Pod Insights The Prof G Pod with Scott Galloway China Decode: Is China Quietly Taking Control of the Iran Conflict? About this episode Tensions in West Asia are escalating fast. Trump is threatening Iran, while China and Pakistan step in with a surprise peace plan that could reshape the conflict—and global energy markets. Alice Han and James Kynge break down whether it could actually de-escalate the crisis or shift the balance of power in the region.
They also dig into China’s new trade investigations against the U. S. and a major FBI cyber breach, exploring what these developments mean for the upcoming Trump-Xi summit and the broader U. S.-China relationship.
Finally, Alice and James look at China’s AI boom, as models like OpenClaw surge in usage, transforming cloud pricing and the global AI landscape.
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Transcript 6,080 words · 12 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:29 James Kynge? I don't think that either the US or Israel is going to be keen to allow China to take a leading role in a peace process in this Iran war or the war in the Gulf. It's just too important for the US and Israel. They don't want China to be playing a leading role in this regard. Yet, I do think that this peace plan by China with Pakistan sort of taking the lead, but China pulling the strings behind it is important. And I think the reason for that is that it allows China yet again to claim the diplomatic high ground from the US.
2:13 Alice Han? Welcome to China Decode. I'm Alice Han.
2:15 James Kynge? And I'm James Kynge.
2:17 Alice Han? In today's episode of China Decode, we're discussing Trump threatening Iran as China and Pakistan propose a peace plan, China launching trade investigations into the US ahead of the Trump-Shi summit, and how the adoption of open-claw AI in China is surging, reshaping the token economy and cloud adoption. All right, let's get into it. Tensions in West Asia are escalating as US President Donald Trump threatens to hit Iran, quote, "back to the stone ages," while China and Pakistan unveil a five-point peace plan aimed at halting the conflict. The initiative calls for an immediate ceasefire, reopening the Strait of Hormuz, and launching diplomatic talks, posing a potential geopolitical
2:59 Alice Han? pivot in a war that the US hoped would cripple Tehran. But there's another layer here. As Beijing publicly pushes for de-escalation, a new report reveals that Chinese firms are simultaneously marketing AI-powered intelligence tools that can track and expose US military movements in the region. Using satellite imagery, flight data, and open-source intelligence, these companies, some with ties to the Chinese military, are mapping American bases, naval deployments, and strike activity in real time. All right, James, we're in week five of this conflict in the Middle East. It seems that the strait hasn't been opened as of yet, although some ships are coming through
3:39 Alice Han? destined for China. China is getting hit in terms of oil imports, but what's been interesting is that they have come in support of the Pakistanis to deliver this peace plan. Now, Trump is not taking it seriously, but what was your thinking behind this peace plan, and do you think it actually has legs?
3:57 James Kynge? Well, I think, you know, the first question is, is it a credible peace plan? My short answer to that is that it's only as credible as the other key players, i.e. the US and Israel, allow it to be. And as you've just hinted, Alice, I don't think that either the US or Israel is going to be keen to allow China to take a leading role in a peace Process in this Iran war or the war in the Gulf. It's just too important for the US and Israel. They don't want China to be playing a leading role in this regard. Yet I do think that this peace plan by China with Pakistan sort of taking the lead,
4:40 James Kynge? but China pulling the strings behind it is important. And I think the reason for that is that it allows China yet again to claim the diplomatic high ground from the US, presenting itself as a peacemaker while leaving people to draw their own conclusions that the US is a warmonger. And I also think it's important because at the margin, it could have an influence on how events in the war in the Gulf unfold. Just a couple of factual references on the plan itself. This does, I think, amount to an initiative that is more than just posturing.
5:23 James Kynge? The reason I say that is because significant work has clearly been done behind the scenes. There has been several hours of talks between Pakistan and Beijing, talks between the respective foreign ministers of Pakistan and Beijing, and because there are five points in the peace plan that have been mentioned. Immediate cessation of hostilities is number one. The start of peace talks as soon as possible is another. The end of attacks on civilian and non-military infrastructure is another. The fourth is restore safe passage through the Strait of Hormuz. And the last is a comprehensive peace framework.
6:05 James Kynge? The other interesting aspect is that there are credible reports of a four-way meeting between Pakistan, Turkey, Saudi Arabia and Egypt. These are all Muslim countries that may be seen as more palatable by Iran as negotiating partners. So there has clearly been work behind the scenes between China and Pakistan and between the four countries that I've just mentioned. That means that this is more than mere posturing by China to paint the US in a bad light and claim some of the moral high ground for China. But does this really have legs in terms of something that is going to bring peace to
6:47 James Kynge? the region and is going to start unrestricted shipping through the Strait of Hormuz? I think we're far away from that so far, Alice. But what's your take on it? How are you seeing this?
