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China Decode: Trump’s Trade War Turns Into a Win for China
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- [00:02]
Alice Han
For a lot of Americans, credit card debt feels like a fact of life. I think it's just important for people
- [00:09]
The Vergecast Host
to understand how credit can work for
- [00:11]
Alice Han
you or against you, why that little piece of plastic has so much power. That's this week on Explain It To Me. Find new episodes Sundays wherever you get your podcasts.
- [00:31]
Preet Bharara
When the political winds change, will there be accountability for those who bent the knee for the Trump administration?
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James King
If these corporations think that the Democrats, when they come back in power, are going to play by the old rules and say, oh, never mind, we'll forgive you, I think they've got another thing coming.
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Preet Bharara
I'm Preet Bharara and this week Ambassador Susan Rice joins me to discuss leadership, decision making and the state of the rule of law in America. The episode is out now. Search and follow Stay tuned with Preet wherever you get your podcasts.
- [01:08]
The Vergecast Host
You don't normally tune into a late night TV show expecting a rigorous debate about free speech, but somehow this is the world we live in. This week on the Vergecast, we're talking about how FCC Commissioner Brendan Carr has turned his agency into the speech police and why it's falling to people like Stephen Colbert and Jimmy Kimmel to fight back. That plus the gadgets we are and maybe aren't getting from Apple and others this year. And the latest in the chatbot wars. On the Vergecast. Wherever you get podcasts
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James King
this year, China is expected to contribute 26.6% of the world's total GDP growth. That will mean that China's contribution to the world's growth will be more than all of the G7 countries put together. And therefore, if China is tweaking its model to rely less on exports to the world and more on boosting consumer spending of Chinese citizens inside China, then that will have big implications for, well, companies that sell in China and also for all countries around the world that import Chinese stuff. Foreign.
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Alice Han
Welcome to China Decode. I'm Alice Han.
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James King
And I'm James King.
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Alice Han
In today's episode of China Decode, we're discussing the IMF warning China to pivot as the US Supreme Court reshapes the trade war, how China's emerging as a global hub for medical tourism, plus how Sea Dance 2.0 could be the future of filmmaking and a threat to Hollywood as we know it. All that is coming up. But first let's take a look at how the Chinese markets are starting. The week the Shanghai Stock Exchange was closed for Lunar New Year, the Hang Seng H share index surged 2.5% on hopes that the US tariff decision will relieve trade pressure on China, but more on that later. The Hang Seng Tech index rose 3.3%, one of its best trading days this year. Chinese chipmaker Semiconductor Manufacturing International Corporation, or SMIC, closed the day up 5% and tech giant Alibaba closed up 3.5%. All right, let's get into it. The International Monetary Fund just released a major report on China with a very, very clear message. The export driven model has run its course. China grew 5% last year, but the IMF projects growth slowing to 4.5% this year and warns the current strategy for China just isn't sustainable. Nearly a third of that growth came from net exports and the yuan is estimated to be significantly undervalued. That combination has fueled a record trade surplus. And rising tensions with the US And Europe now layer in last week's ruling from the US Supreme Court, which says President Trump overstepped his authority in imposing sweeping global tariffs under emergency powers. If parts of that tariff stack come off, especially on China, it could reshape US China trade flows at the exact moment Beijing is being told it needs to pivot inward and boost domestic consumption. James, the IPA tariffs have been struck down. There was a lot of speculation about this in the run up to the Supreme Court ruling, but six, three pretty unanimous in striking down China is a big beneficiary. I was looking into the data. The effective tariff rate has gone down 7 percentage points. How do you think about this ruling and the way that China perceives it and the way that China may even be changing its strategy in advance of that April meeting between Xi and Trump?
