US-China AI Race to Take Center Stage at Trump-Xi Meeting

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1:29Bloomberg Audio Studios. Podcasts. Radio. News. China wants access to markets. China's exporting lots and lots of stuff around the world. China wants access to those markets to continue to be open. And I think China wants there to be relative stability in terms of Taiwan. That's my colleague, John Liu. He's Bloomberg's co-head for Asia and has covered China for the past two decades. Like much of the world, John's attention this week will be on yet another high-stakes summit between President Xi and Trump when they meet at the White House. I think for Donald Trump, he's really hoping to get some wins on the board out of this meeting, be it agricultural goods, be it energy exports to China, and maybe even some help on Iran, although I think that seems relatively unlikely.

2:22But just to be able to come out of that meeting and say to the American people, look what I got. This will be the third meeting between the two leaders since Trump's second term. But John says this week's meeting stands out. It's Xi's first state visit in more than a decade and comes weeks before the U.S. midterm elections. It's also taking place amid a fragile trade truce, the ongoing war in Iran, and a growing debate over how to scale and regulate artificial intelligence. I think both sides want to continue to show that they are making progress in some sort of normalization in the ability to be responsible purveyors of AI around the world.

3:03Then there will be a conversation about sort of more competitive forces, right? Will China be able to get its hands on NVIDIA chips? Will the U.S. cut off access to additional technology that China wants to develop AI with? Can the U.S. get rare earth magnets and other components from China that it needs? And I think actually there is a real opportunity at a macro level when it comes to, you know, being good citizens of the world, working together to protect humanity against unexpected things that might happen one day. I think there's an opportunity for the two countries to show some leadership there.

3:45This is The Big Take Asia from Bloomberg News. I'm Wan Ha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, and businesses that drive this ever-shifting region. Today in the show, the Trump-She Summit in Washington. From tariffs to AI, what each side hopes to gain, and why the world's two biggest rivals may have no choice but to cooperate on AI safety.

4:16Now, back in May, the U.S. and China launched new trade and investment channels that were designed to boost activity as well as reduce tariffs on products worth up to$30 billion in non-sensitive sectors. That was seen as a positive step towards stabilizing the relationship. Since then, what actually, John, has been achieved so far? I think there is real momentum in that there is a motivational force driving both countries to try and get something done. Here in China, the economy, the domestic economy has not been very strong. It's been weak primarily because the government is reducing the amount of money that it is spending.

4:59And so when the government spends less, there's less consumption by state-owned enterprises, by local governments. And that puts more of a burden on the households here in China. And the households have been bogged down by this real estate bubble bursting for the last three, four, five years. And so the domestic economy has been very weak. And what saved China has been exports. And so that's a real impetus for Xi Jinping going into these talks. And for Donald Trump, being able to show that he scored some wins on the international stage, I think is very important to President Trump. So I think in this meeting between Xi and Trump this month in September, I think what we are going to get is the rubber hitting the road and the actual things that are the actual actions, the actual goods that are going to be traded from the United States and China.

5:49Now, the deadline for the trade truce that the two superpowers struck is coming up in November. What's happening as the deadline looms? So there's been a pattern we've seen over the course of the second Trump administration, which is between when the leaders meet, often when the leaders meet, there will be some sort of deal, either a trade deal where tariffs are lowered and exports continue, or some sort of a deal just to stabilize, not to escalate. But then in between those meetings, when the two leaders get together, we also see the cycle of deterioration where whatever deal was previously struck, each side starts to suspect the other side is breaking the deal and starts to accuse the other side of undermining the agreement of not following through until you get closer and closer to the next meeting when, again, I think both sides are making accusations and saying things to try to put themselves in the next meeting.

6:52in the best possible negotiating position ahead of the Xi and Trump talks. Now, Trump has framed competition with China through the lens of tariffs, through deficits and national security. But U.S. companies at the same time want stable access to Chinese supply chains. How much of a balancing act is there for the U.S. to try to negotiate there? It's a huge balancing act because the Chinese are going to use rare earth magnets, let's say, as a point of leverage in their negotiations with the United States. This relationship, because it's moved from one maybe 20 years ago that was characterized by collaboration more than competition, it is mostly competition now.

7:42And in that relationship, everybody, Both sides are looking for whatever leverage they can get. And Beijing is going to get as much out of rare earth magnets as they can. And so Washington is going to have to maintain that balance because China is going to force it to. And so, for example, we've seen heading into these negotiations between Trump and Xi in September that in August, the export of rare earth magnets from China to the United States fell. from the month before. And so I believe the number it's on a monthly basis, China's been exporting about 500 tons of rare earth magnets a month to the United States in 2026.

8:29That was 600 tons a month back in 2024 before Trump came into office. So you can see the volumes have fallen. And I think they will stay low because as long as they're low, they're a point of leverage that China can use. After the break, the battle for AI supremacy. We'll look at who holds the upper hand and why, despite all the rivalry, the two nations might be forced to find common ground.

