China Decode: The World Order Is Tilting Toward China (Series Finale)

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1:30Alice Han:It's going to create masses of friction and stress, both in trade and commerce and geopolitics. We are going to be, I think, amazed by China. And, you know, in the West, let's face it, we're going to be struggling to compete with this. This revolution is being led by China. That is the key difference. China is at the forefront of this cluster of new technologies that promise to fundamentally reshape the way industry, commerce, and actually our daily lives around the world will change and evolve over time.

2:13James Kynge:Welcome to China Decode. I'm Alice Han.

2:15Alice Han:And I'm James King.

2:17James Kynge:Before we get started today, we come with a bittersweet announcement. This will be our final episode of the show. Unfortunately, that is the reality of the media landscape right now. Some topics are easier for advertisers to get behind than others, and we've ultimately hit a wall when it comes to finding advertisers for this show. And that is a real shame. But we've had such a great time, James and I, over the past year, decoding why China has become a superpower that the West simply cannot ignore. and exploring the ways Chinese business, politics, and culture are shaping the world around us.

2:51Alice Han:Oh, Alice, I'm wiping away a tear here. I must say, it really is sad to be saying goodbye to China Decode. And I want to say what a pleasure it's been to co-host this with you. We've really had a lot of fun. We've covered a lot of topics, and I've learned a great deal from your insights. I also want to mention the team at China Decode. It's been an honest privilege. What our listeners perhaps don't know or see is the team of guys in the U.S. who debate the topics with us, who help with the research, who keep us sounding better than we should, or certainly in my case, better than I should, editing out my stumbles and repetitions each week.

3:31Alice Han:I'm going to miss you guys and all of this a great deal. I'm sure you will do too, Alice.

3:36James Kynge:Yeah, I second everything you just said, James, and I honestly couldn't have asked for a better ally, friend, and co-host on this pod, and it's been a real experience of a lifetime, and I'm glad that we got to share that together. So thank you. For our final episode, we wanted to look ahead at how China will continue to shape the future. And we wanted to start off with one of the biggest stories we've covered on this show, and that is AI. When we talk about the US-China AI competition, we tend to focus on who is the best model. But China may be playing a bigger game, embedding AI into the physical economy, cars, factories, smartphones, appliances, toys, and increasingly robots.

4:17James Kynge:And as a quick sense of scale, the US spent about$285 billion on private AI investment in 2025 versus China, roughly 12.4 billion, about 23 times less than the US. But the capability gap between the two countries, despite the investment difference, is rapidly tightening. So James, I think this has been the biggest topic for us over the past year. And certainly in the time in which we've covered this topic, I think China has surprised to the upside on a number of levels, starting from its ability to do cutting-edge models, largely open-weight, open-source. In some instantiations, there are some people saying that China may be six months behind the leading closed models coming out of the US.

5:06James Kynge:China's also, I think, surprised to the upside when it comes to its ability to bypass the constraints on hardware, say chips, for instance, with homegrown talent, but also its ability to find workarounds in the existing architecture. And it's surprised on robotics, too, where I think it's had a real clear lead versus the West. What has surprised you the most, I think, this year on AI in China? And what are your high-level thoughts and predictions for the next 5-10 years.

5:36Alice Han:Yeah, this really got me reflecting, Alice. I think one of the things we've really tried to do on China Decode is to put the right frame around the many, many different topics that we see coming out of China and involving China and the US and China and Europe and China and the rest of the world. And so I spent a little bit of time thinking about the correct frame for China's advances and progress in artificial intelligence. And I would have to say that really, I think that this is so important that we should call it something like the fourth industrial revolution. That's not a phrase I've made up.

6:12Alice Han:That's a phrase that's already out there. And this industrial revolution is one that's characterized by artificial intelligence, robotics, automation, and a few other elements as well. And to me, this revolution is being led by China. That is the key difference. China is at the forefront of this cluster of new technologies that promise to fundamentally reshape the way industry, commerce, and actually our daily lives around the world will change and evolve over time. And I think just to back that up a little bit, to show that China definitely intends to do this, we need to look no further than China's 15th five-year plan, which came out earlier this year, in which it says that it wants the penetration rate of next-generation artificial intelligence and AI agents to exceed 90 % across economic sectors and industries in China by 2030.

