← The World with Richard Engel and Yalda Hakim
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- [00:00]
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- [00:46]
Yalda Hakim
Hello, it's me, Yalda Hakim, and I'm here in London. Welcome to the world. This is a special edition of the World. Richard isn't here with me this week. He's taking a well earned break. But we have a special guest, a gentleman by the name of Carl Chan. And Kyle is a foreign policy specialist working for the Brookings Institute. And his main focus is the race for AI and foreign policy when it comes to China. He has been tracking Chinese technological progress and the almost cold war, the cold tech war that the United States has been in with China. And frankly, when it comes to the race for AI, there are only two superpowers, and that's China and the United States. And we broke all this down with Carl Chan, and I hope you enjoy my conversation with him. Karl, thank you so much for joining us here on the world podcast. You know, I've been really curious to talk to you for some time, but I wanted to begin by talking about China and where China is right now. I first went to China in 1997. I was a young school student and I was there on exchange for a few months. I went to Shanghai, Beijing, and at the time there were more bicycles on the road than there were cars. There was one student whose father had a car. And, you know, everyone sort of gathered around, around this car. So I just want you to help our listeners understand China's evolution in the last few decades, where it is today, and the fact that it is now considered one of only two real serious AI superpowers in the world alongside the United States.
- [02:50]
Carl Chan
Yeah, that's an amazing memory that China I know well. I also remember being there at a time when I did an internship in the middle of Beijing. And in the middle of Beijing, it was a sea of bicycles. That's how a lot of people got to work. And I mean, I remember all sorts of things like people towing carts up the highway backwards. I remember back then the subway system in Beijing was just starting to get built basically, and it was just a very different China. It was The China of mostly low wage manufacturing. It was the China of outsourcing for a lot of the products that we buy in the west, it was the China of textiles and clothing and toys. And I think for a lot of people that is still the image of China that they have. What has happened over time is you've had now multiple decades of high speed economic growth topping the double digits for quite a long period of time. You have perhaps even more important than the sheer headline growth numbers, a shift in what China is doing. It's no longer just about those cheap toys and clothes. It's about moving up the technology ladder and moving up the value chain. Going into areas like automotive components and then the cars themselves, going into clean technology like first solar panels and then moving into solar cells and then down to polysilicon itself. It's now branched into all the areas of technology that we think of as now cutting edge today, like commercial space. Think about reusable rockets like SpaceX. Now China's trying to do that. They are working very fast on biotech. And you see a lot of Western firms licensing drugs from Chinese biotech companies. And then of course in AI and robotics, you see Chinese AI labs now going toe to toe with their competitors in the US And a situation where in the world today you really have two AI superpowers, the United States and China.
- [05:11]
Yalda Hakim
Yeah, Kyle, when we talk about that particular China, it was also a China that was fascinated, endless fascinated by the west and in some ways wanted to emulate, learn the curiosity about the west and what it was and certainly the United States and the pop culture around the United States. You know, and now it feels like there's a level of confidence there. It's not about emulating, it's about innovation, creating their own. And not necessarily, you know, being the China that simply copied, but now they're a China that they're sort of creating their own devices, their own products. Just talk us through that space a little bit.
- [05:57]
Carl Chan
Yeah, so, I mean, many of my friends growing up in the same generation in China learn English by watching the show Friends, the hit American TV show. And yeah, American culture was so dominant globally and that included in China. And a lot of Chinese policymakers also look to the west, to the US in particular, to try to learn what's the secret sauce for Silicon Valley. So the west was seen as the model, and now the time has changed quite a lot. There is a new confidence in China that they can produce their own sort of cultural products. They have their own soft power, not just within China, but on the global stage. So you see everything from the rise of Chinese video games to toys like the Labubu, which has really taken. You can see also just a strong interest in Chinese technology. Like Chinese electric cars have really taken the world by storm. And you have influencers from all over the world flocking to try out the latest Xiaomi sports car and compare it to a Lamborghini or a Ferrari. I think that soft power confidence has emerged more recently and I think now China feels more. More assertive in being able to say that they don't need to just look to the west anymore. They have their own way of doing things and they feel like they're able to hold their own.