6:58 Alice Han? I completely agree with you, James. This is a diplomatic move for the Chinese and the Pakistanis to show that they have skin in the game, the stakeholders in the peace process. I think Trump's speech the other day makes it abundantly clear that he reserves the option to escalate militarily. They've got deployed, you know, thousands of troops to the region and he is willing, I think, to commit boots in the ground, starting in Carg Island and other aspects of the Strait to really take over control of the Strait of Hormuz. That obviously will have major military and political ramifications for the administration. But certainly, his speech made it clear that within two to three weeks, this could escalate with a US military response in the region with boots in the ground in Iran.
7:42 Alice Han? And I'm not sure how the Chinese would respond in that scenario. I was going to throw that question back at you, but I think as this conflict draws out, we're now in week five, we reach a point at which the Chinese country as a whole is going to suffer the energy implications. We've talked at length about how China is, in some respect, insulated, buffered for three to four months because of its strategic reserves and it's the way in which it's diversified oil flows from other parts of the world like Russia. But the fact of the matter is, if you look at some of the strain that's being put on the system, you look at teapot refineries capacities, for instance, there's going to come a point. In the next two months where, you know, something needs to change or else this is going to have massive energy.
8:27 Alice Han? And then, you know, cost push inflation implications for China. So I would assume that the Chinese will try to make some kind of a deal whereby they get, you know, early access, so called to the Strait of Hormuz. Now, we've seen, you know, some Chinese flagships have passed the region along with Pakistani and Indian, more recently, South Korean as well. So I could see more pressure being put on by the Chinese vis a vis Iran to get more access to oil in the region because, you know, as we've noted in the past, more than 50% of oil bound to China comes from the Strait of Hormuz, comes from that region. Although not as high as Trump is saying in the Financial Times, which is 90%, about
9:08 Alice Han? 6% of its total energy consumption and close to 50% of seaborne oil comes from that region through the Strait of Hormuz. So I could see, you know, China coming at least bilaterally to try to get access to more oil from this region. But the fact of the matter is everyone is sitting on their seats, including the Iranians, to see if Trump is actually going to deliver on that threat to actually escalate militarily. But do you think, you know, if you were to put your thinking cap on from the Washington's perspective, do you think that's plausible?
9:37 James Kynge? Yeah, I mean, I think it's plausible, but where I think China's credibility as a real peacemaker in this situation falls down is that China is highly unlikely, I think, to act as a security guarantor of a peace plan in this region. I think, you know, China has said that it supports mediation by Pakistan and other countries to end this war and to move to a peace process. But if mediation doesn't work, or if mediation starts to work and then falls apart because people start fighting again, then there has to be a question of who steps in to secure the security of the region. And I don't see that being China.
10:19 James Kynge? I don't think that China would in any sense be willing to use its military to try to keep peace on behalf of Iran. It certainly wouldn't want to get into some kind of a conflict with the US and Israel. So the idea of China as a genuine security guarantor, I think, is a nonstarter. And that, to me, puts a big hole in this idea of China's five-point peace plan for the region. It's just far too complicated. Mediation can only go so far. At the end, at the end of the day, you have to have somebody who will stand in to guarantee the security. And I don't think that that is China.
10:59 Alice Han? Yeah, and just very quickly, this sort of segues nicely with future discussions about AI. But it's interesting, if you've seen this, James, that a Shanghai company called Midsavision has posted real-time satellite imagery of American military movements in the run-up, actually, to Operation Epic Fury that started in February 28. So they posted some of this on X. And it wouldn't be at all a stretch of the imagination to say that the Iranians could have gotten access to this data. Now, you know, we have to ask, to what extent are the Chinese sharing this surveillance imagery with the American? Well, sorry. And now we have to ask, to what extent the Chinese are sharing this surveillance imagery to the Iranian military?
11:40 Alice Han? But the fact of the matter is that this data, they're publicly accessible. And so it brings into question how safe the US military is in the region. If a lot of the data are being leaked by these Chinese AI companies, that I thought was quite interesting. And may, you know, expose the US-China relationship to some friction, I think.
12:02 James Kynge? Absolutely agree with you there. I mean, we've seen one F-15 US aircraft get shot down. That's another fast-moving situation. It could create tensions that we can't yet judge between the US and China. But I think you're absolutely right to point to this surveillance ability that China seems to have. This is a big setback for the US's war ambitions in Iran.