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James King
Yeah, Alice, as usual, we're reacting a very fast moving and unpredictable picture. But I think we need to say what we think the most important implications are. And to me, there are three big things you've just mentioned. The first one, the overall impact of this is going to be that the tariffs on Chinese goods being exported to the US will decline by 7%. Now, 7% doesn't sound massive, but it certainly isn't negligible either, especially when you consider that total Chinese exports to the US last year was US$525.6 billion. So 7% of that is a very big number. So that's the first thing. US Consumers are going to be able to buy Chinese stuff at an average of 7% cheaper than they used to. The second big thing, and you've also previewed this, is that this is is likely to reduce the negotiating power of President Trump as he prepares to meet Xi Jinping in their summit at the end of this month and in early April. This meeting, obviously is of vital importance. It's the first visit to China by a US leader since 2017. So we don't know at this stage whether Trump was planning on using the US Tariffs on Chinese imports as a bargaining. But if he was, then of course, this weakens his position before he goes into that meeting. And the third big thing is that it will effectively reduce pressure on China to pivot its economic model. And this is where we get back to the imf, the International Monetary Fund, because as you said last week, they came out with their annual report, and as they do in almost all annual reports on China, they said that China needs to shift its economic model away from reliance on exports to boost consumer spending. And here again, I think the context is absolutely crucial. You might hear that and think, well, big deal, they're just going to be boosting consumer spending and reducing their reliance on exports. But because China is such a huge economic presence in this world, even small tweaks in China's economic models orientation can have massive outside impacts on the rest of the world. Just let me give a bit of crucial background here. This year, China is expected to contribute 26.6% of the world's total GDP growth. That will mean that China's contribution to the world's growth will be more than all of the G7 countries put together. G7 countries, of course, are Canada, France, Germany, Italy, Japan, the UK and the United States. So this single country will supply more growth to the global economy than all of the G7 countries put together. And therefore, if China is tweaking its model to rely less on exports to the world and more on boosting consumer spending of Chinese citizens inside China, then that will have big implications for, well, companies that sell in China and also for all countries around the world that import Chinese stuff. Now, I'm really interested to get your take on this, Alice, but personally, I think this IMF report is simply wishful thinking. I do not think that China will change its economic model. I do not think that China will boost its consumer spending in any meaningful way. And I do not think that China will sort of resale, will backpedal at all on its incredible trade export performance, which last year gave China a record trade surplus of about US$1.2 trillion. So I think yet again, the IMF is whistling in the wind and this is not going to have any effect. It basically stands, I think, as a barometer of the West's impatience with China to change its model. But I don't think it's going to have much of an in convincing China to change its model. But I'd love to hear your take on that.
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Alice Han
Yeah. And by the way, just to give you a data point to completely vindicate what you just said, James, I looked at the January data for electric vehicles in China. We had 286,000 EVs that were exported from China in January. That's up 104% year on year. And now China represents, as of January this year, 49.6% share of total auto exports. And that's again up 13 percentage points year on year. BYD, which is a clear front runner, is exporting twice the amount of EVs that Tesla is at second place. That's just to give you a sense of what is actually happening on the ground. And to your point, James, even if the IMF and Beijing theoretically understand that China needs to rebalance, we have a lot of private companies on the ground that we're seeing in China that need to export because all they're seeing is domestic slowdown, domestic headwinds. So they are finding ways to export to apac, export even to the US with subsidiaries that they've set up, or even to Europe where things again seem to be softening. So to your point, James, I don't think that any of the IMF's advice or recommendations for the Chinese government will really be adhered to, primarily because this is too big of a ship to really seriously steer in the opposite direction. And I think that when we get to the NBC, the National People's Congress, the Liang Hui in early March, we'll probably see a government work report and a five year plan, the 15th five year plan focus a lot on China being a manufacturing high tech, manufacturing superpower. So, you know, what Trump is doing marginally helps China because to your point, James, it reduces the effect of tariff rate on Chinese goods. And Trump so far is still in a dovish mode. He's more interested in his tariff war with the rest of the world. He's put on a 15% global tariff through section 122 again showing that even if AIPO struck down, he's got so many other tools. So I think that this trade war hasn't stopped. He's going to continue to use different instruments. But what is clear is that he wants to have a good photo op ed moment with Xi Jinping in Beijing, in China in early April. So he's going to do everything he can to reduce the tensions in that Relationship tariffs being one of them because effectively the 10% fentanyl tariff has been struck down by the Supreme Court ruling. And then we'll have to see going into the meeting whether or not soybeans are on the table as well. But to your point, this is coming at a good time for China. Meanwhile, China is negotiating better deals on the trade front with Canada, with the uk, with Europe. Merz is actually going to be there in a few days. So we'll have to see what the German Chancellor says from his high level meetings, which is the first in many years from a German Chancellor going to China.
