← The Prof G Pod with Scott Galloway
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- [00:01]
Rob G
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- [00:41]
Alice Hen
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- [00:57]
Dr. John Svekianakis
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- [02:05]
Alice Hen
welcome to China Decode. I'm Alice Hen.
- [02:08]
James King
And I'm James King.
- [02:09]
Alice Hen
In today's episode of China Decode, we're discussing how the Iran war is helping China, why Chinese universities are rising in global rankings, and why China's EV giant wants to join Formula One. That's all coming up, but first let's do a quick check in with how the Chinese markets are starting off the week. On Monday, the Shanghai A share index closed down 0.3%. The Hang Seng H share index ended the day up 1.5%. The Hang Seng Tech Index surged almost 3% after famed investor Michael Burry suggested that it may be undervalued. BYD jumped 8%, its biggest gain in over a year on news of significant demand coming out of Latin America. And China, National Offshore Oil Corporation declined over 1% amid escalating tensions in the Middle East. Alright, let's get into it. The war with Iran is starting to ripple far beyond the Middle east, all the way to Asia. Now for years US officials have said the Indo Pacific is America's top strategic priority because of China. But now, as the conflict with Iran escalates, the Pentagon is pulling missile defenses, warships and other military assets out of Asia to reinforce the Middle East. Now joining us to talk about the broader implications is John Svekianakis, chief economist at the Gulf Research center, with decades of experience in the Gulf and Middle east region. John, thanks so much for being here.
- [03:36]
Dr. John Svekianakis
Thank you.
- [03:37]
James King
This is a very fast moving situation. We're seeing a lot happening in the Straits of Hormuz. Would you say that this war risks pulling the US back into the Middle east just as it was trying to pivot towards Asia?
- [03:51]
Dr. John Svekianakis
Absolutely. I think they're back into the region and this is not going to be a short term event. It's going to be far longer than what they anticipated or what they portrayed to the rest of the world. One, because regime change hasn't happened, it will take much longer. And two, for regime change to happen you need to have more of a firepower, greater firepower because Iran is a true enemy, a force to reckon with and they have gone through the decades of experience war with Iraq and they don't care of sparing people to fight this war. So the Iranians are notoriously capable in wreaking havoc in the Middle east and in the Gulf in particular.
- [04:47]
Alice Hen
John, a couple years ago China was involved in, it seemed, diplomatic discussions between the Iranians and the Saudis to revive the diplomatic relations. And at the time there was a feeling that China had a diplomatic presence and an interest to bear in the region. When you look at China today, it's been, I think, remarkably quiet on this issue. How do you think the Chinese are regarding what's happening in the Middle East? Are there opportunities or are there real risks to China's position in the Middle east and its oil interests which remain the paramount concern?
- [05:20]
Dr. John Svekianakis
The Chinese are playing a long game in the Middle east, but also a long game around the world. I don't see any interest, any true gains that the Chinese can have by getting involved in the Middle east besides the commercial interests, besides safeguarding the freedom of passage and vessels that provide and cater for the energy needs of China. But for the Chinese to get involved militarily beyond their commercial interests, I find a lot of dangers and very few gains for the Chinese, especially as the US Tries to get involved, as the US Is getting involved with Israel in restructuring the Middle East. Remember, this is not just a game to change Iran. It's a bigger game, so to speak, but a bigger play to restructure the way the Middle east map has been formulated. So this is a game changer for the US And China doesn't want to get involved. Likewise, Israel won't get involved in whatever China wants to do in Southeast Asia, in Taiwan and so forth. China sees the same way in a similar vein in the Middle East.
- [06:53]
James King
And John, just zeroing in a little bit on the Straits of Hormuz, which seems to be the focal point at the moment. President Trump has said that he wants several countries and he also mentioned China among them, to help with the shipping situation, to get some of the tankers through the straits. As you've mentioned, it doesn't look like China is responding too warmly to that. But could you ever see a non military role for China in helping to either de escalate the situation or maybe help some of the shipping get through the Straits of Hormuz?
