China Decode: Trump’s Trade War Turns Into a Win for China

21:38Alice Han:That was in 2024. So by now, it could well be quite a bit more than that. But yeah, I mean, this is an incredible trend. Don't you think, Alice?

21:48James Kynge:I have so many thoughts about this. Where do I start, James? I start with broken Britain. When I first moved here two years ago from the States, I thought, you know, you can't get worse. I'm Australian. You can't get worse than American healthcare, but I actually found worse, which is British healthcare. What I've realized is that until you have an emergency or cancer, you basically don't get seen by a doctor. And I think that, James, a lot of your doctors in the UK have just moved to Australia where they get paid better and they get more vitamin Ds and sunshine. But to your point, what's been interesting, a couple of threads that I want to pull on.

22:18James Kynge:Number one, so in China, there is a culture which I don't think is very familiar to a lot of Westerners. It's called yuizhe. Zou yuizu means to do a 30 to 40 day confinement. It's a postnatal confinement after childbirth where they effectively treat the pregnant woman like a princess in a spa. All her meals are made for her. She has to do particular exercises. She's not allowed to leave the house. Hence, it's confinement because she could catch a cold or be exposed to bacteria. So she stays inside a hospital or a spa clinic and she's given massages. The baby's taken care of. She's fed well. There's a lot of, in Chinese, we call it bu yang, a lot of nutritious soups and food that are given to her, a set menu.

23:01James Kynge:So she effectively gets to check into a clinic. And I've got girlfriends who've been doing this. They pay probably$1 ,000 to$2 ,000 USD. There are some offerings of this in the US that I think 10 times that amount. I mean, just factoring in labor costs alone. So I could foresee this being a big trend where not just Chinese or ethnically Chinese people go to mainland China, have a baby there, check into this postnatal clinic, and then get treated to a great service. That could be something that I think could be very, very trendy, to your point. But if China can get the quality of service right, on top of much cheaper labor costs and medical services costs, I think it's a no-brainer that China becomes like a Turkey or a South Korea.

23:46James Kynge:And as I was doing research, what I found was interesting was that Hainan, I didn't know if you know this, James, the Hainan Island is actually listed by the State Council of Beijing as a special medical zone. Now, we all know about special economic zones like Shenzhen, for instance, but this is a special medical zone in Hainan. It's a first of its kind. And basically, they allow international travelers, foreigners to come in relatively easily and get cutting edge foreign approved medical treatments and equipments and drugs, some of them in stem cell research and cochlear implants, to name a few.

24:22James Kynge:So this is an interesting direction for China, and it fits well with what we've discussed previously, James, how they're really building up tourism, they're really building up music tourism, now medical tourism. It's all part of an effort to get the services sector more booming, because China traditionally does not have a strong services sector.

24:42Alice Han:Yeah, and just a quick note on that. I'm actually going to Hainan next month. I think it's visa-free, So you can go in there. Well, it certainly is for UK people. You can go in there without getting a visa. But the other thing is just to add a note of caution, because my own experience of Chinese hospitals was not that great. I had a colleague and we were on a business trip, a Chinese guy, and his lung collapsed while we're on a business trip. And I took him straight to hospital because it was an emergency. And when we got there, we were told that he could have the standard treatment, which meant that he'd have to wait a couple of days.

25:20Alice Han:That was clearly not going to be an option, given the fact that he was gasping for breath. Or he could have the express treatment, but that cost 10 times the amount. And it seemed to me clearly that there was corruption going on there, that they knew that we were in a desperate situation. and they could see that I was from a big foreign company and they wanted the money. And of course, I, of course, paid up because when your colleague is gasping for breath with a collapsed lung, you don't have an option. So I would just add that in there. You know, Chinese hospitals are not paragons, put it that way.

25:57James Kynge:Yeah. Which province was this, James?

26:00Alice Han:It was in Beijing, actually.