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James King
Yeah, I think so. And I was just doing a little bit of research, Alice, on whether or not China could actually boost consumer spending. Obviously the whole Fortune 500, the biggest companies in the west, they all want to sell into China. They're all dreaming of a market of over a billion consumers. So this is a big live topic. But it seems to me that the optimism, as I think we both agree, is being overblown. And from what I was able to ascertain, basically the problem is that property prices in China continue to fall and also property transactions in China continue to fall this year. Property transactions. So property sales are due to fall another 10 to 14% compared to last year. And the crucial way in which this connects with Chinese consumer spending is that first of all, most Chinese people have put most of their money into property. So they feel rich or they feel poor depending on how much they perceive their flat or their apartment or their house to be worth. The second crucial aspect is that a lot of Chinese families, they borrow against the value of their house in order to spend on something like their kids education or some other crucial service that they require in. And so if the value of your house is falling, you can't borrow as much as you did previously, or you don't want to borrow as much as you did previously. And therefore you're much less likely to spend on things that you either want or you think you need, like education or healthcare or something like that. And though all of those things fall into the general category of Chinese consumer spending. So I think that, that until we see a rebound in China's property market, we are unlikely to see a rebound in China's consumer spending. And according to the best predictions out there, we're not likely to see the Chinese property market bottom out until about 2027 at the earliest. Unless you've heard something different.
- [14:34]
Alice Han
I mean, we ran regressions and did research on this, I would probably say 27 to 28 I think we're probably going to seek prolonged contraction in the real estate sector. And I don't think crucially we're going to see a lot of policy support at this NPC meeting coming from the government because frankly, they wanted this to change. They wanted this asset bubble to break and they're more interested in boosting investment and growth elsewhere in the economy, namely the manufacturing sector, which leads back to the beginning of this discussion. But to your point, just so people get perspective, Chinese households used to have around 2020 to 2021, 70% of their wealth tied in real estate. It's now gone down to 60% just purely because people are buying less. But also prices have gone down. And for reference, only 5% is in equities and 25% is in savings deposits. If you look at America or many of the developed countries, that ratio somewhat flipped whether it's more equities and heavy as opposed to real estate. So this is a structurally sui generis phenomenon in China, where household consumption is so heavily associated with real estate prices. Okay, we'll be back with more after a break. Stay with us.
- [15:50]
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- [16:52]
Today Explained Host
In the wake of the release of millions of documents related to the Jeffrey Epstein case, the rich and famous are finally feeling some pain. But even with corporate resignations here, and with former Prince Andrew being arrested in the uk, the question remains, how did Jeffrey Epstein remain a thriving member of the elite for decades when everyone seemed to know what he was up to?
- [17:14]
Today Explained Guest
I Don't think you could be friends with Jeffrey Epstein, whose MO was obviously having sex with young girls, even as Trump said, on the younger side, and
- [17:22]
Today Explained Host
not know his MO untangling the Epstein conspiracy. That's this week on Today explained, every weekday and now on Saturdays.
- [17:37]
Alice Han
Welcome back. For years, Western travelers have raved about China's high speed rail and glittering skylines. Now some are raving about its hospitals. A viral video from a British patient who flew to Beijing for stomach pain and says she was tested, diagnosed and treated for about $400 has sparked a bigger conversation.
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British Patient
I landed in Beijing yesterday and I'm here.
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Alice Han
It's very blue.
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British Patient
I saw the specialist this morning. She was very patient. She was really nice. She could not believe that I'd had symptoms for like one to two years. She could not believe that it taken so long for anything to happen. Obviously, I couldn't explain or go into
- [18:14]
Alice Han
the whole why are some foreigners finding faster, cheaper care in China than at home? And as we discussed in the previous segment, China is under pressure to rebalance its economy away from exp and towards domestic consumption, in particular the services sector. Medical tourism is increasingly part of that shift. Last year, Chinese hospitals treated nearly 1.3 million foreign patients, a sharp post pandemic jump. And under the government's Healthy China 2030 initiative, Beijing is actively promoting a mix of modern medicine and traditional Chinese medicine to attract both regional and Western visitors. But there's a tension. Public hospitals are already stretched and some Chinese citizens worry foreigners are benefiting from taxpayer funded care. James, you've been following this closely. What do you make of this rise in medical tourism? And is China going to turn into a Korea or a Turkey in the sense that a lot of people around the world are just going to go there for cheap operations in healthcare?
