China Decode: Taiwan's Record Defense Budget, Evergrande's Life Sentence, and China's Robot Boom

**SPEAKER_1** (0:01)
Support for the show comes from Odoo. Running a business shouldn't feel like surviving a software group project. One app for accounting, another for inventory, another for sales, and somehow, none of them talk to each other. That's where Odoo comes in. An all-in-one business management software that brings every part of your business together, from sales and accounting to inventory and marketing, all in one powerful platform. No messy integrations, no bouncing between tabs, and best of all, no spreadsheets. Stop managing software and start managing your business with one unified system.
Try for free today at odoo.com/profg. That's odoo.com/profg.
Support for the show comes from Alumni Ventures. Your financial advisor may be perfectly happy keeping you in public index funds and spending the afternoon golfing, hoping you don't call. But public markets are not the whole market anymore. Alumni Ventures has spent over a decade building a way for individual accredited investors to assemble their own blue chip venture portfolio. Backed by professional diligence and co-investment alongside leading VC firms, Time and CB Insights both rank Alumni Ventures a top 20 US venture firm. You can sign up for free, see the weekly deal flow and decide for yourself. Or write one check into the Alumni Ventures Foundation fund for a diversified portfolio of about 25 private venture deals. Go to AVVC slash Prof G. Not an offer to sell securities. Venture capital involves substantial risk, including loss of capital invested.

**James Kynge** (1:28)
See disclosures and fund offering materials for more information.

**SPEAKER_3** (1:34)
Recommendations can be amazing. I mean, maybe someone recommended that TV show you've been obsessed with lately. But when it comes to home projects, it's different. If you don't like a show, you might lose a few minutes. If you hire a friend of a friend of a friend to fix a leaky ceiling, you could end up with a flooded kitchen.
Maybe I know a guy just isn't enough for your home. That's why Thumbtack works so well.
They'll match you with a top-rated local pro, and you can see photos of past work, credentials, and reviews all right in the app. For your next home project, try Thumbtack. Hire the right pro today.

**Alice Han** (2:13)
What I found so fascinating digging deeper into the data is the fact that actually a lot of the robots are not being bought by families or consumers. They're actually being bought by these government-backed training centers that do what is called teleoperation training data. So humans are remotely guiding these robots through physical tasks, and then they sell whatever data they generate from those tasks back to the robot makers to improve their AI.
Welcome to China Decode. I'm Alice Han.

**James Kynge** (2:51)
And I'm James King.

**Alice Han** (2:53)
In today's episode of China Decode, we're discussing the largest defense budget in Taiwan's history, the man who built China's biggest property empire, who is sentenced to life in prison, and getting to the bottom of who is really buying and using China's humanoid robots. That's all coming up, but first, let's do a quick check-in with how the Chinese markets are starting the week. On Monday, markets were down thanks to a broad tech sector sell-off with news from Alibaba leading the sell-off. The Shanghai Composite was down 0.59 percent, the Shenzhen Component fell 2.13 percent, and the Hang Seng was down 1.89 percent. Biggest gainers included SinoPek up over 4 percent, China Coal up around 3.5 percent, and Ping An Insurance up 3 percent. All right, let's get into it. We'll start in Taipei, where the government of Taiwan has approved a proposed 2027 budget this week that would push defense spending past 1.12 trillion Taiwanese dollars, or roughly 35 billion US dollars. That's an 18.2 percent jump from this year, but the budget still has to make it through Taiwan's opposition-controlled legislature. Well, James, before we get into the politics minutiae of whether or not this gets passed, this is pretty considerable given that, if you recall, earlier this year, there was some speculation that Trump's $14 billion arm sales package would go through. It seems like he's paused that. It's unclear whether or not he's going to revive that package at a time in which a lot of missiles and ammunitions are being used up in the Middle East. So the big question is, will this spending actually be significant for Taiwan's battle preparedness?
I'm a little skeptical when I compare Taiwan to Ukraine, for instance.
What strikes me is the relative backwardness of the Taiwanese military and the lack of preparedness. There's 170,000 active troops in Taiwan, now 300,000 active troops in Ukraine. Taiwan currently spends about 2.1 percent of GDP on the military. Ukraine seriously ramped up in 2021 spending as a share of GDP, and that's gone up to 40 percent, which is considerable to say the least. But beyond that, it seems like everyday Taiwanese people don't have the same sense of battle preparedness and bellicosity when it comes to mainland China as the Ukrainians do towards Russia. Maybe I'm misreading this, but when I go to Taiwan and even mainland China, I don't sense this degree of urgency that one would have sensed in the years leading up to the Russia-Ukraine crisis. Maybe I'm misreading this. We can get into the specifics of some of the military equipment and hardware, which I think is considerable. But my big takeaway is that I just think that Taiwan will not be in the same place if war strikes that Ukraine has been. Ukraine is really surprised to the upside. The fact that it has been able to weaponize asymmetric capabilities, it has really been able to dig deep into its population for both active duty and reserves.