James King (4:25)

Well, I think, you know, the first question is, is it a credible peace plan? My short answer to that is that it's only as credible as the other key players, I.e. the US and Israel allow it to be. And as you've just hinted, Alice, I don't think that either the US Or Israel is going to be keen to allow China to take a leading role in a peace process in this Iran war or the war in the Gulf. It's just too important for the US And Israel. They don't want China to be playing a leading role in this regard. Yet I do think that this peace plan by China with Pakistan sort of taking the lead, but China pulling the strings behind it is important. And I think the reason for that is that it allows China yet again to claim the diplomatic high ground from the US Presenting itself as a peacemaker while leaving people to draw their own conclusions that the US is a warmonger. And I also think it's important because at the margin, it could have an influence on how events in the war in the Gulf unfold. Just a couple of factual references on the plan itself. This does, I think, amount to an Initiative that is more than just posturing. The reason I say that is because significant work has clearly been done behind the scenes. There has been several hours of talks between Pakistan and Beijing, talks between the respective foreign ministers of Pakistan and Beijing. And because there are five points in the peace plan that have been mentioned, immediate cessation of hostilities is number one. The start of peace talks as soon as possible is another. The end of attacks on civilian and non military infrastructure is another. The fourth is restore safe passage through the Strait of Hormuz. And the last is a comprehensive peace framework. The other interesting aspect is that there are credible reports of a four way meeting between Pakistan, Turkey, Saudi Arabia and Egypt. These are all Muslim countries that may be seen as more palatable by Iran as negotiating partners. So there has clearly been work behind the scenes between China and Pakistan and between the four countries that I've just mentioned. That means that this is more than mere posturing by China to paint the US In a bad light and claim some of the moral high ground for China. But does this really have legs in terms of something that is going to bring peace to the region and it's going to start unrestricted shipping through the Strait of Hormuz? I think we're far away from that so far, Alice. But what's your take on it? How are you seeing this?

Alice Hen (7:27)

I completely agree with you, James. This is a diplomatic move for the Chinese and the Pakistanis to show that they have skin in the game and they're stakeholders in the peace process. I think Trump's speech the other day makes it abundantly clear that he reserves the option to escalate militarily. They've got deployed thousands of troops to the region and he is willing, I think, to commit boots in the ground starting in Cog island or other aspects of the Strait, to really take over control of the Strait of Hormuz. That obviously will have major military and political ramifications for the administration. But certainly his speech made it clear that within two to three weeks this could escalate with a US Military response in the region with boots on the ground in Iran. And I'm not sure how the Chinese would respond in that scenario. I was going to throw that question back at you, but I think as this conflict draws out, we're now in week five, we reach a point at which the Chinese country as a whole is going to suffer the energy implications. We've talked at length about how China is in some respect insulated, buffered for three to four months because of its strategic reserves and the way in which it's diversified oil flows from other parts of the world, like Russia. But the fact of the matter is, if you look at some of the strain that's being put on the system, you look at teapot refineries, capacities, for instance, there's going to come a point in the next two months where something needs to change, or else this is going to have massive energy and then cost push inflation implications for China. So I would assume that the Chinese will try to make some kind of a deal whereby they get early access circled to the Strait of Hormuz. Now, we've seen some Chinese flagships have passed through the region, along with Pakistani and Indian, more recently South Korean as well. So I could see more pressure being put on by the Chinese vis a vis Iran to get more access to oil in the region. Because as we've noted in the past, more than 50% of oil bound to China comes from the Strait of Hormuz, comes from that region, although not as high as Trump is saying in the Financial times, which is 90%, about 6% of its total energy consumption. And close to 50% of seaborne oil comes from that region through the Strait of Hormuz. So I could see China coming in at least bilaterally to try to get access to more oil from this region. But the fact of the matter is everyone is sitting on their seats, including the Iranians, to see if Trump is actually going to deliver on that threat, to actually escalate militarily. But do you think if you were to put your thinking cap on from the Washington's perspective, do you think that's plausible?