26:01James Kynge:It was in Beijing. What year was this?

26:02Alice Han:Oh, it would have been about 10 years ago now. So quite a while. So maybe things have changed somewhat, but I can't really believe that all practices like that will have changed.

26:12James Kynge:Yeah, I agree. I'm sure that there's a level of corruption. And, you know, I've had personal experience with my grandparents who are still in Shanghai and elderly. They've had largely good health care, but I've also heard some horror stories from some of their friends anecdotally. So to your point, James, it's not all peaches and cream. And certainly, I'm sure that there are tons of stories of things not working out as well. But I think more broadly at a macro level, this is an interesting trend that I could foresee coming up in the five-year plan. We've already got the Healthy China 2030 initiative that's been launched in order to turn China into an international medical tourism destination.

26:49James Kynge:So I just foresee a lot of top-down initiatives to try to make China a more attractive place for medical tourists. But the market is expected apparently to grow from$1.2 billion in 2025 to$3.4 billion by 2035. And last year, Chinese hospitals received 1.3 million foreign tourists, and that was up about 75 % from 2022. Although arguably, that would make sense given 2022 was the end of zero COVID in China. Okay, let's take one last quick break and stay with us.

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29:25James Kynge:Welcome back. C-Dance 2.0, a powerful new AI video model from ByteDance, the company behind TikTok, is generating viral clips of Tom Cruise and Brad Pitt brawling on a rooftop and Donald Trump battling Kung Fu masters in a bamboo forest. None of it is real, yet millions are watching it. as if it is. The tool can create hyper-realistic scenes in just minutes, thrilling some and alarming others. Paramount Pictures and the Walt Disney Company have sent cease and desist letters, SAG-AFTRA is pushing back, and critics warn it could turbocharge deepfakes and just completely upend Hollywood. Meanwhile, China's rapid AI push is fueling what some are calling a new tech space race with Washington.

30:10James Kynge:James, did you watch the video of Brad Pitt and Tom Cruise? doing Kung Fu.

30:15Alice Han:I spent a big chunk of this afternoon just being absolutely amazed by this technology, playing around with Sea Dance 2.0. It is just mind-blowing. I mean, I think people who live in Silicon Valley and Hollywood and Los Angeles, San Francisco, all of those places, they know about this already. But I think a lot of the world has not yet really cottoned on to how good this technology has become. And, you know, Seedance 2.0, which is an app created by ByteDance, which is the Chinese company that controls TikTok as well, is one of the leaders, but there are others as well. Google DeepMind has got an app that's equally impressive, I would say.

31:01Alice Han:I was playing around with that too. Basically, Seedance 2.0 can generate cinema quality video, complete with sound effects and dialogue. And it can do so just after you give it a few written prompts. So you would tell it, I want a video of, in the example you gave, Brad Pitt fighting Tom Cruise. I want it to look realistic. I want it to look a little bit like X film or Y film that you remember or hazily remember. And then it does it for you. I was also watching videos of waves crashing onto a little boy on a pier. I can't remember what film that reminds me of, but I'm pretty sure that's another echo from a famous film.

31:47Alice Han:And again, it was incredibly lifelike. lifelike. So it seems to me, Alice, we're living in a world now where these binary questions are coming thick and fast. You know, like you said in your intro, Hollywood is in a panic about this. Could this upend Hollywood? That seems to be an incredible question to be asking, but it has to be a justified question given the speed of the development of Sea Dance 2.0 and the other American alternatives. The last thing I'd say before I get your take on it is, of course, the Chinese AI app costs much less than the US AI app. We're seeing this across the board when we compare Chinese AI with US AI.

32:32Alice Han:Just to give you the numbers here, Seedance 2.0 costs roughly 60 US cents for a 10 second generation of your kind of standard video format. And Google VO 3.1 costs roughly two and a half US dollars for the same 10 seconds. So, you know, obviously the Chinese app is cheaper, but I don't know whether that's going to be a big differentiator. One of the things that fascinates me is what about the legal situation here? Is there going to be a big backlash from Hollywood? I can't imagine that this enormous American film industry is just going to roll over and let this happen. What do you think, Alice?

