Grace Shao on What the World Should Know About Chinese AI

**SPEAKER_2** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**Joe Weisenthal** (0:18)
Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.

**Tracy Alloway** (0:23)
And I'm Tracy Alloway.

**Joe Weisenthal** (0:24)
Tracy, I love being in Hong Kong. I love it here so much. I love it here so much. I would come here a few times a year if we could.

**Tracy Alloway** (0:31)
I'm sure you would. I lived here for, I guess, almost four years, so it's kind of weird coming back, but Hong Kong has a lot of pluses, great food, great weather for most of the year, beaches. I once heard someone describe it as Manhattan meets Maui, which I think is pretty accurate.

**Joe Weisenthal** (0:51)
It's so nice. The weather is actually not great.

**Tracy Alloway** (0:55)
It's not great right now.

**Joe Weisenthal** (0:55)
Incidentally, this week, we've come during a, I guess it's a monsoon season, right?

**Tracy Alloway** (0:59)
Yeah, it's the rainy season. But oh well, I like thunderstorms, so I'm enjoying it.

**Joe Weisenthal** (1:03)
Yeah, I'm enjoying it too. Anyway, one thing that has changed since the last time you were in Hong Kong, you left in 2022 We weren't doing as many AI episodes in those days, to say the least.

**Tracy Alloway** (1:15)
We definitely weren't. In fact, so I remember one of the big stories when I was here in Hong Kong in 2020 was China's tech crackdown, right?

**Joe Weisenthal** (1:24)
That's right. That's right.

**Tracy Alloway** (1:25)
Right. And like there was all this concern about whether or not the crackdown was going to destroy China's entrepreneurial spirit. I'm doing air quotes on a podcast. I don't know why.
But fast forward six years and there's entrepreneurism basically everywhere. And we talk a lot about how China is producing all these new AI models.

**Joe Weisenthal** (1:47)
OK. Can I like say like I know very little. I mean, I know very little about AI, but I know even less about Chinese AI. But here are some of my general impressions, which is, hey, it seems like there's so many open source. OK, so I know they're largely open source. It seems like every random company, you see like some toothpaste company and they'll have produced an LLM. So I'm very curious, like how they're making money on it.
I also get the impression, like, you know, the heads of American AI labs speak in these like sort of quasi mystical terms, et cetera. It doesn't feel quite the same here where it feels like a bit more of like yet another technology. But I'm glad you brought up the point about the tech crackdown because at the time the whole story was like, oh, there needs to be less focus on sort of digital tech and more focus on hard tech, hardware, which has been done extremely. That's been an extraordinarily successful endeavor. And then my last impression, though, is that since the release of CHAT GPT in late 2022, that was the moment it's like, no, we really have to also compete on sort of this next era of software and sort of consumer facing tech breakthroughs.

**Tracy Alloway** (2:58)
Yeah, overall, the AI scene in China feels much more utilitarian to me. It's more about like the big companies, the Tencent, the Alibaba, sort of using AI for their existing business models rather than this existential thing, which it is in the US where like AI is the business. That's just it.

**Joe Weisenthal** (3:20)
Right. Yeah, that's exactly. AI is sort of weird. Like it sort of sits in the middle of what you would call like software and hard tech because we could we consume it through the browser, right? Sort of the same way or in many cases through the browser, the same way that we would go to an Amazon or an online gaming or something like that. But it's clearly, you know, it's a scientific endeavor. And so it's sort of is this blend. And then you have to figure China is so far ahead of the US when it comes to things like robotics and EVs and batteries. And one thing I don't know anything about is the degree to which that melding of hardware capabilities with AI capabilities, how that influences the direction of the development of the AI tech.

**Tracy Alloway** (4:00)
Yeah, I'm also very interested in like the capital stack for Chinese companies, because over in the US, we all know that people are flinging money at anything with the word AI in it. But in China, it's very different. I get the impression that it's like much harder to raise enormous sums of capital. And so I'm very curious how that limited capital actually influences the development of these models and the tech.