China Decode: Hong Kong's AI Crackdown, Lululemon’s Marketing Backlash, and World Cup Fever

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**James Kynge** (1:01)
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**James Kynge** (2:02)
I've never lived in a country that is as football mad as China, and I come from the UK. But China is more football mad, I would like to say, than the UK. People are fascinated by it. So for China not to have qualified for the World Cup since 2002, obviously, it's a big disappointment for Chinese people.

**Alice Han** (2:31)
Welcome to China Decode. I'm Alice Han.

**James Kynge** (2:33)
And I'm James King.

**Alice Han** (2:34)
In today's episode of China Decode, we're discussing private companies limiting the use of AI models in Hong Kong, a Lululemon campaign that goes wrong, and World Cup fever takes over despite the Chinese team not qualifying this year. That's all coming up, but first, let's do a quick check in with how the markets are starting the week in China. On Monday, markets were once again open following the Dragon Boat Festival holiday and saw a strong rebound. The Shanghai Composite closed up 1.78% and the Shenzhen Component finished the day up 2.13%, its highest level in 11 years. The People's Bank of China announced it would keep its key lending rates steady. Notable gains included Bank of China up 2.8%, Narrow Technology, a semiconductor equipment company up 3.3% and electric battery maker CATL up 4.4%.
Alright, let's get into it. JPMorgan Chase has reportedly cut off its employees in Hong Kong from accessing Anthropic's AI models, citing concerns over licensing terms that restrict use in Greater China. Goldman Sachs has already made a similar move in the region. At the same time, Washington is escalating pressure on Dutch chip maker ASML over concerns that advanced chip making lithography equipment could have reached China. A reminder that the battle over AI isn't just about software but also the hardware needed to power it.
So James, I thought it was super interesting to have those two stories really come to the fore in pretty much the same week. And it reminds me that we are living in a technological Cold War 2, where there is an iron curtain increasingly developing, being drawn up between mainly China and the US. We can debate as to whether or not Anthropic has done this move to cut off access to China and now Hong Kong because it wants to be seen as anti-China and pro-US or if it's kowtowing to the pressure from Washington. But what is clear to me is that increasingly, Hong Kong is getting looped into mainland China. This, I think, may be net bad for the financial services sector in Hong Kong, which relies on being a cross-border hub, not just of funds and financing, but also of talent and IP.