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James King
The short answer is I think it absolutely will. And the UK woman that you mentioned whose video has been on Facebook and probably on other platforms, really struck a chord to me personally, Alice, because I live in southeast London. It's not a particularly smart part of the town, but it's a decent place. I haven't been able to get an appointment with our National Health Service. That's the free healthcare in the UK for a couple of years.
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Alice Han
You've been on the wait list for a couple of years.
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James King
For a couple of years.
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Alice Han
Oh, gosh.
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James King
Just for sort of routine tests. I mean, I hope nothing major. And so when I listened to the video from this UK woman that you mentioned, I was really struck. She's there in Beijing. She's on day One. And she said, the first thing she says to the video is, I couldn't get an appointment for over a year. So I flew out to China to see somebody, and I've been seen immediately. So when I heard that, I thought, well, maybe I need to go to China to see a doctor. The other thing is the costs that you mentioned are really very reasonable. I mean, you mentioned it was about $400. That's £298. But for that, she got an endoscopy, she got blood tests, she got an electrocardiogram, a biopsy, she got various drugs. She had consultations with the consultants at the. And it all happened immediately. It was like she went in the next day, there were tests. The day after that, it was tests. And she says, this is phenomenal. And I have to tell you, Alice, well, you're in the uk, too.
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Alice Han
It's a broken Britain.
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James King
It is. I'm afraid we have to be honest about this. It is phenomenal that you can get that type of healthcare in China that quickly at that sort of price. So I think, in answer to your question, will this create a flood of foreigners from probably all over the west heading to China for medical treatments? I think the answer has to be yes, and we're already seeing it now. I would say, I think people all over the world are gonna be looking at this, just one extra little statistic here. The Chinese Hospital association has said that according to Incomplete statistics, about 850 hospitals and clinics in 57 cities across mainland China are offering international medical services. That was in 2024. So by now it could well be quite a bit more than that. But, yeah, I mean, this is an incredible trend, don't you think?
- [21:56]
Alice Han
Alice, I have so many thoughts about this. Where do I start, James? I start with broken Britain. When I first moved here two years ago from the States, I thought, you know, you can't get worse. I'm Australian. You can't get worse than American healthcare. But I actually found worse, which is British healthcare. What I've realized is that until you have an emergency or cancer, you basically don't get seen by a doctor. And I think that, James, a lot of your doctors in UK have just moved to Australia, where they get paid better, they get more vitamin Ds and sunshine. But to your point, what's been interesting, a couple of threads that I want to pull on. Number one, so in China, there is a culture which I don't think is very familiar to a lot of Westerners. It's called Yuezi. So what Yuezi means to do a 30 to 40 day confinement. It's a postnatal confinement after childbirth where they effectively treat the pregnant woman like a princess in a spa. All her meals are made for her, she has to do particular exercises, she's not allowed to leave the house, hence it's confinement because she could catch a cold or be exposed to bacteria. So she, she stays in inside a hospital or a spa clinic and she's given massages, the baby's taken care of, she's fed well, there's a lot of, in Chinese we call it bu yang, a lot of nutritious soups and food that are given to her, a set menu. So she effectively gets to check into a clinic. And I've got girlfriends who've been doing this. They pay probably a thousand to two thousand USD. There are some offerings of this in the US that I think ten times that amount, I mean just factoring in labor costs alone. So I could foresee this being a big trend where not just Chinese or ethnically Chinese people go to mainland China, have a baby there, check into this postnatal clinic and then get treated to great service. That could be something that I think could be very, very trendy to your point. But if China can get the quality of service right on top of much cheaper labor costs and medical services costs, I think it's a no brainer that China becomes like a turkey or South Korea. And as I was doing research, what I found was interesting was that Hainan. I didn't know if you know this James. The Hainan island is actually listed by the State Council of Beijing as a special medical zone. Now we all know about special economic zones like Shenzhen for instance, but this is a special medical zone in Hainan. It's a first of its kind and basically they allow international travelers, foreigners to come in relatively easily and get cutting edge foreign approved medical treatments and equipments and drugs, some of them in stem cell research and cochlear implants to name a few. So this is an interesting direction for China and it fits well with what we've discussed previously James, how they're really building up tourism, they're really building up music tourism, now medical tourism. It's all part of an effort to get, get the services sector more booming because you know, China traditionally does not have a strong services sector.