7:17Alice Han:And of course, 2030 is just around the corner. China has already deploying AI automation robotics into many different sectors of the economy. We've spoken about this a lot. You and I have both done trips to China where we've seen this in real time. But just to stress the enormity of this, you know, so the first Industrial Revolution was around, you know, 1760 to 1840, and that consisted of water power and steam power. The second Industrial Revolution was late 19th and early 20th century. That was all about electric power. The third Industrial Revolution, which began in the 1960s and 70s, was all about electronics, computing, and information technology.

8:06Alice Han:And so what we're talking about here is something that is a discontinuity. It takes us to the next step. And that is what is going to happen with artificial intelligence and factory automation. But I want to be clear that we're not just talking here about humanoid robots that are driven by artificial intelligence and can do backflips and dance and amuse everyone at China's Spring Gala every year. That is the flashy end of AI and robotics, but it isn't the end that, to use a phrase that Deng Xiaoping used to say, it's not the end that so far anyway, catches mice. The area that's catching mice in China right now is factory and industrial automation.

8:52Alice Han:And last year, China installed 295 ,000 new industrial robots. That makes up over 54 % of all industrial robot installations throughout the world. And it's that that you and I have seen in factories and in exhibition centers all over China. It's that that's really moving the needle. I mean, my favorite example of this is the absolutely stunning example. I've used it a few times on China Decode. I'm going to use it again without apology of the Xiaomi car factory in Beijing that has production lines with not a single human being on them, entirely automated. They're producing a car called the SU-7.

9:39Alice Han:I met an American friend this morning who's been in an SU-7, and he says it's like a Porsche, but it costs, you know, about slightly more than half the price of a Porsche. But the key point is that these production lines that are entirely automated produce a new SU-7 every 76 seconds. That, to me, is a crystallization of the world that we're going into. That is a crystallization of what the fourth industrial revolution really means. I think it's going to amaze the world. It's going to create masses of friction and stress, both in trade and commerce and geopolitics. We are going to be, I think, amazed by China.

10:22Alice Han:and, you know, in the West, let's face it, we're going to be struggling to compete with this for decades to come. So those are my high-level thoughts. Alice, what about you?

10:33James Kynge:Yeah, it chimes with what I've been thinking, and it's great to hear you quote Karl Schwab at World Economic Forum, who's been harping on about the fourth industrial revolution for a time, and also interesting to note that the first industrial revolution was really dominated by the Brits, the second and third by the Americans. Any student of history will realize that empires don't last for an indefinite period of time. And I would be betting on the side of a handover to the Chinese in the fourth revolution for all the examples and reasons you've cited. I would add to that, that, you know, China will be very, very strong on the hardware part of the AI stack, Maybe excluding parts of the cutting edge of chip production and chip equipment production, where I think even though China has shown that with Huawei and the SMIC and YMTC, that it has very strong homegrown capabilities.

11:28James Kynge:I think given the lead that Taiwan, ASML, some of the US chip design companies for GPUs like NVIDIA have, it's hard for me to see China completely disrupt them out of the water. So I think there will still be a clear advantage that the West has over chips. Although China will continue to preference its own domestic production, largely through lower-grade GPUs, ASICs, but also DRAMs and memory, where they actually have a distinct advantage, I think, on cost and scale. But elsewhere in the hardware stack or the hardware outputs, and this is where I think it chimes with your argument, China will be, I think, the dominating power when it comes to robotics.

12:14James Kynge:And these are not just humanoid robots used in the home. This is industrial robots. This is already the fact of today. But also for autonomous vehicles. Here again, I think you have both the hardware capabilities, but the software through some of the leading car companies. And whether it's, for instance, Huawei collaborating with Chinese EV companies or whether it's Xiaomi or Nio, I think that there's been a lot of investment and R &D into autonomous vehicles, and China will have the productive capacity scale cheapness to really export that to the rest of the world. I think that will be a theme that replaces EVs in 10, 15 years from now.

12:55James Kynge:And I also think that China will ride the coattails of this fourth industrial revolution and become, I think, still a dominant trade surplus running country, the biggest exporter in the world, and by historical standards as well. That is, I think, an unavoidable truth. But one thing that I will caveat is that I do see the risk of regulation and national security elements in the West, in Europe, in the US, maybe even countries like Australia, Japan, and Canada to regulate some aspects of the China AI stack. And here, I think in particular that they won't be so much directed against maybe the robots or the autonomous vehicles because there's a clear consumer surplus that cheap, you know, at scale Chinese robots and AVs can produce for those domestic economies in G7 primarily.