James King (10:05)

Yeah, I mean, I think it's plausible. But where I think China's credibility as a real peacemaker in this situation falls down is that China is highly unlikely, I think, to act as a security guarantor of a peace plan in this region. I think, you know, China has said that it supports mediation by Pakistan and other countries to end this war and to move to a peace process. But if mediation doesn't work, or if mediation starts to work and then falls apart because people start fighting again, then there has to be a question of who steps in to secure the security of the region. And I don't see that being China. I don't think that China would in any sense be willing to use its military to try to keep peace on behalf of Iran. It certainly wouldn't want to get into some kind of a conflict with the US And Israel. So the idea of China as a genuine security guarantor, I think is a Non starter. And that to me puts a big hole in this idea of China's five point peace plan for the region. It's just far too complicated. Mediation can only go so far. At the end of the day, you have to have somebody who will stand in to guarantee the security. And I don't think that that is China.

Alice Hen (11:27)

Yeah. And just very quickly this sort of segues nicely with future discussions about AI. But it's interesting if you've seen this, James, that a Shanghai company called Mizu Vision has posted real time satellite imagery of American military movements in the run up actually to Operation Epic Fury that started in February 28th. So they posted some of this in X. And it wouldn't be at all a stretch of the imagination to say that the Iranians could have gotten access to this data. Now, you know, we have to ask to what extent are the Chinese sharing this surveillance imagery with the American. Sorry. And now we have to ask to what extent the Chinese are sharing the surveillance imagery to the Iranian military. But the fact of the matter is that this data, they're publicly accessible. And so it brings into question how safe the US military is in the region. If a lot of the data are being leaked by these Chinese AI companies, that I thought was quite interesting and may expose the US China relationship to some friction, I think.

James King (12:31)

Absolutely agree with you there. I mean, we've seen one F15 US aircraft get shot down. That's another fast moving situation. It could create tensions that we can't yet judge between the US and China. But I think you're absolutely right to point to this surveillance ability that China seems to have. This is a big setback for the US's war ambitions in Iran.

Alice Hen (12:56)

Okay, we'll be back with more after a quick break. Stay with us.

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Alice Hen (16:18)

Welcome back. China has launched two trade investigations into US Practices retaliating against similar probes by The Trump administration just weeks before a planned summit between President and Xi Jinping. The investigations target US Policies that Beijing says disrupt global supply chains and block Chinese green tech exports, signaling political tensions as the world's two largest economies prepare for high stakes talks. Adding another layer of complexity, the US FBI recently declared a suspected China linked hack of a U.S. surveillance system, a quote, unquote, major cyber incident, suggesting sensitive data on agency networks may have been compromised. James, just really quickly looking into this, the timing couldn't be worse for Trump and Xi in a way, right, because they haven't met in Beijing. They may meet, you know, mid May, although that hasn't been confirmed from the Chinese side. The Chinese, it appears, are retaliating against the section 301 probes that US put on after AIPO was struck down by SCOTUS. Does this at all put a spanner in the works for a Trump Xi summit? Should we read deeply into this as being a portender for doom?

James King (17:31)

I think it's bigger than just the Trump Xi summit that we now think is supposed to take place in May. I think it shows just how deep the tensions and the problems between the US And China really are. You've just been referencing in the previous segment that China is able to hack into US Operations in Iran, and now we're talking about a different form of security breach that China has been able to affect inside the U.S. i think this shows just how little the security state, or the deep state as we sometimes call it in both countries, trust each other. And I think that goes much deeper, deeper than a summit between President Trump and Xi Jinping of China, because that summit is really, even if it takes place on time in May, is really all about mood music. It's about trying to sort of put a bottom under the relationship which has been deeply damaged in recent years. But I think this just shows that behind the attempts to put a brave face on relations and to sort of contain this slide in US China ties, particularly over trade, you have these security states kind of grinding away and there is no trust or very little trust between the security states of both countries. And so every time you try to get some kind of diplomatic progress between the US And China, you get it removed or taken away, eroded by something that happens behind the cloak of secrecy, as it were, in the real deep state relationship between the US And China.

