doing it.

• 30:06James Kynge?

  Yes, absolutely. And I also noted the way in which the language was quite colorful. China, Chinese officials reportedly described the transaction, I'm talking about Meta's acquisition of Manus, as conspiratorial, as a conspiratorial attempt to hollow out China's technology base. That's very, you know, that's very revealing to me. I think that shows the level of emotion involved in this as well. You know, China is just as determined to block the US's acquisition of crucial Chinese technology as the US is to block China's acquisition of US technology.

• 30:51Alice Han?

  Then I guess the question will be, because Manus was trying very hard to do the ByteDance model in moving to Singapore, not being seen as a Chinese, Chinese company, will this be a blowback to Manus's foreign expansion goals? Because it's clear that they were trying to pitch themselves as a global company by moving to Singapore. They saw themselves as a potential leader in the agentic AI space. Now, this is also a very powerful space in and of itself, because if you have more and more consumers and corporates using AI agents to do different parts of their daily lives and daily jobs, that's, you know, a very compelling use case that can be scaled quite quickly.

• 31:36Alice Han?

  Do you think that this sets them back from globalizing in the way that, say, a ByteDance has successfully, but Tencent hasn't?

• 31:43James Kynge?

  Maybe the subtext here is that Manus is being called home to be put into the service of, as we know, Tencent's WeChat and other domestic applications, and then it's going to go global from China rather than from Singapore. I, I just don't know, but I think it's a very interesting point.

• 32:03Alice Han?

  If we look at the divergence between Tencent and ByteDance, you just said Tencent's the biggest, you know, Chinese tech company listed in terms of market cap. But ByteDance, which hasn't IPO'd yet, would probably exceed that if it ever did, just by looking at its, its, you know, revenue streams, its growth, its user scale. And yet, if you compare the two, Tencent has really just generally stayed domestic or grown with the China diaspora of users using WeChat outside of China. Whereas ByteDance has done exceptionally well with TikTok, but also with some of its,

• 32:43Alice Han?

  you know, enterprise AI software like Lark, that is also being used throughout Southeast Asia outside of China. So I think the reason I raise this question, and I don't have an answer to it, is that I think it's quite important in terms of setting a precedent, but also setting the tone for future Manus's, future Chinese AI companies, as to whether or not they can truly be global like ByteDance has succeeded in doing, in doing. Because the, I think China's pivoted very much from this model of the traditional incumbents like Baidu, Alibaba, Tencent, JD, to these new AI startups, you know, we talked a lot

• 33:27Alice Han?

  about them, like Moonshot, Zepur, Manus. These are sort of the new entrance into the field. And it remains to be seen, I think this is a big question for China's AI revolution, whether or not they can become global and try to shake off this China moniker or China association in the way that ByteDance has done successfully.

• 33:47James Kynge?

  Those are really good points, I think, absolutely very important for the future of this whole Chinese tech sector.

• 33:55Alice Han?

  Let's take one last quick break and stay with us.

• 34:05Speaker 00

  When you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs.

• 34:35Speaker 02

  Welcome to Sephora.

• 34:36Speaker 03

  I'm looking for a perfume that's not too perfumey.

• 34:41Speaker 02

  I got you.

• 34:41Speaker 04

  Serum moisturizer or moisturizer syrup.

• 34:45Speaker 02

  Let's get into layering.

• 34:46Speaker 03

  My concealer is making me look worse.

• 34:49Speaker 02

  Sounds like the wrong shade. Let's get you matched.

• 34:53Speaker 05

  There's only one store that really gets what you're going for. Get beauty from people who get beauty, only at Sephora.

• 35:00Speaker 09

  Hi, I.

• 35:02Speaker 02

  Let's get you a basket.

• 35:05Scott Galloway?

  Support for the show comes from Nutriful, the number one dermatologist recommended hair growth supplement brand used by over one and a half million people. When you get to the stage of life where you start to notice hair loss, you have a few options. You can shave it all off and enjoy your new look, or you can commit to a new team whose logo you wouldn't mind constantly spotting on a hat, or you can actually restore some of your hair's former glory with Nutriful. Nutriful has formulas built for men at different life stages, such as Nutriful Men for guys aged 18 to 49, or the new Nutriful Men 50 and older. It's the first product of its kind specifically made for men over 50. You can address the key root causes of thinning wherever you are in life. Grow visibly thicker, fuller hair in three to six months. Start Nutriful today and make the hat optional.