- [07:31]
Dr. John Svekianakis
I'm very circumspect because one, the Chinese are able to get their vessels or Iranian oil. As we know, most of the Iranian oil goes to China. As long as that oil finds passage through the straits, which the Iranians can safeguard, I don't think the Chinese will gain by getting involved even on a commercial basis, even on issues like safeguarding free passage of other vessels. Or if we get into the issue of mines getting the Chinese to demine the Gulf. And remember, there is a commercial relationship that binds Iran with China far longer than anything else. So I think the Chinese are observing, watching, they're staying away from being criticized, providing military hardware to the Iranians. They want to be watchful because this crisis is going to be much longer and deeper than we initially envisaged or we were told by the U.S. so
- [08:48]
Alice Hen
John, on top of being a Middle east expert, you're also a bit of an oil whisperer. So I really want to get your take on what's actually happening in oil markets where we're going to be in a couple of weeks from now. And more importantly for the China perspective, what is actually happening in the Strait? We get these conflicting stories about tankers passing through. There's a narrative that China gets precedence because of the strategic relationship with The Iranians and the Ayatollah Suns abiding by that relationship. Walk us through what's happening in the strait right now. And is it true that China is getting preferential treatment in terms of still accessing the strait, moving forward?
- [09:25]
Dr. John Svekianakis
So far the Chinese are getting preferential treatment. Yet what we don't know is the exact amount of vessels going through oil tankers going through. One, because there isn't a lot of transparency, two, the logistical aspect requires that they go silent for a while and three, we don't have enough data points. But it's not just the Chinese, it's also the Indians that can get some vessels and some shipments of crude oil through the straits. But what seems to be going on is that the market last week and the week before was spooked. Hence we saw the spike. Now the market is beginning to take notice of what exactly is happening to the war. Is this a long war, a short war? And I think this week it'll be very crucial because we will go into the market thinking that this is going to be a longer war. And as a result prices could be spiking a bit more than we witnessed before. Having seen this and having said this, if we had this crisis 20 or 30 years ago, clearly oil would not have been at $100. I believe that from day one, 20 years ago, oil would have spiked to 150, if not $200. And I think the geopolitical premium that we've all discussed in the past has in a way been priced in, but also the importance of geopolitics has shifted. The US today exports a lot of oil. It's self reliant on oil and really Gulf oil goes to Asia. And on top of this, China today has stockpiled a lot of oil. Remember, given what we know, China today has about three months, maybe four worth of crude oil. And also in terms of natural gas, China is able to shift from natural gas to coal and that makes it a little bit more versatile. And also the war is happening at a time when we go into the spring and summer months. So the demand for heating fuel, transportation fuel evolves and changes. But China is little bit more independent than we could have said 20 or 30 years ago. And also there is storage and the strategic reserve unfolding that will help the market. But this week is very crucial because if the straits remain closed and if the Iranians actually do mine the straits, that becomes very difficult to solve because it's going to be a long campaign. And that could really shift the way markets appreciate the supply of oil, and that could spike oil prices up.
- [12:38]
James King
You say it's going to be a long war and some say that it could also become a more regional war. I'd like to get your take on that. Do you think that there is a very significant risk in that regard? And if that was to happen, maybe that draws China in to some extent. I've been looking at some of the numbers. In addition to the fact that China gets the 38% of its imported oil through the Straits of Hormuz, China's also invested huge amounts of money in the major countries of the region, about US$300 billion over the last 20 years or so in Saudi Arabia, UAE, Iraq, Egypt, Turkey, Israel and other countries, including Iran. If it becomes a regional war, John, do you feel that this, basically China cannot resist, but you know, to try to protect its interests, these very significant interests that it has?
- [13:37]
Dr. John Svekianakis
I completely agree that commercially, China is big in the Middle east and it has been doing exactly the same thing as it has been doing in Africa, providing credit facilities, construction companies, and so forth. So the China of today is far deeper in the Middle east, including the Gulf, including Iran, including Iraq. When Western companies are not so forthcoming to build things, the Chinese are always there to build things. So that tells a lot about China's presence in the Middle East. Having said this, if we go into a regional war, which I don't expect, because the Gulf states will not retaliate, and if they do retaliate, it'll be measured, it'll be more guided by the U.S. this is a U.S. israel war, and it's becoming more of a U.S. war, a Trump war, than anything else. And I don't think the Gulf states, unless they're heavily attacked, more so than what we've witnessed over the last two weeks, the Gulf states will not get involved because they're just 20 miles across the Gulf, which the Iranians call the Persian Gulf and the Gulf Arabs call the Gulf. So I don't think we're going to see original war. If we do, however, see a regional war, then the Chinese could take a different position. But again, I do caution and I do believe that the Chinese will stay out of it and they will prefer to be observers, commercial participants, through vessels, through the commercial routes. They have established negotiators. Remember, it was the Chinese who offered their good offices to mediate between Saudi Arabia and Iran, to the surprise of the US So in a way, China is there, but they don't want to be really at the forefront, especially when the US is taking the lead on this war.