- [07:26]
Yalda Hakim
Yeah, and you talk about those exports, you know, but equally, when I went through China, just, you know, transiting through, I was going to Australia over Christmas and what I found in Shanghai was my phone didn't work, my WhatsApp didn't work. You know, none of the applications that I had worked. And I was, I was terrified about, you know, using my phone in the 10 hours or so that I was at the airport because I was, I was worried about it being surveilled or people accessing my phone. So while on the one hand the Chinese market is very much open to the rest of the world, on the other hand, China still feels on some level closed off from the innovation that the west has and that we use on a daily basis.
- [08:13]
Carl Chan
That's right. This is really important. We have now a bifurcated tech ecosystem in the world. There is the tech ecosystem that the rest of us use. Google, Instagram, Wikipedia, YouTube, all these things that are ubiquitous platforms outside of China. But then many of those are blocked in China. And then within China you have sort of Chinese equivalents. WeChat is China's answer to WhatsApp. It's sort of their super app that allows you to do actually a whole bunch of different things. And that's their primary form of communication. They have their own sort of E payment systems like Alipay and WeChat Pay. They have their own Google, which is supposed to be Baidu. They have a lot of their own equivalents. But you're right to point out that there's sort of this disconnect on purpose, created by policy, created by real technological barriers. And so you have this strange co evolution on the one hand, in some ways between these two ecosystems, but also a divergence where China has created something separate, if not in parallel with what the rest of the world is doing.
- [09:30]
Yalda Hakim
So we're talking about 1.4 billion people using their own systems and not necessarily using what the rest of us in the rest of the world might use. I guess what I'm trying to get at is, you know, we've seen how that ended for Jack Ma, for example. Jack Ma, who of course was the founder and CEO of Alibaba. In many ways, Beijing thought he got too big for his boots, and there were big questions around whether he was under house arrest at one point, and then he was banished. Essentially, he was living out of the country for a little while. How much freedom do these tech companies within China have, you know, in comparison to, say, how Silicon Valley operates and the fact that they can innovate, they can create, they can, you know, say no to the government if, you know, the Pentagon wants them to provide some form of technology for them. I mean, even within Google right now, for example, there is an almost an uprising from the staff saying we don't want certain aspects of our technology used, you know, as part of military hardware or sold to Israel, for example. You know, there is that conversation being had, and yet it's unlikely that we would ever see that kind of conversation being had within China.
- [10:45]
Carl Chan
That's right, yeah. I think a lot of folks in the Chinese tech community are looking at what's happening in the US and are quite astonished by, for example, Anthropic's pushback against the U.S. pentagon and the sort of clash between a private company and the American federal government. I mean, that would be unthinkable in China where if there was any kind of tension, it's clear who holds the cards, essentially, and who has the real leverage, and that would be Beijing, the Chinese government. And so from that tech crackdown in China earlier, where Alibaba ByteDance were crossing some lines as perceived by Beijing, and so Beijing kind of pushed back. And since that crackdown, Jack Ma had to leave the country basically for a number of years. And a lot of the tech founders were very careful about what they said, careful not to be critical, careful not to push back too hard. And now what we see is Chinese tech founders, including the heads of Chinese AI companies, are outspoken in terms of being advocates for their products, being the number one salesperson for their products or services. But they are very careful to make sure that their companies and their statements align well with the broader goals of the Chinese central government.
- [12:18]
Yalda Hakim
How much does that then sort of put them at a disadvantage in terms of being able to be enterprising if ultimately everything you're doing is to service the Chinese government? Are we ever likely to see then sort of an Elon Musk type character emerging within China?