• 35:50Scott Galloway?

  Visit nutriful.com and enter promo code PROVGE for $10 off your first month's subscription and free shipping. Find out why Nutriful is the best-selling hair growth supplement brand at nutriful.com, spelled N U T R A F O L dot com, promo code PROVGE. That's nutriful.com, promo code PROVGE.

• 36:13Alice Han?

  Welcome back. Finally today, a look at what some of this economic news might be doing to Gen Z in China. James, we've heard of lying flat, and we've heard the youth unemployment numbers. We're now seeing more movement from Gen Z people in China who are shying away from the hustle and bustle of major cities. Tier three and tier four cities in the country are becoming increasingly popular amongst Chinese youths. I was first alerted to this, James, by an F T piece by, you know, your colleagues or former colleagues that I thought was really interesting, because it framed it as the ghost cities being revived by the youth in China, effectively Gen Z, opting to eschew

• 36:56Alice Han?

  tier one and tier two and go to these lower tier cities where rent and the cost of living are noticeably cheaper. And so it, in a way, solves some of this problem that a lot of people associated with China, which was, you know, China has all these ghost cities, China has been overbuilding in the property sector. I think one statistic that Goldman had was that in terms of the shadow supply, so the overbuild of apartments, it's apparently around 100 million units, which is a considerable amount. Now, the fact that you have these graduate students who are saying, hey, the cost of living and job market are too high and competitive in Shanghai, Beijing,杭州, we're going

• 37:41Alice Han?

  to move out further afield into, like in Nanjing or Suzhou or Xi. That is a trend that is documented and happening, at least from what I see, but also on Chinese social media. But it also changes, I think. Um, the, the shape of cities in China, but also the lifestyle of people uh in China and what they expect. Because, you know, if we look at recent history in China, people were all struggling to get into the best schools, to get into tier one cities, fighting to get Hukou uh residency. Now it seems that there's a kind of a reverse trend where people are saying, hey, it's not too bad to go back to my hometown or to a lower tier city,

• 38:25Alice Han?

  where, you know, the cost of living is three, four, five times cheaper uh in terms of rent, in terms of food costs. Maybe that is the future of China and it weaves, I think, rather nicely into the first uh segment, which was really mu- very much about people's fears about job displacement, uh youth unemployment going up. And so maybe the flip side of this is actually, this will allow for the revival of, of the overbuild of the ghost cities.

• 38:53James Kynge?

  Yes, absolutely. I mean, I, I think that's the positive impact of this. Uh, but it comes from a, a very difficult place for Chi- for, for China. I think this gives us a glimpse into the flip side or the dark side of the Chinese economic miracle. Um, it very much reminds me of a previous period in a country like Japan. Um, Japan in the nineteen seventies. Um, and I, I lived there in the nineteen eight, in the late nineteen eighties for a while. Uh, there was a famous book called Japan in the Passing Lane, and it was all about the relentless, grueling reality of uh Japanese salary men's lives in the nineteen seventies.

• 39:36James Kynge?

  The forced overtime, the physical exhaustion, even death from overwork. And I think China's got a version of that going on right now. This is China in the passing lane. And what we're seeing is the collateral damage of all the effort that individual people are putting in to spur China's emergence as an economic superpower being so considerable. Um, and Gen Z or Gen Z just deciding that, you know what? I'm going to escape from this. I'm jumping off the treadmill. I'm gonna swap my big city existence for life in a tier three or tier four city.

• 40:19James Kynge?

  And while we have similar trends uh in the US and uh in the UK, I think in the US they call it, you know, opting for a soft life or something like that to minimize stress and avoid burnout. And in the UK, we have downshifting, you know, leaving a high-pressure job for a less demanding and more balanced life. What happens in China, I, I, I think, and I've seen this, is much more extreme. First of all, the stress of the nine-nine-six existence, you know, working from nine in the morning to nine in the evening, six days a week, uh is much more extreme than what we see in the US or in Europe.