- [15:46]
Alice Hen
Really interesting. Well, I look back to last year and how markets were very much disturbed by the April Liberation Day tariffs. And then fast forward a month, the markets digested it. Some of the tariffs were walked back or done in Swiss cheese style. So we did see carve outs. How do you feel about what's happening now in the Middle East, John? And where do you think we'll be at the end of 2026? Is this going to be something that blows over? Or as to your point, if it is a longer conflict conflict, is it going to have ongoing ramifications for us, for China, for oil, for commodities writ large?
- [16:24]
Dr. John Svekianakis
I think what is clear is that when this war is over, it's going to be a very different Middle East. The Middle east geopolitically is moving towards a Middle east that is led and thought by, by what Jerusalem decides and that is on the geopolitical side, on the military side, on the political side, on the economic side. Of course, the importance of the Middle east stems from the fact that you have a Gulf region which still produces a lot of assets, it still produces wealth, it still invests in different parts of the world. They have invested upwards of $5 trillion throughout the world as a of the petrol money that they have collected, amassed over the decades. But this will be a very different Middle East. It will be more unstable, it'll be fragmented, it'll be smaller states, it'll be decided on the basis of Israel having the military upper hand with the US providing additional security measures, but also a fragmented Middle East. Because the Gulf, remember, although it is six nations, they also have seven different opinions. They're not all friends and they're more kind of frenemies trying to vie for power not just within the Gulf, but beyond the Gulf in the Middle East. And that changes a lot the situation after the war. More specifically, with regards to Iran, if you do have regime change, the big question is what happens to Iran? Do you have one Iran? Do you have three Irans? Do you have four Irans? What is the role of Turkey because it has a Turkic minority? What happens to the Kurds? What happens to the majority who are persians or so 65% of them? How do they decide their future? And then if there is a spillover effect into other parts of the Gulf? But for sure, what you see out of all of this is long term instability, which makes Beijing acutely concerned because they have commercial interests and they do want to continue and further these commercial interests, but eventually they don't want to see their Construction companies being unpaid and they don't want to see construction workers returning back home and they don't want to have a negative ROI on the balance sheet of many of these Chinese firms.
- [19:12]
James King
This might be a little bit on the nose, but, you know, could it possibly be that as the US attention is diverted to Iran and the Middle east, that China sees its moment to make a move on Taiwan? We all know that China's got longstanding strategic interests and it says very clearly it wants to recover Taiwan. Do you see this as a danger that, you know, the US is preoccupied over here and China seizes its time?
- [19:41]
Dr. John Svekianakis
It could be they're moving a lot of hardware. Although I'm not a military expert on Asian geopolitics, they are moving a lot of hardware. As you know, they're moving another aircraft carrier group from Asia into the Middle east and they're moving a lot of assets, military assets which eventually have to be replenished. The US defense sector will need time to replenish those military hardware goods. And so that could give an opportunity. But if I may forecast into the realms of the unknown, into Asia, I would say that the Chinese take their time, China will take their time, and eventually China would come out more of a winner than a loser from all of this.
- [20:35]
Alice Hen
Really interesting. Thank you so much for joining us, Dr. John. We'll be back after a quick break. Stay with us.