Alice Hen (19:18)

Well, it reminds me of, you know, the Obama years when we had that previous hack into, you know, federal data, Federal agency data, I believe is the OPM hack. And, you know, it's interesting how these things end up being quite political or they used to score political points. The fact of the matter is I'm pretty sure that, you know, some level of cyber theft, cybersecurity violations happen throughout the relationship, but oftentimes they get deployed politically to drive home message. And so my deeper underlying concern is that the timing of this at a time where, you know, you've also got some trade investigations on both sides where you haven't really seen real meat on the bones in the lead up by the seconds and thirds of Trump and Xi before a meeting. Again, even if everything points towards positive mood music, I still think that the underlying currents are quite difficult. And you add to that some of the recent stories that we just mentioned, Chinese satellite imagery potentially being used to help the Iranians, although maybe not deliberately so, that could really easily turn into Trump potentially going sour in China. Although another read of that is that maybe if he escalates or he doesn't escalate and Iran becomes a real quagmire nightmare, he'll need to use a positive China relationship to spin his foreign policy. Both, I think, are equally feasible. But what's interesting to me to frame it more generally is that the US hasn't really shifted the trade relationship that much. You know, as much as Jamison Greer talks about the Board of Trade and trying to reduce the deficit with the Chinese, the fact of the matter is that even although the bilateral deficit has been reduced quite significantly because a lot of Chinese exports aren't going directly to the US they're being rerouted. So the bilateral number doesn't reflect the final destination of goods going to the US Maybe through third party countries like Southeast Asia, like Mexico and Jamison Green at USTR and Besant at State, even though they threatened last year, haven't really gone through with the rules of origin to really line by line figure out where all these goods are coming from and in that way control the trade relationship. So. So right now it feels very hollow, all this discussion about, you know, trade investigations reducing the deficit. You add to that the fact that actually US exports to China, which is something that the administration would like to see grow, have actually fallen. They fell in nominal terms, 26% in 2025. And by some estimates, trade in terms of US exports to China should have been $90 billion higher last year, but due to the trade wars that did not happen. So when I add it all together, it seems like all of these are politically motivated. And maybe they're motivated, these stories, the FBI story, the trade probes to try to get the Chinese to make concessions ahead of a Trump summit. But right now it looks like the US Is in a weaker position, mainly because of what's happening in Iran. So let's take one last quick break and stay with us.

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K Pop demon hunters Haja Boy's breakfast meal and Huntrick's meal have just dropped at McDonald's. They're calling this a battle for the fans. What do you say to that Rumi?

Alice Hen (23:58)

It's not a battle.

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Alice Hen (24:02)

breakfast and give our meal the rest of the day.

James King (24:04)

It is an honor to share.

Alice Hen (24:06)

No, it's our honor.

James King (24:07)

It is our larger honor.

Alice Hen (24:09)

No really, stop.

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Commentator (24:20)

It's today explained. President Trump has not made a coherent case for his war in Iran and last night he said he's not ending it yet.

Narrator (24:28)

We're going to hit them extremely hard over the next two to three weeks. We're going to bring them back to the Stone Ages where they belong.

Commentator (24:37)

His ally Tucker Carlson has been making a very coherent case against the war

Narrator (24:41)

because it doesn't serve American interests in any conceivable way. And, and let, let me just say that if it does in some way serve the interests of the United States, I'd love to hear it. I haven't heard.

Commentator (24:53)

On Tuesday, we asked Carlson about his break with Trump and about how the Trump coalition is splintering as some young conservatives abandon the president and embrace something darker.

Narrator (25:04)

It becomes like all of a sudden, like, hey you kids, why you listening to Elvis Presley? And that rock music is bad. Like all of a sudden Fuentes controls the conversation and becomes the cool kid. And the net effect is to make

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the Holocaust a joke today explained every weekday wherever you get your podcasts.