12:27 Alice Han? Okay, we'll be back with more after a quick break. Stay with us.
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15:58 Alice Han? Welcome back. China has launched two trade investigations into US practices retaliating against similar probes by the Trump administration just weeks before a planned summit between Presidents Trump and Xi Jinping. The investigations target US policies that Beijing says disrupt global supply chains and block Chinese green tech exports, signaling political tensions as the world's two largest economies prepare for high-stakes talks. Adding another layer of complexity, the US FBI recently declared a suspected China-linked hack of a US surveillance system a "major cyber incident," suggesting sensitive data on agency networks may have been compromised.
16:40 Alice Han? James, just really quickly looking into this, the timing couldn't be worse. For Trump and Xi in a way, right? Because they haven't met in Beijing. They may meet, you know, mid-May, although that hasn't been confirmed from the Chinese side. The Chinese, it appears, are retaliating against the Section 301 probes that US put on after AIP was struck down by SCOTUS. Does this at all put a spanner in the works for a Trump-Xi summit? Should we read deeply into this as being, you know, a portender for doom?
17:11 James Kynge? I think it's bigger than just the Trump-C summit that we now think is supposed to take place in May. I think it shows just how deep the tensions and the problems between the US and China really are. You've just been referencing in the previous segment that China is able to hack into US operations in Iran. And now we're talking about a different form of a security breach that China has been able to affect inside the US. I think this shows just how little the security state, or the deep state, as we sometimes call it, in both countries trust each other.
17:54 James Kynge? And I think that goes much deeper than a summit between President Trump and Xi Jinping of China, because that summit is really, even if it takes place on time in May, is really all about mood music. It's about trying to sort of put a bottom under the relationship which has been deeply damaged in recent years. But I think this just shows that behind the attempts to put a brave face on relations and to sort of contain this slide in US-China ties, particularly over trade, you have the security states kind of grinding away.
18:33 James Kynge? And there is no trust, or very little trust, between the security states of both countries. And so every time, you know, you try to get some kind of diplomatic progress between the US and China, you get it removed or taken away, eroded by something that happens behind the cloak of secrecy, as it were, in the real deep state relationship between the US and China.
18:58 Alice Han? Well, it reminds me of, you know, the Obama years when we had that previous hack into, you know, federal data, federal agency data, I believe it's the OPM hack. And you know, it's interesting how these things end up being quite political or they're used to score political points. The fact of the matter is, I'm pretty sure that, you know, some level of cyber theft, cybersecurity violations happen throughout the relationship, but oftentimes they get deployed politically to to drive home a message. And so my my deeper underlying concern is that the timing of this at a time where, you know, you've also got some trade investigations on both sides, where you haven't really seen
19:42 Alice Han? real meat on the bones in the lead up by the seconds and thirds of Trump and Xi before a meeting. Again, you know, even if everything points towards positive mood music, I still think that the underlying currents are quite difficult. And you add to that some of the recent stories that we just mentioned, you know, Chinese satellite imagery being potentially being used to help the Iranians, although maybe not deliberately so. That could really easily turn into Trump potentially going sour on China. Although another read of that is that maybe if he escalates or he doesn't escalate and Iran becomes a real quagmire nightmare, he'll need to use a positive China relationship to spin his foreign policy.
20:26 Alice Han? Both, I think, equally feasible. But what's interesting to me to frame it more generally is that the US hasn't really shifted the trade relationship that much. You know, as much as Jameson Greer talks about the Board of Trade and trying to reduce the deficit with the Chinese, the fact of the matter is that even although the bilateral deficit has been reduced quite significantly, because a lot of Chinese exports aren't going directly to the US, they're being rerouted. So the bilateral number doesn't reflect the final destination of goods going to the US, maybe through third-party countries like Southeast Asia, like Mexico.
21:07 Alice Han? And Jameson Greer, USTR, and Besen State, even though they threatened last year, haven't really gone through with the rules of origin to really, line by line, figure out where all these goods are coming from and in that way control the trade relationship. So so right now, it feels very hollow, all this discussion about, you know, trade investigations, reducing the deficit. You add to that the fact that actually US exports to China, which is something that the administration would like to see grow, have actually fallen. They fell in nominal terms 26% in 2025. And by some estimates, trade in terms of US exports to China should have been $90 billion higher last year, but due to the trade wars, that did not happen.