- [20:45]
Rob G
Support for the show comes from Serval AI. Having a successful business means having a well functioning IT department. But if your team is always inundated with tedious tasks including working on password resets, access requests and onboarding, then your business is suffering. And the more your business grows, the more requests pile up. But with Servil, they say you can cut about 80% of your help desk tickets, which can free up your team for more meaningful work. Unlike other legacy players, Serval was built for AI agents from the ground up. Servil AI writes automation in seconds. Your IT team just describes what they need in plain English. And Serval generates production ready automation instantly. Plus, Servil guarantees 50% help desk automation by week four of your free pilot. But try it now because pilots are limited. Servil powers the fastest growing companies in the world, including Perplexity, Merkore, Verkada and Clay. Get your team out of the help desk and back to the work they enjoy. Book your free pilot@servil.com propg that's S E R-V-A L.com Pro Rob G. Support for the show comes from Shopify starting a new business. It can be a lonely endeavor, especially in the beginning. But in those early days, it's more important than ever to make sure you have the right tools in hand. And if your business includes E commerce, a great next step is to try Shopify. Shopify is the commerce platform that millions of businesses around the world rely on to sell their products online. You can get started with your own design studio. With hundreds of ready to use templates. Shopify helps you build a beautiful online store that matches your brand style. If you're asking yourself what if people haven't heard about my brand? Shopify helps you find your customers with easy to run email and social media campaigns. Best yet, Shopify is your commerce expert. With world class expertise in everything from managing inventory to international shipping to processing returns and beyond, it's time to transform turn those what ifs into With Shopify today you can sign up for your $1 per month trial and start selling today at shopify.com Prof. G Go to shopify.com Prof. G that's shopify.com Profg. Support for the show comes from LinkedIn. It's a shame when the best B2B marketing gets wasted on the wrong audience. Like imagine running an ad for cataract surgery on Saturday morning cartoons or running a promo for this show on a video about Roblox or something. No offense to our Gen Alpha listeners, but that would be a waste of anyone's ad budget. So when you want to reach the right professionals, you can use LinkedIn ads. LinkedIn has grown to a network of over 1 billion professionals and 130 million decision makers, according to their data. That's where it stands apart from others ad buys. You can target your buyers by job title, industry, company role, seniority, skills, company revenue, all so you can stop wasting budget on the wrong audience. That's why LinkedIn Ads boasts one of the highest B2B return on ad spend of all online ad networks. Seriously, all of them. Spend $250 on your first campaign on LinkedIn ads and get a free $250 credit for the next one. Just go to LinkedIn.com Scott that's LinkedIn.com Scott Terms and conditions apply.
- [24:01]
Alice Hen
Welcome back. For decades, American universities dominated global research, but new rankings suggest that this might be changing. Chinese universities are rapidly climbing the list. In one major index, eight of the top 10 schools are now in China, while Harvard University has slipped to number three. US Schools are still producing huge amounts of research, but China has dramatically scaled up its scientific output with massive state investment. Some experts say this signals a real shift In Global Research Power, others argue that the rankings reward the quantity of papers and not necessarily the quality of discoveries. James, as a Harvard alum, I have to say actually Harvard and Stanford alum, I'm pretty shocked at what's been happening and it seems to reinforce this view that the locus of science and technology research, the locus of higher education is shifting eastwards towards Asia. What was your quick take on these rankings?
- [25:02]
James King
You're still okay for now, Alice. I see in the QS World University Rankings, 2026, Stanford is number three and Harvard is number five. So don't worry about it, you're okay. I was at Edinburgh University, I think we're something like 34th, so you're doing all right. But the point you make is a very valid one, which is that Chinese universities really are leaping up these tables and a lot of the time it depends on which table you look at. The QS World University rankings, the one I just cited, is generally seen as the most rounded measure. But there are some really eye catching rankings that have just come out. The CWTS Leiden ranking that comes from Leiden University in the Netherlands shows that 19 of the top 25 universities ranked as being Chinese. Harvard is the only foreign, well, the only US university that gets a look in, in the top 10 and it's ranked number three. There's no Yale, no MIT, no Stanford. The only other university in the top 10 is the University of Toronto and that comes in at number 10. These rankings are, you know, are rather different. The one that I've just mentioned, the CWTS Leiden ranking, that looks very much at what's called bibliometrics, that's looking at how many papers are published, how many times those papers are cited. Whereas the QS rankings, the one that we mentioned at the top, there is a much more comprehensive reputation heavy ranking and it looks at things like teaching, employability, research and also internationalization. And internationalization is one area in which Chinese universities really stumble because there aren't that many international students there. I also went to a Chinese university, we were really like a rare breed foreigners in the Chinese university campus that I was in. So you do have to take these rankings one by one, I would say. But my final point is that this is very much a strategy of the Chinese Communist Party. Although these universities are independent institutions, the Communist Party of course lies behind them and orders them and informs their policies and strategies. And so this is a big national push to push Chinese universities to the top rank and then to gain the kudos, I suppose that that bring with them but what's your sense, Alice? Did you go to a Chinese university as well?