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Carl Chan
Yeah, I would not bet on that. I would not bet on an Elon Musk type personality emerging right now in China's tech ecosystem. I think overall there's this interesting balance that I think the Chinese government, the Chinese regulators are trying to strike because on the one hand they certainly want a high degree of control. They do want to make sure that certain ideas, certain kinds of criticisms of the government, that those are sort of infused into the Chinese tech ecosystem. At the same time though, they're also quite aware of the need to provide enough space for innovation. They know that if you just have a sort of top down system where the government basically dictates what the companies do, which is sort of China's old model that really can only get you so far, especially in a fast moving space like AI, where you really need to adapt quickly. And the central government bureaucrats, they might not know exactly where the technology is heading or where to focus their attention, but the technologists themselves at the Chinese AI companies know and so they have to have enough room to be able to experiment and to try new things. So I think everyone's sort of doing this balancing act, the entrepreneurs, the government officials, trying to emphasize innovation and progress, but then doing so in a constrained manner.
- [14:03]
Yalda Hakim
Yeah. And we know ultimately that the Chinese government are always playing the long game. Right. And this is the difference between the democracies, that they can have a, you know, 50 year plan and work towards that. And I just wonder then, in a race like this, because it is a race, do the Chinese believe that they are able to surpass the Americans at some point? And is that something that the west, the United States should be frankly worried about and losing sleep over and thinking about all of the time?
- [14:38]
Carl Chan
I do think that there is a longer term approach, I think that's right in China for AI. I think what will be really interesting is again this kind of balance between wanting to promote AI development overall in the long term. And I do think that the Chinese government, they seem quite committed to this being sort of the new information technology revolution. The new AI revolution is something that they're sort of all in on. At the same time though it is shifting so quickly and they need to update their approach. An example of that is actually earlier China had previously focused more on machine vision and voice recognition in AI and for a while they felt like they were ahead. And then you get ChatGPT and then you have a sudden paradigm shift. Suddenly it's about Large language models which are different from what China had focused on before. And you have a scramble from both the government and from the private companies, including the startups, to try to capitalize on this new shift and to adapt. And along the way you have some players losing out and you have new players emerging. So I think that will be the most interesting thing to watch in China, how you can continue to play the long game, as it were, while still being flexible enough with this fast changing technology.
- [16:07]
Grainger Announcer
When you manage procurement for multiple facilities, every order matters. But when it's for a hospital system, they matter even more. Grainger gets it and knows there's no time for managing multiple suppliers and no room for shipping delays. That's why Grainger offers millions of products in fast, dependable delivery. So you can keep your facility stocked, safe and running smoothly. Call 1-800-GRAINGER Click grainger.com or just stop by Grainger for the ones who get it done.
- [16:48]
Yalda Hakim
You know, Kyle, there is no doubt that China is a formidable enemy, competitor, whatever you want to call it, of the United States. But they also need each other. There's a co dependence and both sides are trying to almost be less dependent on the other. But when you think about China's monopoly over rare earth minerals, for example, something they've worked on and built on when the rest of the world wasn't even paying attention decades ago. And then you think about the monopoly that the United States has when it comes to chips for. And so there's almost like despite their competition, despite the war of words or the trade wars that we're seeing, they need each other and there needs to be some form of truce. So we almost saw that with that recent trip that Donald Trump made to Beijing. But just help our audiences understand, you know, we throw these words around like chips like rare earth minerals, just help our audiences understand what they're used for, why they need it, the fact that they are everywhere, all of the time, everything, every device we use, everything that we own and have.