- [24:50]
James King
Yeah, and just a quick note on that. I'm actually going to Hainan next month. I think it's visa free. So you can go in there. Well it certainly is for UK people. You can go in there without getting a visa. But the other thing is just to add a note of caution because my own experience of Chinese hospitals was not that great. I had a colleague and we were on a business trip, a Chinese guy, and his lung collapsed while we were on. And I took him straight to hospital because it was an emergency. And when we got there, we were told that he could have the standard treatment, which meant that he'd have to wait a couple of days. That was clearly not going to be an option given the fact that he was gasping for breath. Or he could have the express treatment, but that cost 10 times the amount. And it seemed to me clearly that there was corruption going on there, that they knew that we were in a desperate situation. They could see that I was from a big foreign company and they wanted the money. And of course I of course paid up, because when your colleague is gasping for breath with a collapsed lung, you don't have an option. So I would just add that in there. You know, Chinese hospitals are not paragons, put it that way.
- [26:05]
Alice Han
Yeah. Which province was this, James?
- [26:08]
James King
It was in Beijing, actually.
- [26:09]
Alice Han
It was in Beijing. What year was this?
- [26:11]
James King
Oh, it would have been about 10 years ago now, so quite a while. So maybe things have changed somewhat, but think I. I can't really believe that all practices like that will have changed.
- [26:20]
Alice Han
Yeah, I agree. I'm sure that there's a level of corruption and you know, I've had personal experience with my grandparents who are still in Shanghai and elderly. They've had largely good health care, but I've also heard some horror stories from some of their friends, anecdotally. So to your point, James, it's not all peaches and cream. And certainly I'm sure that there are tons of stories of things not working out as well, but I think more broadly at a macro level, this is an interesting trend that I could foresee coming up in the Five Year Plan. We've already got the Healthy China 2030 initiative that's been launched in order to turn China into international medical tourism destination. So I just foresee a lot of top down initiatives to try to make China a more attractive place for medical tourists. But the market is expected apparently to grow from $1.2 billion in 2025 to $3.4 billion by 2035. And last year, Chinese hospitals received 1.3 million foreign tourists and that was up about 75% from 2022. Although arguably that would make sense given 2022 was the end of zero Covid in China. Okay, let's take one last quick break and stay with us.
- [27:34]
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James King
heard you nine years of bring back the snack wrap and you've won. But maybe you should have asked for more. Say hello to the Hot Honey Snack Wrap. Now you've really won. Go to McDonald's and get it while you can.
- [29:20]
Alice Han
Welcome back Sea Dance 2.0, a powerful new AI video model from ByteDance. The company behind TikTok is generating viral clips of Tom Cruise and Brad Pitt brawling on a rooftop and Donald Trump battling kung fu masters in a bamboo forest. None of it is real, yet millions are watching it as if it is. The tool can create hyper realistic scenes in just minutes thrilling some and alarming others. Paramount Pictures and the Walt Disney Company have sent cease and desist letters. SAG AFTRA is pushing back and critics warn it could turbocharge deep fakes and just completely upend Hollywood. Meanwhile, China's rapid AI push is fueling what some are calling a new tech space race with Washington. James, did you watch the video of Brad Pitt and Tom Cruise doing kung fu?