- [27:53]
Alice Hen
I didn't, James, so I'm going to have to ask you a lot of questions about that. I only went to universities in the States, so I don't have a clear sense. But you know, what you've just said to me, James, gels with my own understanding of some of the metrics used to assess China's AI publications. There's an argument that China is vastly overproducing, or rather producing way more in terms of AI related research than any other country. But then this begs the question, what is the quality of this research? And there's a figure. For instance, in 2024, China produced over 870,000 journal articles and reviews in journals, while the US produced roughly 500,000. China's AI research publication output is the combined output of the US, UK and EU, and now is about 40% of the global citation attention. And just in terms of the STEM graduate students, Chinese STEM graduates make up about 50% of the world's total. You've got 12,000 PhDs coming out of China every year. That's three times coming out of the US. So numbers aside, the big question is what is the real productivity or innovation that's coming out of this research and out of these graduate students and PhD students? And it's hard to really find a metric that captures that. And I think this story that you've cited, James, about the conflicting rankings is at the heart of how we in the west struggle to really understand the degree of innovation coming out of China, because we don't trust the volume of research alone. And it's still very much a black box in terms of really figuring out what is actually happening on the ground in terms of innovation. But James, you're the only one of us here who's actually been to a Chinese university. So please tell me what that was like and whether or not it can reveal things about China's education system at the tertiary level.
- [29:49]
James King
My sense is that there is absolutely no doubt that Chinese universities have really sharpened up their act. And the level of teaching, the level of determination among the students is really very close to, you know, the, the global standard right now. The difficulty comes because there are stories that are true and appear to go against what I've just said. The Financial Times wrote an article about Chinese universities and they quote Ivan Oransky, who's co founder of a, of, of an institution called Retraction Watch. And what this researcher has found is that there are huge numbers of papers issued by university academics that are then retracted later on in. According to his statistics, in 2024, about 3,000 retractions of Chinese authored papers from journals took place and that compared with just 177 retractions from US authors. So there's no question that faking of papers is in China is a big deal. And actually there's a whole business model you'll be surprised to hear. So called paper mills are companies that are paid to create fake academic studies. So some people focus on that and they go, oh well, you know, everything in China is fake. You can't trust this. They appear to be leaping up the rankings, but it's not real. But my sense of it is absolutely, very, very clearly it is real. China is leaping up the rankings. The academic output of Chinese academics is going through the roof. And the other sidelight that I think we can shine on this is to look at how many Chinese academics from abroad, particularly the US are going back to China. There has been a study done by Princeton, Princeton University's Paul Marshall Wise center on Contemporary China, and they found out that 80 to 90 professors are returning annually from the US to China in recent years. And these include some really big names we've mentioned before on the podcast. Song Chun Ju, a consumer scientist at UCLA who went back to Peking University. He is top of the tree in his area. There's another one called Niang Yan who is a biologist who left Princeton. And then there are also some famous name foreign intellectuals who are going as well. There's a field medal winning mathematician who joined Tsinghua University, et cetera, et cetera. So I would like to say that this is a very real theme. My own time at a Chinese university was a long time ago. It's not really relevant to the current day. Aside as a point of comparison, I would say when Chinese universities were really nowhere on the global rankings. And yeah, as I said, foreigners were seen as a kind of rare species around campus.
- [33:01]
Alice Hen
That's fascinating. I have a friend of mine is actually a professor at NYU Shanghai and I'm actually going to be there doing an event in a couple weeks time. And what he said to me I think chimes with the concern that you raised, James, about the lack of international students in Chinese universities. Now this is supposed to be more of an international program that invites people from around the world, but they heavily rely on Chinese students who want an NYU brand name going to university in Shanghai. Another key market for them is actually Central Asia, where they're seeing a lot of growth and some mix of students from Europe, Africa, Latin America. But really what I've noticed is a decline in American students going to China. There's an example of the Schwarzman program that I think has been suffering in the last couple of years, relying more on non American students. But there's a bigger, broader question at play, which is to what extent can China be truly international? Putting aside how cutting edge and innovative the research can be, can it ever become at the US or European level of international university, or even the British level of international university with international standing for cultural reasons? I'm deeply suspicious of that. But I think, James, you raise an interesting point about ethnically Chinese people, Chinese passport holders coming back from potentially being educated or working in the States to the mainland. And I often hear anecdotally that it's not just because of the financial or patriotic rewards. It's oftentimes a decision to come home and take care of their parents who are getting older as well. I see that a lot amongst my peer group, for instance, who have lived and worked in the States. Coming back to China, James, do you feel that there is a change in the way that Chinese universities are being regarded in the West? Is that something that you're plugged into?
