China’s AI Strategy Extends Beyond the U.S. Tech Rivalry

SPEAKER_1 (0:00)

Thanks so much for that, Mali. Yes, joining me here now at the desk to discuss the Chinese economy is Peter Alexander, Managing Director at ZBEN Advisors. Peter, it's always nice to chat with you. Thank you so much for your time today.

Peter Alexander (0:12)

Glad to be here.

SPEAKER_1 (0:13)

You've come a long way, all the way from Shanghai.

Peter Alexander (0:15)

Yeah, I have come a long way.

SPEAKER_1 (0:18)

Look, we opened tonight on the mainland markets after a week long holiday. I'm just wondering, given the holiday headlines we've been digesting, Tencent Oracle, Huawei, Qualcomm, more fundraising coming from DeepSeek, Moonshot, what that is telling us? I mean, are we being misled? Because you've got your ear to the ground, you've got your eye to the ground on the progress or are we making strides in China against the US, even in the face of these export controls?

Peter Alexander (0:50)

So this is one of two reasons actually that I'm here on this trip. Because there is a lot of confusion throughout the US about what is transpiring on the ground in China. And I had a client today who laughed at me and said, you must be like last man standing. And what I explained was the conversation in China is different.

It's not about building god in a box, which is what people are now referring to, at least in China, of what's going on here. China is looking to build applications, how to use AI in a way that is going to be able to improve manufacturing. They're coming up with new products. They're using it and deploying it across the economy already. And I think that when you look at the competition, it's not something that the Chinese are looking at in the same vein.

In fact, the groups that I talked to kind of scratched their head and squint a bit saying, why are you making such a big deal of this? Because they're not looking to take it to the same level, at least not right now.

SPEAKER_1 (1:55)

Why is it not showing up in the data as far as the old economy versus the new economy?

Peter Alexander (2:01)

It's early. And again, this goes to the second reason I'm here, which is talking about what is transpiring within the broader economy. Because every, I don't know, month or so, people continue to come out and say, where's the stimulus? Where's the household spending? And my conversations have been centered on the fact that, number one, Keynes is dead in China.

The central government in Beijing is trying its best right now to maybe not provide austerity, but it's definitely deleveraging. Because you had a massive expansion in credit that they're trying to rein in. So when you're looking at the direction the economy is going, they're trying to move from property and infrastructure to something that's new, whether it's biopharma or AI.

And interestingly enough, the bridge between the two, exports, which is where we're hearing the EU and the US and everybody up in arms.

SPEAKER_1 (2:59)

Right. And obviously it's been the last leg that China has been left standing on, you know, as far as the economic growth is concerned. So what I'm hearing from you is, is tech going to be the stimulus as far as feeding into economic productivity that the China needs right now? And then obviously, which feeds into that social contract of, you will have a better life.

Peter Alexander (3:20)

So it's tech, but broadly defined. Meaning they're looking at ways to be able to inject the, whether it's AI or any other developments such as chips, they're being very aggressive on the chip build out. Yeah. That they're able to then deploy within the pre-existing manufacturing base. So there are these conversations about, you know, high-tech manufacturing or fourth industrial revolution.

This is the direction that they want to go, so they can improve the efficiencies, hopefully productivity, that will then dare I say, trickle down and then begin to factor into the households. But again, it's, and I've told all of my clients this week, we don't know if it's going to work. But at least the government is saying we needed to do something and they're taking that new direction.

SPEAKER_1 (4:07)

Okay. We seem to be getting some degree of validation from that. I mean, as I mentioned at the start, Tencent Oracle deal, obviously, Huawei Qualcomm deal as well. So that's how China is looking in. How is China looking out right now? I mean, we've just had this summit between President Xi and Trump down the road. We've got nothing from it except for an extension of the truce of kicking the can down the road. I mean, I read your newsletters every week. I know that you had anticipated maybe there would have been a little bit more maybe a joint statement or something.