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11:20Ahead of this week's summit between Presidents Trump and Xi, U.S. Treasury Secretary Scott Besant and Chinese Vice Premier He Li Feng met in New York. The two sides agreed to create a U.S.-China AI dialogue. That's intended to build a shared understanding of AI's opportunities, risks, and potential threats. The move comes as China's AI industry gains ground at a remarkable pace. Since DeepSeek's breakthrough last year, Chinese companies have narrowed the gap in the race to develop cutting-edge AI. Bloomberg's John Liu says those advances are helping to bring Washington and Beijing to the table at a crucial moment for the technology.

12:02I think it remains the fact that the United States is without a doubt ahead when it comes to technology and the capacity of that technology to do lots of different things. What the Chinese have been able to do is to change the conversation so that the race is not being determined by whose AI model is the most capable, but instead to have price also be part of the conversation. It's not only what your model can do, but how much I have to pay for it to get, for it to do that performance. What is the dollar per performance that I get? And because the Chinese made them available to lots of countries around the world, especially emerging developing markets, China's got the momentum behind it because usage for its models has gone up.

12:55And that has caused a lot of concern in Washington. Now, American AI companies heavily depend on Asian supply chains for data center infrastructure, right? Just some numbers here for reference. China controls 66 % of global optical transceivers, over 90 % of rare earth magnet manufacturing, and certainly a massive share of the high voltage power equipment that's needed for the U.S. grid bottleneck. How significant is Beijing's leverage over the American AI rollout? I think it is surprisingly strong. I think a few years ago, nobody would have connected power transmission with AI data centers. But now, because there's not enough electricity to go around, it's become a limiting factor to that buildout.

13:43It's essential. And I think it's because that build out in the United States is so big, because it's touching so much of the economy, that that fact in itself makes China super, super important because China makes so much stuff. You know, even for manufacturers in the United States, they need to buy equipment from China so that they can make their products in the United States. And so I think what the world is finding out, I think what probably the American administration is finding out is a super globalized world. It was one before Donald Trump became president. He would like to reverse that.

14:25It's not so easy to reverse. And certainly on the U.S. side, I mean, the biggest leverage they've got that we've talked about is the chips, right, and restricting China's access to the world's most powerful advanced AI chips. Does Trump actually have more leverage when it comes to slowing China's AI progress? Semiconductors are a substantial point of leverage for the United States. It is one of the big reasons why China has remained substantially behind, even though it's closing, substantially behind the United States when it comes to AI models. And that's because for the training, as we understand it, for the training of the Chinese models, many of those firms still prefer if they can get their hands on or if they can get access to NVIDIA chips to do that training.

15:13just because the performance is substantially better. And so even though Huawei is making better chips and even though some of those chips are getting much closer in performance and do a pretty good job when it comes to running the models, the training part of it is still in the U.S.'s hands in terms of an advantage. And so if AI is the thing everybody wants to win out of this competition, then that's a tremendous point of leverage for the U.S. Now, John, despite the AI race, the two countries are trying to find common ground on AI. U.S. Treasury Secretary Scott Besant said the two sides agreed to set up a dialogue on AI that's aimed at finding common ground on goals and threats.

16:01Why is that development important? I think it depends on what you think AI is. Is AI a tool like a wrench or a screwdriver or is AI like, you know, nuclear weapons? And I think at this point in the technology's development, you can make a valid argument for either. And if that is the case, then I think responsible players, the United States and China, being the two countries in the world that are leading this race in AI, the development of this technology, it's within their realm of responsibility to show that they're going to take caution, that they're going to put up some guardrails, that maybe AI is never going to be a nuclear weapon, but if it were, that we should be prepared, we should have thought about it, we should have set up systems to avoid escalation or something unintended going wrong.

17:02Despite their interdependence in AI, the U.S. and China aren't approaching the technology in the same way. John says there are fundamental differences in how the two countries view AI and its role in society. If we look at the reactions to AI in the United States and China, they're very distinct. In China, people have largely embraced AI as a technology, embraced AI as a symbol of the future. And in the United States, increasingly, there is suspicion of AI and what AI will do. Will it take my job? Are these data centers going to make my electricity bills go up? Take my water? And that difference, I think, has been a reflection of how these two societies operate.

17:51So what I mean by that is in the United States where we've seen some of the leaders of these AI labs talk about job losses, talk about some of the negative impacts that AI could have on society. In China, we have not had that. In China, largely the discussion is about what AI is doing for people, what AI is helping companies in China do in terms of efficiency, in terms of creating better products. People see these new AI models being rolled out by Chinese labs as a point of pride to show that China is able to create something that is world-class, that can compete with some of the most advanced technologies coming out of the United States.

18:37People are proud of that. It's really interesting because obviously both Washington and Beijing see AI leadership as vital to their economic and national security interests. And I wonder, how do you have a meaningful conversation about AI safety when both sides are competing to try to win the race? I hope the discussion that's happening between the American and Chinese sides is one in which they are trying to find the points of mutual benefit, where they can agree, where they have aligned interests. and there may be more points where the two countries are at odds, but if you can find a few things where everybody can get on the same page, that's where you have a start.

19:24And so, for example, I think what we've heard from Besant and the vice premier out of their meetings is this idea of creating a hotline, some way for the two countries to quickly communicate with each other about what's happening with AI. And so I think it's finding enough of those little things that everybody can agree on and then building.

20:09Thanks for listening. See you next time.

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