Alice Hen (25:26)

Welcome back. China's large language models are outpacing the US for a fourth consecutive week, fueled by the rise of AI agents like OpenClaw that dramatically increase token usage. Now this surge is reshaping cloud pricing in China, enterprise adoption and the global AI token economy, signaling a shift from simple chat models to task executing AI agents at massive scale. James, I believe you just came back from China and apparently this was all the rage. I mean, I've been seeing it, the so called lobster farming, that's what they call it, using OpenClaw and rejigging and for different purposes. But this expression, yang longxia, which means lobster farming, has taken over China. You see a lot of these lobster plushies going around. But I really want to hear your perspective having been there on the ground.

James King (26:14)

Yeah, I spent just over a couple of weeks in China and I was researching a lot of things such as robots and AI and other tech topics mainly, but just to kick off for listeners who may not know exactly what OpenClaw is, it's a free and open source AI agent. So it's designed to act as a virtual assistant that can actually execute tasks rather than just chat with you. So for instance, it connects to large language models like Claude or deep seq or OpenAI's ChatGPT, and then it integrates them into messaging apps so that basically when you're using openclaw, you only have to ask it to perform tasks like booking flights or managing calendars or writing code, and it'll do that for you. So in that sense it's different from a kind of a chatbot that will only sort of respond to your questions. As you said, everybody is talking about openclaw in China. I mean, I really think of course I was moving in tech to circles, but it was the biggest topic of conversation. People would want to ask me about it. I would want to ask them about it. And the adoption in China of this is really quite amazing. So far, about 67% of Chinese industrial firms have deployed AI agents in production in China. That's compared to about 34% in the U.S. so that's all agents. That's not just OpenClaw, but you can see that OpenClaw is now really becoming popular. The other aspect of OpenClaw is that it sort of came out of left field. It was developed by Peter Steinberger, who's an Austrian programmer, and it was released in November 2025 and it quickly became one of the fastest growing open source projects in GitHub history. But the Chinese have now taken this to heart. And maybe because it's open source, maybe that's the attraction here, but it is so convenient. You just have to ask it to do certain tasks and it'll get on and do them for you. But what are you seeing as the implications of this, Alice?

Alice Hen (28:34)

It reminds me of a previous discussion you and I had, James, where I said that China would be a fast adopter of these super agents. I called it. You know, China 10 years ago was living through super apps, mainly Tencent, WeChat and Alibaba's Alipay. And now those super apps will give rise to an ecosystem of super agents where these agents have access to every aspect of your life. Your calendar, your flight bookings, your children's, you know, school records, food deliveries, et cetera, et cetera. And it seems like this is already happening, which is why I'm going to call this Lobster Mania, you know, in a nod to Beetle mania from your country. I just think that this is a perfectly natural that a country where digital adoption has been so fast, where people are willing to try new things and are less scared about privacy from a data perspective, it was perfectly natural that this would take a sweep over China. I've read, and I'd be interested to know your opinion on this, but I've read that the rise of agenting tools in China apparently is being reflected in the Chinese consumption of tokens. The National Data Administration revealed just this week that at the end of 2025, so in December, there were 100 trillion tokens being consumed. That's a metric for AI consumption. And this month, so the month of March, rather, 140 trillion tokens were consumed. That's just to show you how in the space of three months we've grown in AI usage. And it seems that a lot of companies and people are retooling and rejigging OpenClaw to create new Applications. So for instance, this one guy apparently retooled it as a tool for Tencent. So he called it QClaw. And basically it allows him to deploy OpenClaw and send orders via WeChat. He can interface with it via his WeChat app. But then he had this huge data issues where some of his data were erased entirely. And that brings me to my next question, which is how worried will we be that there isn't going to be a government backlash? Because if you recall, in 2021 we saw a massive tech crackdown. Now, if you had been living in China the year before that, or even 2019, 2018, you would have been hard pressed to think that that was going to be the future, because it was all about Internet, economy, digital applications. Now we're all about AI. Certainly the five year plan was all about it. And adoption is really high. For instance, 93% of respondents according to a KPMG survey last year said in China that they already use AI for work. I'm sure that's higher than the UK or the US and apparently 69% of the Chinese believe that they see benefits outweighing the risks, versus in the US it's only 35% who believe that benefits outweigh the risks in terms of using AI. I'm talking really fast because this is a really exciting topic for me personally. But my big question to you, James, is when do we hear the music stop? Because this can't be good for the everyday consumers. Security and privacy.