- [35:00]
James King
Kind of. But as it happens, I met the son of an old friend the other day here in London. I knew him when he was a kid in China. He grew up entirely in China and speaks Chinese like a native. He went to university in China, but he was put into the foreigner's stream. And this to me shows the real problem with the internationalization of Chinese universities. His Chinese is definitely good enough to sit alongside the Chinese students in the Chinese stream, but he wasn't allowed to do that because in general foreigners are not given that kind of access. They're shunted off into foreigner only streams. And that isn't real internationalization, that is fake internationalization. And quite honestly, very few foreigners speak native level Chinese. So it is a problem for them to sit alongside Chinese students. But even those who do are not allowed that opportunity or very rarely allowed that opportunity in Chinese universities. So I think Chinese universities really do have a long way to go to genuinely internationalize and give foreign students the same kind of treatment that a Chinese student would have at a university in the US or in the uk where they sit alongside, you know, students from everywhere in the mainstream course, not in some adjunct course for foreigners.
- [36:27]
Alice Hen
It's interesting that you raised that, the language aspect, James, because it's coming at a time where in the last week or so we've seen announcements that the government really wants to reinforce the use of Mandarin Mandarin Chinese in schools. And this is especially targeted to minority groups and minority schools around the country. And the idea is that all courses need to be taught in mandatory fashion with Mandarin Chinese. I don't know if you've been following this, but certainly I think in the west there is a bit of consternation anytime anyone raises this issue, especially as it pertains to minority rights. But as you were saying this, this definitely came to mind. Okay, let's take one last quick break and stay with us.
- [37:12]
Rob G
Support for the show comes from Quint. Building a wardrobe you actually like comes down to pieces that mix well and last. That's where Quince shines. Lightweight cashmere sweaters, short sleeve 100% Mongolian cashmere polos, linen bottoms and shorts. These are just a few of the versatile pieces Quince offers that make your wardrobe actually work season to season. Our colleague Claire Miller has tried Quints and she she's a fan. Claire, talk to us. Say something new about Quint.
- [37:39]
Alice Hen
I love quints and I did get a cashmere sweater from them for the winter. Now it's spring. I gotta stock up on their linens, but whatever I need for each season, they've got me covered. So I love Quint's.
- [37:52]
Rob G
I'd buy some more linen, but I'm not 80. Anyways, go to quints.com probably. I wonder if that'll make the edit. Go to Quint for free shipping and 365 day returns. That's a full year to build your wardrobe and love it. And you will now available in Canada too. Don't keep settling for clothes that don't last. Go to Q-I-N-C-E.com propg for free shipping and 365 day returns. Quint.com profg. Support for the show comes from hims. Thinning hair is part of life. But not everyone can pull off the Mr. Clean look. If you're not ready to throw in the towel and start, start buzzing it all off. Here's something you could try instead. Hims HIMS offers convenient access to a range of prescription hair loss treatments with ingredients that work, including chews, oral medication, serums and sprays. These are products that use doctor trusted ingredients like finasteride and minoxidil which may be able to stop further hair loss and regrow hair in as little as three to six months. Think of HIMS as your digital front door that leads to better hair health. They bring expert care straight to you with 100% online access to personalized treatment plans that put your goals first. For simple online access to personalized and affordable care for hair loss, ED, weight loss and more, visit HIMSS.comProVg that's HIMS.comProVg for your free online visit HIMSS.comProVG Featured products include compounded drug products which the FDA does not approve or verify for safety, effectiveness or quality. Prescription required. See website for full details, restrictions and important safety information. Individual results may vary based on studies on topical and oral minoxidil and finish treat.
- [39:35]
Alice Hen
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Alice Hen
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Alice Hen
Get a $75 sponsored job credit@ Indeed.com podcast. Terms and conditions apply. Welcome back. Chinese EV giant BYD is reportedly considering a big new way to boost its global brand entering motorsports. The company is exploring options ranging from the Formula One championship to the FIA World Endurance Championship, which includes the famous 24 Hours of Le Mans. It would be a major move for a Chinese automaker in a sport long dominated by European and American teams. It also comes as BYD is expanding globally after recently surpassing Tesla in global EV sales and pushing into higher end vehicles. But getting into F1 isn't cheap. Building and running a competitive team can cost up to $500 million a season and can take years to pull off. James, are you a car enthusiast? I have to confess that I love drive to survive. It really got me into F1 driving.