- [17:54]
Carl Chan
So for the United States, this is about AI chips, especially from Nvidia, which are regarded as the best in the world and are loved by Chinese developers. I mean, when you talk to any Chinese AI developer, their preference, if they could, would be to buy the best AI chips from Nvidia and then just run with it and develop your own model. But they can't do that because the US is restricting their access to those chips on purpose because the US does not want to see Chinese AI get ahead of the US Essentially on the Chinese side, they have their own choke points that they can leverage. And in particular, rare earths is a really, really powerful one. So rare earths and the magnets that are made from them are used in everything from basic consumer electronics to the global auto industry. They're actually also used for the semiconductor supply chain. So these supply chains actually overlap and are sort of nested within each other. They're also really important for the defense industry, for military jets and missile systems. So China decided to hit back, as it were, against recall this time last year, Trump imposed Liberation Day tariffs and got into a sort of trade war with China, escalating tariffs further and further to a point where there was almost an effective embargo on Chinese products going to the US And China retaliated by taking advantage of its own control over rare earths, which over 90%, over 95% of refined rare earths comes from China and Magnus as well. And China basically said that if the US Was going to raise tariffs, China could only match them so far. But China could do one step better, which was these export controls on rare earths. So you're right to point out that now, with Trump's recent visit to China, this was a moment where you have the two countries both wielding significant leverage over the other, trying to find a equilibrium or at least a temporary detente in this whole process to avoid the escalation that we saw this time last year and to give each other space and to do their own thing. And the question is now both of them have these sort of economic supply chain weapons at their disposal, will they try to use them again?
- [20:19]
Yalda Hakim
And Donald Trump has said, you know, that, that race for rare earths, or trying to make the United States a bigger player in that space so they're less dependent on the Chinese for it. He said that it, you know, they could catch up in the space of two to five years. Do you think that's just Donald Trump, you know, and how Donald speaks rather than what the reality is on the ground that we're talking. How can that possibly be two to five years when China's been at this for decades?
- [20:48]
Carl Chan
Yeah, I think this will be a years long process for the United States. I mean, two years is sort of unthinkable. In five years, there might be substantial progress. Keep in mind, it's not a black and white issue. It's not like the US can flip a switch at some point and suddenly be not dependent on China for this. It will always be a matter of degrees and also depend on the specific rare earth elements themselves. There are heavy Rare earths, there are light rare earths. They're not always found in the same place or refined in the same way, and they're used for different applications. So it's quite a messy situation. I do think that, if anything, the US Is more motivated than ever to try to do this.
- [21:31]
Yalda Hakim
One of the other things that many people thought that Donald Trump would raise with the Chinese leader was the war in Iran. And we know that behind the scenes, the Chinese have quietly worked with the Pakistanis to put pressure on. On Iran to come to the negotiating table the first time round. And we know that relationship that the Iranians have with the Chinese. But I just wonder, from your perspective, how do you think that Xi Jinping China is viewing this almost quagmire that the United States has managed to get itself into? Another US President getting caught up in a war in the Middle east, the sort of quicksand that is the wars that they get caught up in?
- [22:12]
Carl Chan
Yeah. I think in some ways, China is happy to see the US Shift attention back to the Middle east once again, to be dragged down by a war of its own choosing and to shift its focus away from China. And so this takes some of the pressure off, and if anything, it actually turns the tables and makes the United States then more dependent on China. So in a number of ways, one is that the US now feels like we need to ask for help basically to reopen the Strait of Hormuz. And Trump has looked to Xi Jinping as a potential source of leverage to try to influence Tehran to change its tune. I think that that will probably not yield very much, because China's approach to this whole situation has been to basically say some nice words about how both sides should de escalate and there should be the free flow of trade and goods through the Strait. But otherwise, Beijing has been very reluctant to really do anything significant. Meanwhile, China has been preparing for a moment like this for a long, long time. So by investing heavily in clean technology and building out solar and wind and batteries and electric vehicles, by shifting away from fossil fuels, and then also by stockpiling oil, for example, within China and trying to identify other sources of oil and gas around the world, China has become fairly resilient, at least in the near term, to some of the shocks that we're seeing hit other countries across Asia and then also even in the US where gas prices at the pump have risen dramatically.