21:53 Alice Han? So when I add it all together, it seems like all of these are politically motivated. And maybe they're motivated, these stories, the FBI story, the trade probes, to try to get the Chinese to make concessions ahead of a Trump summit. But right now, it looks like the US is in a weaker position, mainly because of what's happening in Iran. So let's take one last quick break and stay with us.
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24:27 Alice Han? Welcome back. China's large language models are outpacing the US for a fourth consecutive week, fueled by the rise of AI agents like OpenClaw that dramatically increased token usage. Now, this surge is reshaping cloud pricing in China, enterprise adoption, and the global AI token economy, signaling a shift from simple chat models to task-executing AI agents at massive scale. James, I believe you just came back from China, and apparently this was all the rage. I mean, I've been seeing it, the so-called lobster farming, that's what they call it, using OpenClaw and rejigging it for different purposes. But this expression, "yanglongxia", which means lobster farming, has taken over China. You see a lot of these lobster plushies going around.
25:12 Alice Han? But I really want to hear your perspective, having been there on the ground.
25:15 James Kynge? Yeah, I spent just over a couple of weeks in China, and I was researching a lot of things, such as robots and AI and other tech topics mainly. But just to kick off, for listeners who may not know exactly what OpenClaw is, it's a free and open-source AI agent. So it's designed to act as a virtual assistant that can actually execute tasks rather than just chat with you. So, for instance, it connects to...
25:48 James Kynge? Large language models like Claude or DeepSeek or OpenAI's ChatGPT. And then it integrates them into messaging apps. So that basically, when you're using OpenClaw, you only have to ask it to perform tasks like booking flights or managing calendars or writing code, and it'll do that for you. So in that sense, it's different from a kind of a chatbot that will only sort of respond to your your questions. As you said, everybody is talking about OpenClaw in China. I mean, I really think, of course, I was moving in tech circles, but it was the biggest topic of conversation. People would want to ask me about it, I would want to ask them about it.
26:33 James Kynge? And the adoption in China of this is really quite amazing. So far, about sixty seven percent of Chinese industrial firms have deployed AI agents in production in China. That's compared to about thirty four percent in the US. So that's all agents, that's not just OpenClaw. But you can see that OpenClaw is now really becoming popular. The other aspect of OpenClaw is that it sort of came out of left field. It was developed by Peter Steinberger, who's an Austrian programmer. And it was released in November twenty twenty five, and it quickly became one of the fastest growing open source projects in GitHub history.
27:18 James Kynge? But the Chinese have now taken this to heart. And maybe because it's open source, maybe that's the attraction here. But it is so convenient. You just have to ask it to do certain tasks and it'll get on and do them for you. But what are you seeing as the implications of this, Alice?
27:35 Alice Han? It reminds me of a previous discussion you and I had, James, where I said that China would be a fast adopter of these super agents. I called it, you know, China ten years ago was living through super apps, mainly Tencent's WeChat and Alibaba's Alipay. And now those super apps will give rise to an ecosystem of super agents, where these agents have access to every aspect of your life, your calendar, your flight bookings, your children's, you know, school records, food deliveries, et cetera, et cetera. And it seems like this is already happening, which is why I'm going to call this lobster mania, you know, in a nod to beetle mania from your country. I just think that this is a perfectly natural.
28:16 Alice Han? That a country where digital adoption has been so fast, where people are willing to try new things and are less scared about privacy from a data perspective, it was perfectly natural that this would sweep, take a sweep over China. I, I, I've read, and I'd be interested to know your opinion on this, but I've read that the rise of agentic tools in China apparently is being reflected in the Chinese consumption of tokens. The National Data Administration revealed just this week that at the end of 2025, so in December, there were 100 trillion tokens being consumed. That's a metric for, for AI consumption. And this month, so the month of March, rather, 140 trillion tokens were consumed.
28:57 Alice Han? That's just to show you how in the space of three months, we've grown in, in AI usage. And it seems that a lot of companies and people are retooling and rejigging OpenClaw to create new applications. So for instance, this one guy apparently retooled it as a tool for Tencent, so he called it QClaw. And basically it allows him to deploy OpenClaw and send orders via WeChat. He can interface with it via his WeChat app. But then he had this huge data issues where some of his data were erased entirely. And that brings me to my next question, which is how worried will we be that there isn't going to be a government backlash? Because if you recall, in 2021, we saw a massive tech crackdown.