- [40:56]
James King
Oh really? Okay, well I'm going to come straight back to you on this. Just a couple of things. I'm not a massive fan, but I do follow it a little bit. And I must say, Alice, when we were thinking about this segment, I just thought a few episodes ago we did a piece on how Sea Dance, a video generation technology which has been created by ByteDance, is disrupting Hollywood. And I can't help but think that what we're really talking about today in this segment is the next potential Chinese tech disruption story, and that is Formula one. I had a quick look at some of the speeds involved. Now, I guess as a bit of essential background, Formula one cars are almost all conventional combustion engines. They do have batteries, but that's not what they're mainly about. And byd, which as you said wants to break into Formula one is a pure battery car. And yet if you look at their fastest car, the Yangwang U9 Extreme, it's purely battery and it set a world production car speed record of 308 miles per hour. That's 496 kilometers per hour in September last year. That's quicker by quite a long way than any of the modern Formula one cars around. So, you know, if we're just talking about pure speed, I don't know about cornering, going around the corner, I don't know about driving technique, but if we're just talking about pure speed on the straight, this BYD car could lick any of the Formula 1 cars that are currently out there. Tell me your sense of this. Do you welcome this? The battery cars coming in? Are you a traditionalist? Do you like hearing the roar of the engines and lifting, listening to those combustion cars?
- [42:51]
Alice Hen
I have to say the combustion cars probably went out. There's something very special about a motor, the sound of a motor and a combustible vehicle. So I'm not sure if an EV would be able to deliver the same kind of satisfaction from a driver's or even a viewer's perspective. But certainly when I saw the story, I had a couple of thoughts. Number one, what I've seen trending in social media is the virality of F1 driving, especially amongst young females, educated females in China. They seem to be really keen on F1 driving. And over the weekend we just saw the Shanghai F1 Grand Prix about I think 230,000 spectators. This is a world record, according to Chinese press. This is the biggest record in two decades. And a lot of these drivers, in particular, one Chinese one that I have to shout out for Zhou Guanyu, who's the driver for Cadillac. Now this is an American, American company, is very, very popular in China, is originally from Shanghai. We also have Lewis Hamilton who's been going around China. He was actually just in Tibet with his mother and posting about the beauty of the Chinese landscape. The reason I raised this story and these anecdotes is that it's clear that the government seems to be in favor. This goes back to previous episodes when we talked about concert tourism of these sorts of extreme experience, economy related tourism. There was, I think, a statistic from Trip.com, which is a big Chinese tourism platform, online tourism platform, that during the F1 weekend there was a 20% year on year increase in inbound tourism bookings and hotel reservations in Shanghai rose 96% year on year. So that's Just to give you a sense of how much enthusiasm that has been from everyday Chinese towards the F1 Grand Prix. And I get the sense that this could be like what snow sports were for China A couple years ago. If you remember, before Guiling AI Ling Gu came on the scene, there was a big, I think, government led push, but also supported by everyday people, to get more people into skiing, into ski sports, snowboarding and skiing. I could see something similar where the government is super supportive because it sees this as being actually really beneficial for consumption, for tourism. What's your feeling, James, about. About whether or not this could be popular in China moving forward, do you sense that the market is ready for an F1 story in China? There's a separate question about whether or not F1 is ready for a Chinese brand. But do you think that the market in China is primed for F1 mania?
- [45:32]
James King
I remember when some of the first F1 cars arrived in China, it was mania at that time. And I think this is exactly what a lot of Chinese people will love to support and do and follow. You know, I mean, we've often spoken about it on here, Alice. Chinese people in general, I would say, are very interested in technology. You know, when you go to China, you find, to an extent that I never find over here in the UK or even in the us. You know, people love to talk about technology. They will kind of interrogate your mobile phone or ask you about whatever technology you're interested in. It will be the font of many conversations. So I think the level of interest in this type of thing is sky high. And then of course, there's the glitz and the glamour that goes with F1. There's the sort of howl of these cars going around those tracks. And then there's the winners and the losers. It couldn't be better designed for a Chinese consumer audience.