• 41:01James Kynge?

  Um, and secondly, the escape is more extreme, I think. It's more extreme of a social statement. Um, mums and dads in China are not happy. Um, I think generally speaking, if their kids say, you know what? I'm gonna leave my tier one city existence and go to a tier three or tier four city. Um, and Xi Jinping, we know, is on record as not supporting this trend. He, he has been exhaust- exhorting uh Chinese people to eat bitterness, as the Chinese phrase has it, uh which means undergoing hardship in order to get along and to build the country.

• 41:41James Kynge?

  So, um, from those perspectives, I think this is a really uh considerable trend. And uh the issue, as you've described, Alice, is that, you know, once somebody's moved from a tier one city or a tier two city to tier three or tier four, they can probably have a better chance of affording somewhere to live. Um, but they are downshifting in terms of their earning potential. Um, and that means they have to tighten their belt. Uh, so they have to live a life of what is sometimes called minimalist consumption. So they have to spend more, they can't afford to buy luxury and stuff like that. But they, but they feel that their life is freer.

• 42:24James Kynge?

  They feel it's more carefree, they feel less pressure. Um, and um it's probably, you know, a, a, a lot more sane than some of their former colleagues that, that remain in the tier one cities. This is obviously a social issue, but it has become a political issue in China as well. In uh recent weeks, the Ministry of State Security has accused overseas groups uh funding influencers to constrain China's development by brainwashing people to lie flat. Um, I don't think there's any evidence for this, but uh this is what the intelligence agency is saying.

• 43:05James Kynge?

  And there's been a flood of uh social media comments in China saying, oh, so my exhaustion from overwork, that was the CIA all along. Um, so, yeah. So it has become a little bit of a political issue. I would say probably tinged with a little bit of politics. But obviously, this is a big social issue, really. Um, do you know, do you know people uh in China who've uh, who are, who are doing this, following the so-called low-desire life by moving to a third-tier, fourth-tier city?

• 43:39Alice Han?

  I do sense, you know, what you just talked about, soft living and lying flat in different contexts, that, that Gen Z is a little bit, I think, uh more indexed for quality of life than, than working non-stop. Uh, and that has been a generational shift that I have noticed. Uh, it's also viral on social media, and we haven't discussed it yet, but there's a trend in China called Dream Corps, where they are reflecting back to the nostalgia of the two thousands, um, when a lot of things were better and, and, and uh more innocent. So things like internet cafes, KFC coupons, QQ Messenger, um, the two thousand and eight Olympics in China.

• 44:24Alice Han?

  A sense that um there was still hope and optimism during that period and innocence in, in China's economy. So there's that side of things. But what you just said about the government being annoyed with laziness and, you know, seeing it in political terms seems to be at cross purposes with another government initiative, which is to try to get young people through, you know, loans and tax incentives to start businesses in rural parts of China, in, in, in some of these lower-tier cities in order to boost their growth. So I feel like we're getting conflicting messages from the government. On the one side, I do sense that the government likes the fact that,

• 45:07Alice Han?

  you know, more people are moving into the lower-tier cities uh because it increases productivity in other parts of China. It also relieves um burdens on some of the higher-tier cities. It, you know, it enables, I think, just a more um even uh distribution of productivity uh and benefits across the country, instead of it being pulled all in tier one. But at the same time, um, you know, the government still wants people to be high achievers, to be pushing at the frontier of technology, of business, of AI. So I, I, I, I do sense that we're getting conflicting messages, which I think are part of China's transition.

• 45:49Alice Han?

  Uh, but certainly, my biggest takeaway um from being in China in the last couple of years is in general, people, and it's not just young people, are shifting away from this nine-nine-six uh mentality. Um, this is obviously not inclusive of the people who work in the AI companies and who are at the frontier of technology. But in general, your everyday person is more interested in TCM, in quality of life, in going out into nature and, you know, in wellness. That's a, that's a shift that I think has been uh fast occurring in the last couple of years.

• 46:28James Kynge?