33:17James Kynge:I 100 % agree. I think that it's deeply concerning for these traditional content creators, the cinema studios, the streaming platforms, because their copyright and IP are being violated illegally. Now, whether or not they can crack down is something that I'm not so sure of. I think that you would really need the pressure of the US government to weigh in on this debate. I don't think that Trump is incentivized anytime soon to do this. He probably hates most of Hollywood anyway. But zooming out a little bit, what I think is interesting is that the Chinese government clearly has an initiative. A couple of years ago, they started doing AI regulations really at the forefront and inspired in part by GDPR from Europe to go after deep fake AI technologies.

34:00James Kynge:They actually saw that this was coming down the pipeline and that they needed to actually put in these guardrails. So the Cyberspace Administration of China, which is basically the large cybersecurity authority, has penalized more than 13 ,000 accounts and removed hundreds of thousands of posts that were propagating this kind of AI-generated content illegally in unlabeled fashion. I don't see America doing this. Maybe the Europeans will pretty soon. Europe seems to be pretty good at regulating or at least setting up guardrails for technologies. America, I'm less certain of. So my concern is that we are giving China full reign in creating the Wild West of this unregulated AI content outside of China that infringes upon other traditional companies and media platforms' IP.

34:50James Kynge:As I look to, I don't know what you watch nowadays, James, but there's so much computer-generated content and AI slop, even in films nowadays, let alone TV shows. So now I really feel like the difference between a C-Dance 2.0 generated video and what I see on the screen is getting far smaller as time goes by.

35:10Alice Han:Yeah, I mean, I've just been having a look down a list of some of the actions that some of the big US companies are taking. So Disney, Paramount, Warner Brothers and Netflix have all sent individual cease and desist letters to ByteDance. That doesn't seem like a legal sanction, but it sort of implies that if they don't cease and desist, then there might be some kind of action that is taken by those big American companies. And in those letters, those big American companies are accusing ByteDance of, quote, systemic infringement and treating their intellectual property as a, quote, free public domain clip art.

35:55Alice Han:So, you know, you can see that the big names of Hollywood are really limbering up here. There's been several other actions taken as well. But I think we're at the early stage of this. It seems to me that this is going to be a big bust up in the courts.

36:12James Kynge:Yeah, they just don't have any leverage on China, do they, James? I mean, China has, as of really 2016 onwards, really pushed out Hollywood. So most, apart from Zootopia more recently, most of the highest grossing films in China are Chinese. They're not coming out of Hollywood. And more than that, they don't really have the legal authority to get ByteDance to step down. The only real pressure they can do is to pressure some of the shareholders and to lobby Congress and the Senate to pass some kind of a bill. but that would require a more thoughtful debate about deepfake technologies. I personally, I don't know how you feel, James, I'm worried about this Pandora's box that CDance 2.0 and VO and Sora coming out of OpenAI and Google are creating because I don't think we're far off from a place in which people could be using our content online and creating fake videos.

37:05James Kynge:And if we don't do a regulation of this, it's really very much the wild west. And that keeps me up at night sometimes. I don't know. What do you feel, James?

37:14Alice Han:Yeah, I mean, I feel the same. I hadn't actually thought about myself in this regard. But I mean, this basically does the work of all creators everywhere. You know, so it is a big concern. And I think what we've got here is a situation in which the technology is advancing quicker than potential legal sanction against it. And when you add into that the complexity of different geography, such as you've just mentioned, you know, China has different rules from the U.S. It doesn't necessarily abide by what a court may find in Los Angeles or San Francisco or New York or wherever. And so if you want to use legal sanction against Chinese companies, you're facing a very different process from what you would be used to in the U.S.