- [24:05]
Yalda Hakim
Yeah. And every day that the Strait of Hormuz is closed is free advertising for China and all its innovation. When you talk about clean energy and yet the rest of the world is sort of saying, well, we need access to this energy that, you know, and these ships need to pass through. So, you know, it has sort of turned the table slightly. Even though China does prefer certainty and stability. Well, certainly that's what we hear. And they're not, you know, forthcoming when it comes to, you know, being mediators, when it comes to resolving global conflicts. It's not, not their natural position. That's not kind of how they like to sell themselves.
- [24:47]
Carl Chan
That's right, yeah. They really try to pitch themselves as being non interventionist, as not meddling in other countries affairs because they themselves don't like it when they feel like other countries like the United States have quote, unquote, meddled in their affairs. So I think they're fairly consistent in that. I do think also they just don't want to get embroiled in a big international dispute. They would just rather not have skin in the game and keep themselves out of it and try to manage the situation domestically, maybe sell more electric vehicles along the way around the world and have that be the end of it. So I think that that is very much in line with how China has conducted international diplomacy up until now.
- [25:34]
Yalda Hakim
Kyle, you've pivoted really naturally to the idea of Taiwan because, you know, you said that China doesn't like when it feels like it's under pressure and people are meddling in its own affairs. And it's made its position on Taiwan very clear. It's not even negotiable. You know, when I've spoken to Chinese officials, they're just like, what are you even talking about? The idea that, you know, Taiwan is part of us and it's a matter of when, not if. And so everyone else needs to be to butt out of our affairs. And that is what they have consistently made clear to the United States. In previous administrations, though there has been that strategic ambiguity. And I think that applies now with Donald Trump. But we're not quite sure what his position could potentially be on Taiwan.
- [26:19]
Carl Chan
Yeah, that's right. So China has for a very long time maintained that Taiwan is part of its territory. And what's notable is this time around the readout from the Chinese side after the summit really emphasized the Taiwan issue as being almost an issue that could cause a potential conflict between the US And China. It sounded almost threatening. And what's interesting to see now, what's sort of tragic is President Trump has not held the line on what has been longstanding US Policy. Right. The US does not want to see a conflict over Taiwan does not want a change that is not agreed upon by both sides to the status quo. This is something where the US has been, despite this term strategic ambiguity, which means that the US Is not going to commit outright to action one way or another. But despite that, the US has been actually quite clear in trying to support peace in the Taiwan Strait and peace in the region. And I think what's worrying right now is Trump seems to view Taiwan as a bargaining chip and arms sales to Taiwan, for example, from the US As a bargaining chip. And these are not normally regarded as bargaining chips for American presidents and American diplomats. This is more about core US national interests and a belief that the US Wants to see a stable, peaceful economic and geopolitical system. So those comments, those straight comments. It's interesting. Up until his comments on Air Force One or right after the trip, Trump had actually been quite careful not to take a stance on Taiwan, saying that he was listening to what Xi Jinping had to say. And I think some people were starting to breathe a sigh of relief until he finally talked about Taiwan as a bargaining chip. And I think that caused a lot of folks in Washington to suddenly worry that Trump was trying to change how we approached the issue and potentially signal in a worrying way a shift that could be interpreted differently by Beijing. So this is something that is a really, really big topic, a really huge issue, and one that I think is only becoming a bigger issue now.
- [28:49]
Yalda Hakim
Yeah, indeed. Very much so. Kyle, really grateful for your time. Thank you so much for sharing your thoughts and expertise here with us and our listeners.
- [28:58]
Carl Chan
Oh, it's been my pleasure.
- [29:04]
Yalda Hakim
That was Carl Chan who has a very fascinating outlook on that competition with China and where the two countries are at at the moment. Of course you can send me all of your thoughts at the usual place the world@sky.uk and follow us wherever you get your podcasts, whether that's Spotify or Apple. And watch us on YouTube. We look forward to hearing from you.
- [29:41]
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