James King (31:36)

That's right. But you also mentioned the backlash. And I must say I left China with a very strong sense that some kind of correction or backlash indeed has to come. And this is simply because literally everyone I spoke to who doesn't work in the AI area seem to be concerned about employment, about the rising level of unemployment among young people in particular. Just to give you a sense of this, I think a lot of people are now concerned in China that AI is just taking their job. A lot of people are looking at their peers and the struggles that their peers are having to find jobs and drawing the conclusion that AI has already taken those jobs. And this only will be accelerated by the adoption of agents such as OpenClaw, which as we've just described, moves the locus from a ChatGPT type dynamic where you can ask a chatbot to do research for you, to a new locus of action where you ask the agent to perform a task for you. That's a very different thing that is going to strip quite a lot of people of their jobs. So I left China both amazed by the speed of China's tech advance and deeply concerned that the backlash may well be coming.

Alice Hen (33:00)

You're not the only one, James, because I just saw this posted a couple months ago in December by the Cyberspace Administration of China in which they regulate the, quote unquote humanized or another way to translate is anthropomorphic AI Interactive Services. And some of the articles reflect on the moral difficulties or the moral problems with AI services given to elderly users that quote, unquote, simulate their relatives or specific relationships. There's Another article, Article 12, that talks about putting the need to put on a minor mode, meaning to protect minors, underaged peoples, you know, either through time blocks or time restrictions or really blocking them from certain accounts. So I, I think we're starting to see the wheels moving, but I think right now I think the government's still in the mode of let it rip because we want to compete against the US in AI and we want AI to boost productivity. I think they still have drugged the Kool Aid on that.

James King (33:56)

I agree. I think the government is still in the mode of let it rip. But I think that if you're on the ground in China talking to normal people, let it rip is not a policy that has legs. People are very, very concerned about losing their jobs to AI.

Alice Hen (34:09)

All right, James, you know what time it is? It is prediction time. What's your view for the future this week?

James King (34:15)

My prediction is related to what I was just talking about, this sense that the march of AI, which is truly breathtaking in China, quite on a different scale from anything I think we can see in the west, is going to have adverse effects. And I think that it could be bigger than what I'm about to say. But I think that when it comes to jobs of graduates, particularly those graduates that will be graduating this summer, I think we're going to see an upsurge in unemployment. And so the unemployment rate among urban 18 to 24 year olds, I feel could exceed 20% at some point this year. This would exceed the peak of 2025 when it rose to about 18.9% in August. And I think this is a very sensitive number in China. I don't know if the Chinese government will announce the number, but if they do, I reckon it will go above 20%, which is. Which is going to be a politically sensitive number, I reckon.

Alice Hen (35:21)

So I will go back to Iran and say, I think in the next couple of months Operation Epic Fury will have failed and will end up with Operation Tollbooth. I'm just making it up as I go along, but I think the Strait of Hormuz is going to effectively be an Iranian tollbooth, and I think the Chinese will negotiate to be at the start of the line because they're going to need to have access to oil pretty soon. That will probably be negotiated bilaterally. I just look at what's happening on the ground and Trump statements in US Resolve and I'm very pessimistic about how this ends and from a military perspective for the US And I think we end up with Iranians stronger and taking control of the Strait of Hormuz and the Chinese negotiating it economically to get access. Pretty soon they'll need it. China Decode is now available on substat. Subscribers get ad free episodes, our exclusive newsletter and a place to engage with James and me and other listeners. Find us@chinadecode.profgmedia.com that's all for this episode. Thank you for listening to China Decode. Make sure to follow us wherever you get your podcast so you don't miss an episode. Talk to you again next week. Sam.