38:04Alice Han:Meanwhile, the technology is charging ahead and, you know, all kinds of intellectual property is being used to create these videos. The videos themselves are amazing. They look incredible to the consumer. And do consumers really care about the providence of the videos that they're watching? And what about all of the global platforms that these videos appear on? Who controls them? What about the jurisdiction for all of those guys. So we're facing an incredibly complex world bolted to a technology developing at warp speed.

38:41James Kynge:Yeah, I don't know if you've seen this, James. I highly recommend it. One in particular that strikes me as very Chinese that has been somewhat viral. There's a video of Kanye West in imperial Chinese attire doing a very traditional Chinese music video for people who watch a lot of imperial Chinese dramas. They'll appreciate this, the tropes in it. And his wives, including Kim Kardashian, are in it, supposedly, either his concubines or his queens in this music video. But it's crazy the amount of content that I'm seeing on Chinese social media, Xiao Hong Shu and Dou Ying, which is China's TikTok and Instagram, of stuff that is coming out of C-Dance 2.0 or just AI-generated content.

39:23James Kynge:It's really, really dazzling to see, but also deeply worrying. and I hope at least that there will be more pressure put on governments around the world to get their act together because the technology is already here. The barbarians are the gates.

39:38Alice Han:Very much agree.

39:40James Kynge:James, here is our favorite part of every episode, prediction time. What is your prediction for the coming weeks?

39:47Alice Han:Well, given that we don't script these conversations that we have, Alice, I think we kind of touched a little bit on my prediction earlier. I think 2026 will be the year of litigation by Hollywood towards Chinese AI video apps. And I think these actions will fall behind the technological advance of the Chinese AI video apps. That means the lawsuits will pile up while the apps march ahead and the film industry will be thoroughly disrupted in its wake.

40:21James Kynge:it kind of reminds me of remember back in the day you had those chinese piracy dvds i remember as a kid of the 2000s every time i went to china i would just pick up you know i probably shouldn't have made this but they were just selling this on the street for one cny one yuan one renminbi these pirated dvds of people that literally just got into the cinema and just videoed it and really hollywood couldn't do much about it until really china cleaned up its act the government started cracking down on piracy, if you recall. So when I think about the future pathway, I mean, I agree with you, James.

40:53James Kynge:I think the only way out of this is if there's a government-related set of regulations to really clamp down.

40:59Alice Han:I agree. Maybe Trump and Xi Jinping will talk about this, or maybe their officials will talk about this when they meet at the end of this month and in April. You know, it really is a big topic. I mean, we're talking about the future of Hollywood. I mean, there is no more iconic word probably in the world than Hollywood. Now we're talking about its potential extinction. I mean, it's just extraordinary.

41:22James Kynge:Yeah. This is not my prediction, but I could foresee some kind of statement about AI cooperation, even though nothing comes out of it substantively between Trubishi and China in April. So my prediction is more markets related. By the time we air this, the mainland stock exchanges will have opened. I think we're probably going to see a pretty good performance in Chinese mainland stocks in advance of the NPC meeting on March 4. And that's primarily because in the lead up, historically in the lead up to the NPC meetings, we've seen stock markets actually rise. And so I think that we'll see a similar momentum happening in advance of that NPC meeting with a lot of market anticipation about some of the announcements related to hardware, especially semiconductors, some of the upstream and downstream providers to the semiconductor industry as well as AI.

42:15James Kynge:All right, that's all for this episode. Thank you for listening to China Decode. This is a production of Prof G Media. Our producers are David Toledo, Eric Janikas, and Ness Smith-Savadoff. Thank you to Catherine Dillon, Drew Burrows, Billy Bennett, Dan Shalan, William Flynn, Jesse Millwood, Gil Espinosa, James Patton, and Isabel Kinsel for production help every week. Make sure to follow us wherever you get your podcasts so you don't miss an episode and talk to you again next week.

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