- [30:10]
James King
I spent a big chunk of this afternoon just being absolutely amazed by this technology playing around with Sea Dance 2.0. It is just mind blowing. I mean, I think people who live in Silicon Valley and Hollywood and Los Angeles, San Francisco, all of those places, they know about this already. But I think a lot of the world has not yet really cottoned on to how good this technology has become. And you know, Sea Dance 2.0, which is an app created by ByteDance, which is the Chinese company that controls TikTok as well, is one of the leaders. But there are others as well. Google DeepMind has got an app that's equally impressive. I would say I was playing around with that too. Basically, Sea Dance 2.0 can generate cinema quality video, complete with sound effects and dialogue. And it can do so just after you give it a few written prompts. So you would tell it, I want a video of in the example you gave Brad Pitt fighting Tom Cruise. I want it to look realistic. I want it to look a little bit like X film or Y film that you remember or hazily remember and then it does it for you. I was also watching videos of waves crashing onto a little boy on a pier. I can't remember what film that reminds me of, but I'm pretty sure that's another echo from a famous film. And again, it was incredibly lifelike. So it seems to me, Alice, we're living in a world now where these binary questions are coming thick and fast. You know, like you said in your intro, Hollywood is in a panic about this. Could this upend Hollywood? That seems to be an incredible question to be asking, but. But it has to be a justified question given the speed of the development of Sea Dance 2.0 and the other American alternatives. The last thing I'd say before I get your take on it is of course the Chinese AI app costs much less than the US AI app. We're seeing this across the board when we compare Chinese AI with US AI. Just to give you the numbers here, Sea Dance 2.0 costs roughly 60 US cents for a 10 second generation of your kind of standard video format. And Google VO 3.1 costs roughly two and a half US dollars for the same 10 seconds. So, you know, obviously the Chinese app is cheaper, but I don't know whether that's gonna be a big differentiator. One of the things that fascinates me is what about the legal situation here? Going to be a big backlash from Hollywood. I can't imagine that this enormous American film industry is just going to roll over and let this happen. What do you think, Alice?
- [33:12]
Alice Han
100% agree. I think that it's deeply concerning for these traditional content creators, the cinema studios, the streaming platforms, because their copyright and IP are being violated illegally. Now, whether or not they can crack down is something that I'm not so sure of, that I think that you would really need the pressure of the US to weigh in on this debate. I don't think that Trump is incentivized anytime soon to do this. He probably hates most of Hollywood anyway. But zooming out a little bit, what I think is interesting is that the Chinese government clearly has an initiative. A couple years ago they started doing AI regulations really at the forefront and inspired in part by GDPR from Europe to go after deep fake AI technologies, they actually saw that this was coming down the pipeline and that they needed to actually put in these guardrails. So the Cyberspace Administration of China, which is basically the large cybersecurity authority, has penalized more than 13,000 accounts and removed hundreds of thousands of posts that were propagating this kind of AI generated content illegally and unlabeled fashion. I don't see America doing this. Maybe the Europeans will pretty soon. Europe seems to be pretty good at regulating or at least setting up guardrails for technologies. America I'm less certain of. So my concern is that we are giving China reign in creating the wild west of this unregulated AI content outside of China that infringes upon other traditional companies and media platforms. IP as I look to. I don't know what you watch nowadays, James, but there's so much computer generated content and AI slop even in films nowadays, let alone TV shows. So now I really feel like the difference between a Sea Dance 2.0 generated video and what I see on the screen is getting far smaller as time goes by.
- [35:05]
James King
Yeah, I mean, I've just been having a look down a list of some of the actions that some of the big US companies are taking. So Disney, Paramount, Warner Brothers and Netflix have all sent individual cease and desist letters to ByteDance. That doesn't seem like a legal sanction, but it sort of implies that if they don't cease and desist, then there might be some kind of action that is taken by those big American companies. And in those letters, those big American companies are accusing bytedance of quote, systemic infringement and treating their intellectual property as a quote, free public domain clip art. So you can see that the big names of Hollywood are really limbering up here. There's been several other actions taken as well, but I think we're at the early stage of this. It seems to me that this is going to be a big bust up in the courts.
- [36:07]
Alice Han
Yeah, they just don't have any leverage on China, do they, James? I mean, China has as of really 2016 onwards, really pushed out Hollywood. Apart from Zootopia more recently, most of the highest grossing films in China. China, Chinese, they're not coming out of Hollywood. And more than that, they don't really have the legal authority to get bytedance to step down. The only real pressure they can do is to pressure some of the shareholders and to lobby Congress and the Senate to pass some kind of a bill. But that would require a more thoughtful debate about deepfake technologies. I, personally, I don't know how you feel, James. I'm worried about this Pandora's Box that Sea Dance 2.0 and Veo and Soar are coming out of OpenAI and Google are creating because I don't think we're far off from a place in which people could be using our content online and creating fake videos. And if we don't do a regulation of this, it's really very much the Wild west. And that keeps me up at night sometimes. I don't know. What do you feel, James?