13:51James Kynge:But I think open source models coming from China may face the risk of the same kind of regulation we saw against Huawei in 1819 onwards. And I think that that will create, as we've said previously, James, some kind of a digital iron curtain when it comes to models. And I think the U.S. will lead on that. I think it'll be very significant when we look at the 2028 election who comes into the White House. Because if it is somebody who's able to coalesce the allies and G7 countries to really regulate against Chinese AI companies on the models front, and maybe the applications front, that I think will be a serious blow for China's lead of the fourth industrial revolution.

14:36James Kynge:But other than that, I do agree with you. And I think I came away from reading Ruby Wong's book and talking to feeling like actually biotech is another aspect where, you know, in 5, 10, 15 years from now, China will be leading across the supply chain, but also across the research pipelines. And James, I think one topic that we don't talk about enough, but that I think will be one of the most significant drivers, and here I'm in part influenced by James Leung, who just came out with a book, Innovationism. And he's, you know, the CEO of C-Trip, is a demographer. I think the talent pool is actually pretty significant.

15:15James Kynge:So some of the figures coming out suggest that China dominates on AI top talent. before Macropolo, I think, finished their surveys. In 2024, 38 % of top talent came from China, 24 % from the US. 72 % of those top talent Chinese researchers live and work in the US. That, I think, will shift. We'll start to see more Chinese people going back to mainland China, working for Chinese companies, bringing the know-how back. And I suspect China will be better equipped to educate and train leading AI. talent and AI conversant or cognizant students. And as a result, I think China will be better equipped for this AI revolution from a human talent, human capital standpoint.

16:04James Kynge:Okay, we'll be back with more after a quick break. So stay with us.

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19:46James Kynge:Welcome back. It's often hard to separate the global balance of economic power from the balance of political power. But we should offer some predictions on where we think geopolitics are going as well. We recently saw this pretty stunning poll from Pew Research that many countries now view China more positively than the U.S. That Pew Research obviously is pretty startling in terms of, you know, the real shift in people's sentiments in the West towards China. But I don't apply a lot of credence by the facts because, you know, if you look back to previous surveys five, six, seven years ago, it was the mirror opposite, showing again that actually national sentiment towards China can shift on a dime quite quickly in a matter of years.

20:32James Kynge:But I do think one trend that is, to my mind, inelectable, it's the trend towards China leading AIPAC and the Global South. And here, I think the creation of BRICS +, adding more countries, primarily from the Middle East to BRICS, which is 30 % of global GDP, the creation of RCEP, SCO, other multilateral China-led organizations, and the fact that the global south, as we previously discussed, James, is two-thirds of the global population, a third currently of PPP-adjusted GDP. That will only rise given demographics and the way that the economies are shifting in those regions. I think China is going to have a bigger say in, I think, a growing part of the global community, and that is the global south.

21:22James Kynge:And here I think Chinese tech benefits, China's economy benefits to some extent, But it also enables what we've previously discussed, James, which is China's massive trade surplus. China's trade surplus as a share of its GDP is the biggest by any historical count. It's now currently, in terms of exports share of GDP, 20%. I wouldn't be surprised if in 10, 15 years from now, it's closer to 30%. We already are talking about China Shock 2.0. I think this is going to be an unavoidable, inconvenient truth for many in the West. But the global South, I think, is what China is banking on, and it's going to be a bigger part of the story.

22:04Alice Han:Yeah, I couldn't agree more, Alice. When you live in the West, if you're in the US or in Europe, the amount of, kind of, I suppose, what we used to call column inches in the newspapers, now, of course, online, the amount of writing you find about the global South, the amount of analysis on the global south is really very weak. And this means that China is effectively expanding into the West's blind spot. And I would go one stage further, maybe even than what you've said so acutely about the global south and say that the global south is seen by China as an agent through which China plans to rewire the world in a way that serves China.

22:51Alice Han:As you've said, China's trade and commerce connections to the global south are, well, they put the west into the shade. All you've got to do is look at the amount of trade that China does with Africa, the amount of Chinese infrastructure that's being built in Africa, the amount of Chinese investment going into Africa, then you can see exactly what I'm talking about. And what comes from this is that in many of the global institutions, not just the China-led institutions that you've mentioned, but the global institutions such as the United Nations, you can see a very clear tendency among countries of the global south, this is more than 100 countries, to vote alongside China and to support China's positions on global issues.