  Absolutely. I think this uh is also, it's remarkable how many graduates are opting for the lower-city type of life. So uh according to statistics, about twenty percent of graduates relocate to lower cities for employment um after they've graduated. So that's uh primarily due to the high living costs, et cetera, that we've discussed in the tier one cities. So this is not a small trend in any way at all. This is now becoming part of the mainstream. I have known uh Chinese who have uh done this uh with their lives, I would say more than ten years ago.

• 47:09James Kynge?

  Um, and I think they've really enjoyed the lives they've had in lower-tier cities. Or uh perhaps they're people who've kept a uh, a, a kind of a minimalist consumer um existence in the tier one cities, but then um spent a lot of their time in lower-tier places um uh pursuing a more spiritual life, you know, um including tier four or even tier five cities in beautiful parts of China, running a coffee shop or something like that, you know. Um, so I think, you know, thi- this is a fairly well-established um social trend in China. The idea that you don't have to be in the rat race to live your life.

• 47:54James Kynge?

  You don't have to dedicate your life to the accumulation of um, of monetary capital. You can go for intellectual capital or social capital or spiritual capital or different types of capital and seek fulfillment in your life through that. Um, and so that's why I think some of these places in China, if you go to Dali or, you know, some of the other places in uh, in, in Sichuan, Yunnan Province, near the border with Tibet, you can find a lot of people living their best life, I suppose, uh down there.

• 48:31Alice Han?

  Yeah. I particularly like Dali. If no one's been, it's the hippie kind of capital in China. They love, in Yunnan, they love coffee. They have their own type of coffee. Um, but they have, love their cafes, they love wearing um tie-dyes. There's this kind of blue type of tie-dye that's very popular down there. Um, so if no one's been, I highly recommend, but that's a great example of. People opting out of the rat race, to your point, James, and deciding to start up coffee shops and living in places. I was running some of the numbers in terms of the Jiangsu province area. So Wuxi is apparently currently now, in terms of home prices, three times cheaper than Shanghai.

• 49:13Alice Han?

  And in some parts of China, you can get away with rent that's, you know, as low as 200 US dollars a month. So at that point, you know, how much work do you need to do? There are these stories of people who do some part-time work online and they live in a cheaper province or city in China and they are enjoying their lifestyle as a result. So it's this shift away from, I would say, this kind of Americanized live-to-work to a more work-to-live European mindset in some parts of China. All right, James, you know what time it is? It's prediction time. As you peer into the future this week, what do you see?

• 49:53James Kynge?

  I'm going to predict that about half of China's workers next year will be gig economy workers. That will be about 362 million workers and that will equate to about half, as I said, 50% of all China's workers. So I'm just picking on this extraordinary number to dramatize the point that Chinese society is really undergoing massive change at the moment. And I think this is a rather under-covered story. I think this is, you know, this could have big impacts on what China is and where China goes for many years to come.

• 50:34Alice Han?

  Yeah, fascinating. So mine is more in the realm of AI. We just saw some data come out that suggests that really since the beginning of the year, Chinese models in terms of token usage have really outpaced American models. And these are the Chinese open source models. By some metrics now, six times more used in terms of token usage metrics. My prediction is that as we continue to scale AI use through tokens, the consumption of tokens, Chinese models will continue to, I think, outpace the American ones. And, you know, because they can leverage, as we've talked previously,

• 51:17Alice Han?

  cheaper costs, being quite easy to use and host and then fine-tune. And on the back end, people are increasingly using it to, again, minimize their costs and do more AI integration. I think it's, you know, really interesting that Jipu now is in some respects as, almost as competitive as Claude in terms of Claude code. So I'm starting to get more bullish on Chinese open source models. And I think the use cases for corporates and consumers are becoming more and more compelling. That's all for this episode. Thank you for listening to China Decode. This is a production of Prof G Media. Make sure to follow us wherever you get your podcasts so you don't miss an episode. Talk to you again next week.

• 52:13Speaker 10

  They're running a cover two defense. But you're running to get game day deals on Uber Eats. Keep everyone at tonight's watch party fed with deals from your go-to restaurants or stock up with deals on your favorite snacks and groceries. Whatever the occasion, get game day deals on Uber Eats all season long. It's not football without food. Uber Eats, order now. Terms apply. Product availability varies by region. See app for details.