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James King (1:49)
the White House accusing China of industrial scale theft of intellectual property from US AI Labs. This is different. And on the China side we've got the Chinese government banning the acquisition by one of America's biggest companies, meta of a promising AI company that was founded in China but is now based in Singapore. So I would say all of this to me means that the rivalry has entered a new phase.
Alice Han (2:24)
Welcome to China Decode. I'm Mat. I'm Alice Han.
James King (2:27)
And I'm James King.
Alice Han (2:28)
In today's episode of China Decode, we're discussing the tightening and increasingly combative race for global AI supremacy, why US Banks are scooping up Chinese currency in offshore markets and the growing industry of pretend to work offices in China. 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. The markets open the week with slight gains, the Shanghai composite closing up 0.16% while the Shenzhen component was up 0.37%. Industrial profits jumped 15.8% in March, year on year, with enterprise profits growing by over 15% in Q1. That growth comes in spite of the shocks brought on by the war in Iran and is largely attributed to the booming AI and chip industries in mainland China. The high tech manufacturing sector alone saw a 47.4% gain in profits in Q1. Stock market standouts included More Threads up 8.5% and SMIC A shares up 5%. Fibercom Wireless and Layard Optoelectronic Company were both down over 12% and tech giant stocks were broadly mixed, with Tencent ending the day down 3% and Baidu up 3.5%. All right, let's get into it. As the US and China barrel towards a high stakes summit next month, the fight over artificial intelligence is getting a lot more aggressive and a lot more complicated. Just today, China has announced it will prohibit foreign investment in Manus, a Singapore based AI company with Chinese founders, which means Meta's December acquisition of the company will have to be undone. Experts are saying the move could hold other Chinese entrepreneurs, especially in the AI space, from seeking out foreign partners. Meanwhile, the White House has now accused China backed actors of running industrial scale campaigns to essentially siphon off the capabilities of American AI labs, querying systems millions of times to replicate how they work. It's the kind of claim that is hard to definitively prove, but if true, it suggests the global AI race isn't just about innovation, it's about extraction. And here's where the timing gets really interesting. Just as those accusations ramp up, Chinese startup Deepseek has rolled out a powerful new model, built cheaper, released to open source, and quickly closing the gap with US AI leaders. What some are calling China's deep seek moment is starting to look less like a one off and more like a real strategy. James, we talk a lot about AI on this podcast and with good reason I think. I think some of the news that has come out seems to suggest that there is an escalation now in this AI conflict between the US and China. And it's not just driven by Washington and Beijing. I detected in China was just there for three weeks consternation about AI competition, but also about the politics of Silicon Valley. I want to get your take really quickly on whether or not AI is going to be perceived broadly as a threat, not just by American legislators, but also by Silicon Valley.