- [46:34]
Alice Hen
Yeah, I think that's honestly what is prompting the head of fia, the Formula One's governing body, to actually be open to having China potentially join. Now, there's a separate discussion of whether or not they would be allowed to with EVs, as we mentioned, but certainly, I think as F1 grows more popular in China, I think it economically would make sense for FIA to really start to take BYD seriously. And it seems that BYD is really at the forefront and would be the front runner candidate if China is allowed. And currently, I think, insofar as I understand it's dominated by the Europeans and the Americans, China doesn't really have any representation apart from that driver Joel, that I mentioned, but aside from byd, some of the other car brands potentially that we've mentioned. Geely also has participated in international touring car racing through Sian Racing. Nio won the Formula E electric championship back in 2015. So there's a lot of other car brands out there that could want to get into this Formula one ecosystem. But it I think tells a bigger story, which is my sense that the EV industry and the auto industry in China is starting to evolve and really want to capture the high end or luxury end of the market we had more recently in the last few months, BYD's Danza model that just came out. This is the premium model that's being marketed differently from the other BYD offerings. And you already mentioned, James, the Yangwang high end model that was tested recently in Germany that had huge and very, very high speeds. But certainly I get the sense that as this auto industry is maturing, they really are trying to rebrand and create alternatives that are more high end luxury as opposed to mass market and cheaper. And I think this F1 story is a good indication of the ambitions of a lot of these Chinese automakers, not just byd. All right, James, you know what time it is? It is prediction time. What is your prediction for this week?
- [48:37]
James King
This one might sound a little bit left field, but actually when you look at the numbers and you think about it, it's pretty mainstream really. I would say this year is going to be a bumpy year for AI emotional companions in China. These are avatars online. They don't forget your birthday, they don't forget your anniversary, they'll never ghost you. That's a given. Because the software of these AI companions these days is so good that you can have a proper interaction with them. They're good company, they lend us sympathetic gear, they're witty, they can be humorous, etc. So I have a prediction. This year the market for Chinese AI emotional companions will grow to about US$1 billion. That's up from US$530 million in 2025. And by the way, there are predictions out there that see a even more aggressive market growth by, let's say, 2028 or beyond that. So this is a huge market. It's really catching on. I have not yet tried an AI emotional companion, but I might give it a go.
- [49:52]
Alice Hen
How are they monetizing it, James? Is it through online platforms, online chats?
- [49:57]
James King
I think you have to pay a subscription. So you pay probably a monthly subscription for your AI companion. And I was searching, there are lots of different, different competing names There, you know, some of them are quite famous. I think Xiao Ice is the most famous. That originally was a Microsoft product. I'm not quite sure what happened to it, whether it still belongs to Microsoft, but it's huge in China and I saw a number online. I don't know how real this is that there are 660 million people worldwide who look at SEO Ice or interact with SEO Ice.
- [50:34]
Alice Hen
That's crazy. I mean, it's all feeding into the Silicon Valley fears that people aren't going to have kids because they're all going to be with AI girlfriends and boyfriends. But I think in East Asia that's going to be a pretty developed market given where things are heading. Fascinating, James. So mine is a bit less left field. I would say it's very much in the vein of what is happening right now. I get a spidey sense, I don't know why, don't ask me why, that we might have a delay of the Trump visit to China. I was reading some of the coverage of the He Feng and Scott Besant meeting in Paris over the last few days, and even though there were no real bad news or signals coming out of that meeting, I just got the sense that there hasn't been anything really substantive that the Americans are still very much distracted by, as Dr. John mentioned, what is happening in a fractured Middle east in Iran specifically. So I just see an alignment of a lot of stars that point towards Trump potentially delaying. And now he's even said in the last 24 hours that he could delay that trip. So I think we'll see in the next few weeks if that indeed happens. But that certainly changes, I think, the nature of detente, which was very much the base case for a lot of people and investors when thinking about the US China relationship. Because certainly if we don't have that Trump meeting, which I think was a key sign of the continuation of detente, that opens the doors for a lot of challenges and risks in the relationship.
- [52:06]
James King
To my mind, that's such an interesting call. Yep, I'm going to be attuned to that as well. Alice, thank you.
- [52:11]
Alice Hen
Before we go, some very big news. China Decode is now available on Substack. Subscribers will get A.D. free episodes, our exclusive newsletter and a place to engage with James and me and other listeners. Find us@chinadecode. Prof. Gmedia.com that's all for this episode. Thank you for listening to China Decode. Make sure to follow us wherever you get your podcasts so you don't miss an episode. Talk to you again next week.