29:42 Alice Han? Now, if you had been living in China the year before that, or even 2019, 2018, you would have been hard pressed to think that that was going to be the future because it was all about internet economy, digital applications. Now we're all about AI. Certainly the five-year plan was all about it. And adoption is really high, for instance. 93% of respondents, according to a KPMG survey last year, said in China that they already use AI for work. I'm sure that's higher than the UK, the US. And apparently sixty nine percent of the Chinese believe that they see benefits outweighing the risks versus in the US, it's only thirty five percent who believe that benefits outweigh the risks in terms of using AI.
30:23 Alice Han? I'm talking really fast because this is a really exciting topic for me personally. But my big question to you, James, is when do we hear the music stop? Because this can't be good for the everyday consumer's security and privacy.
30:36 James Kynge? That's right, but you also mentioned the backlash. Um, and I must say, I left China with a very strong sense that some kind of correction or backlash indeed has to come. Uh, and this is simply because literally everyone I spoke to who who doesn't work in the AI area uh seem to be concerned about employment, uh about the rising level of unemployment among young people in particular. Just to give you a sense of this, um, I I I think a lot of people are now concerned in China that AI is just taking their job. A lot of people are are looking at their peers and the struggles that their peers
31:17 James Kynge? are having to find jobs and drawing the conclusion that AI has already taken those jobs. And this only will be accelerated by the adoption of of agents such as Open Claw, which, as we've just described, moves the locus from a chat GPT type dynamic where you can ask a chatbot to do research for you to a new locus of action where you ask the agent to perform a task for you. That's a very different thing. That is going to strip quite a lot of people of their jobs. So I left China both amazed by the speed of China's tech advance and deeply concerned that the backlash may well be coming.
32:01 Alice Han? You're not the only one, James, because I just saw this posted a couple of months ago in December by the Cyberspace Administration of China, uh, in which they regulate the quote-unquote "humanized" or another way to translate is anthropomorphic. AI interactive services. And some of the articles reflect on the moral difficulties or the moral problems with AI services given to elderly users that quote unquote simulate their relatives or specific relationships. There's another article, Article 12, that talks about putting the need to put on a minor mode, meaning to protect minors, underage peoples, you know, either through time blocks or time restrictions or really blocking them from certain accounts. So I think we're starting to see the wheels moving.
32:46 Alice Han? But I think right now, I think the government's still in the mode of let it rip because we want to compete against the US in AI and we want AI to boost productivity. I think they still have drugged the Kool-Aid on that.
32:57 James Kynge? I agree. I think the government is still in the mode of let it rip. But I think that if you're on the ground in China, talking to normal people, let it rip is not a policy that has legs. People are very, very concerned about losing their jobs to AI.
33:10 Alice Han? All right, James, you know what time it is? It is prediction time. What's your view for the future this week?
33:15 James Kynge? My prediction is related to what I was just talking about, this sense that the march of AI, which is truly breathtaking in China, quite on a different scale from anything I've seen, I think we can see in the West, is going to have adverse effects. And I, I think that it could be bigger than what I'm about to say, but I think that when it comes to jobs of graduates, particularly those graduates that will be graduating this summer, I think we're going to see an upsurge in unemployment. And so the unemployment rate among urban 18 to 24 year olds, I feel could exceed 20% at some point this year.
33:59 James Kynge? This would exceed the peak of 2025, when it rose to about 18.9% in August. And I think this is a very sensitive number in China. I don't know if the Chinese government will announce the number, but if they do, I reckon it will go above 20%, which is, which is going to be a politically sensitive number, I reckon.
34:22 Alice Han? So I will go back to Iran and say, I think in the next couple of months, Operation Epic Fury will have failed and will end up with Operation Tollbooth. I'm just making it up as I go along, but I think the Strait of Hormuz is going to effectively be an Iranian tollbooth. And I think the Chinese will negotiate to be at the start of the line because they're going to need to have access to oil pretty soon. That will probably be negotiated bilaterally. I just look at what's happening on the ground and Trump's statements and US resolve, and I'm very pessimistic about how this ends. From a military perspective for the US, and I think we end up with Iranians stronger and taking control of the Strait of Hormuz and the Chinese negotiating economically to
35:06 Alice Han? get access pretty soon, they'll need it.
35:10 Alice Han? China Decode is now available on Substack. Subscribers get ad-free episodes, our exclusive newsletter, and a place to engage with James and me and other listeners. Find us at chinadecode.profgmedia.com. That's all for this episode. Thank you for listening to China Decode. Make sure to follow us wherever you get your podcasts so you don't miss an episode. Talk to you again next week.
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