- [37:08]
James King
Yeah, I mean, I feel the same. I hadn't actually thought about myself in this regard. But I mean this, this basically does the work of all creators everywhere. So it is a big concern. And I think what we've got here is a situation in which the technology is advancing quicker than potential legal sanction against it. And when you add into that the complexity of different geographies, such as you've just mentioned, China has different rules from the us it doesn't necessarily, necessarily abide by what a court may find in Los Angeles or San Francisco or New York or wherever. And so if you want to use legal sanction against Chinese companies, you're facing a very different process from what you would be used to in the U.S. meanwhile, the technology is charging ahead and, you know, all kinds of intellectual property is being used to create these videos. The videos themselves are amazing. They look incredible to the consumer. And do consumers really care about the providence of the videos that they're watching? And what about all of the global platforms that these videos appear on? Who controls them? What about the jurisdiction for all of those guys? So we're facing an incredibly complex world bolted to a technology developing at warp speed.
- [38:36]
Alice Han
Yeah. I don't know if you've seen this, James. I highly recommend it. One in particular that strikes me as very Chinese that has been somewhat viral. There's a video of Kanye west in imperial Chinese attire doing a very traditional Chinese music video. For people who watch a lot of Imperial Chinese dramas, they'll appreciate this. The tropes in it and his wives, including Kim Kardashian, are in it, supposedly either his concubines or his queens in this music video. But it's crazy. The amount of content that I'm seeing on Chinese social media, Shaohongshu and Douyin, which is China's TikTok and Instagram, of stuff that is coming out of Sea Dance 2.0 or just AI generated content. It's really, really dazzling to see, but also deeply worrying. And I hope at least that there will be more pressure put on governments around the world to get their act together because the technology is already here. The barbarians are the gates.
- [39:33]
James King
Very much agree, James.
- [39:35]
Alice Han
Here is our favorite part of every episode. Prediction time. What is your prediction for the coming weeks?
- [39:42]
James King
Well, given that we don't script these conversations that we have, Alice, I think we kind of touched a little bit on my prediction earlier. I think 2026 will be the year of litigation by Hollywood towards Chinese AI video apps. And I think these actions will fall behind the technological advance of the Chinese AI video apps. That means the lawsuits will pile up while the apps march ahead and the film industry will be thoroughly disrupted in its wake.
- [40:16]
Alice Han
It kind of reminds me of, remember back in the day you had those Chinese piracy DVDs. I remember as a kid of the 2000s, every time I went to China, I would just pick up, I probably shouldn't have made this, but they were just selling this on the street for 1 CNY, 1 Yuan, 1 Renminbi. These pirated DVDs of people that literally just got into the cinema and just videoed it. And really Hollywood couldn't do much about it until really China cleaned up its act. The government started cracking down on piracy, if you recall. So like, when I think about the future pathway, I mean, I agree with you, James. I think the only way out of this is if there's a government related set of regulations to really clamp down.
- [40:54]
James King
I agree. Maybe Trump and Xi Jinping will talk about this, or maybe their officials will talk about this when they meet at the end of this month and in April. You know, it really is a big topic. I mean, we're talking about the future of Hollywood. I mean, there is no more iconic word probably in the world than Hollywood. Now we're talking about its potential extinction. I mean, it's just extraordinary.
- [41:16]
Alice Han
Yeah, this is not my prediction, but I could foresee some kind of statement about AI Corporation, even though nothing comes out of it substantively between Trebuchet and China in April. So my prediction is more markets related. By the time we air this, the mainland stock exchanges will have opened. I think we're probably going to to see pretty good performance in Chinese mainland stocks in advance of the NPC meeting on March 4th. And that's primarily because in the lead up, historically, in the lead up to the NPC meetings, we've seen stock markets actually rise. And so I think that we'll see a similar momentum happening in advance of that NPC meeting with a lot of market anticipation about some of the announcements related to hardware, especially semiconductors, as some of the upstream and downstream providers to the semiconductor industry as well as AI. All right, that's all for this episode. Thank you for listening to China Decode. This is a production of Prof. G Media. Our producers are David Toledo, Eric Janikis and Ness Smith Savadoff. Thank you to Katherine Dillon, Drew Burrows, Billy Bennett, Dan Shalan, William Flynn, Jesse Millwood, Gil Espinoza, James Patton, and Isabel Kinsel for production help every week. Make sure to follow us wherever you get your podcast so you don't miss an episode and talk to you again next week.