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0:00:32 Fifteen years ago, I was very pessimistic.
0:00:37 I was very much in that we’re all doomed because of climate change and there’s no way we’re going to solve this.
0:00:42 Now I’m framed as the kind of optimistic person on climate.
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0:01:03 This week on Version History, The Verge’s new chat show about old technology, we’re talking Guitar Hero.
0:01:10 You know, the game that we all spent countless hours standing in our living rooms, hammering away on a plastic guitar, just trying to be rock stars.
0:01:11 And you know what?
0:01:12 We were rock stars.
0:01:18 On this episode, we go through the whole history of the game, from its origins in arcades in Japan,
0:01:26 to its incredible ascent in the music industry, all the way to a somewhat surprising place you can still see remnants of Guitar Hero.
0:01:30 All that on Version History, on YouTube, or wherever you get podcasts.
0:01:38 You know, the last major Trump-Xi meeting was in 2018 in Argentina at G20.
0:01:47 And it took still a year after that meeting for Trade War 1 to end and for a trade, effectively, deal to be worked out and signed.
0:01:55 So I think we’re still a long way away from an actual deal, but certainly this should be seen as a positive signal to markets.
0:02:03 Welcome to China Decode, I’m Alice Han.
0:02:04 And I’m James King.
0:02:10 In today’s episode of China Decode, we are discussing Trump’s trip to Asia and a possible trade truce,
0:02:16 the state of crypto in China, and Europe trying to curb China’s fast fashion dominance.
0:02:18 All right, let’s get right into it.
0:02:22 The last few weeks have been a bit of a wild ride, I think, for US-China relations.
0:02:27 China just wrapped up a major four-day meeting, and the message couldn’t be clearer.
0:02:34 Tighten control, doubled down on manufacturing, and purged disloyalty, especially in the military top brass.
0:02:41 Beijing’s new five-year plan, to my mind, leans heavily on technological self-reliance and manufacturing strength,
0:02:47 even as its economy strains under high debt levels and weak domestic demand.
0:02:53 Chinese President Xi Jinping has also launched one of the biggest military purges in decades,
0:02:58 ousting nine top generals and promoting a trusted enforcer in the PLA.
0:03:05 Meanwhile, President Trump is on a huge Asia diplomatic tour, fresh off a visit with Japan’s emperor,
0:03:10 and is heading to a summit meeting with Xi Jinping, likely on Thursday.
0:03:14 US and Chinese negotiators have teed up a series of easy wins.
0:03:19 China, for instance, buying soybeans again, Washington dialing back on tariffs,
0:03:24 and a potential extension of the critical minerals export controls.
0:03:29 But the deeper fights over technology and national security remain unresolved.
0:03:30 It’s a one-to-play.
0:03:36 Xi is consolidating power at home, and Trump is chasing quick diplomatic wins abroad,
0:03:38 both eyeing a long standoff ahead.
0:03:43 James, this is, I think, a really exciting episode in US-China relations.
0:03:48 I want to start first with the fourth plenum and the five-year plan,
0:03:52 because I think that that document, the communique for the five-year plan,
0:03:56 is potentially one of the most important documents to come out of Beijing this year.
0:04:01 My own take is that there are three main elements to keep in mind.
0:04:05 Number one is China wants to have complete technological self-reliance,
0:04:09 whether it extends to semiconductors or biotech or aviation equipment.
0:04:13 It also wants to double down on its manufacturing output.
0:04:18 And the third element, which is boosting domestic demand or consumption,
0:04:22 that is going to be a key part of this longer-term rebalancing strategy.
0:04:25 But James, I’d love to get your thoughts on this.
0:04:28 Do you agree that this is probably the most important document this year?
0:04:30 Yeah, absolutely.
0:04:32 I mean, I rarely reach for hyperbole,
0:04:37 but I really do think that this could even be a historic document.
0:04:40 I think this fourth plenum, which, of course,
0:04:45 tees up the five-year plan, which we announced next spring, is really important.
0:04:49 A lot of it builds on things that China has been doing for a while,
0:04:52 but some of the phrasing is different.
0:04:53 Some of the emphasis is different.
0:04:57 And, you know, Alice, you and I don’t compare notes before this.
0:04:59 I’m not sure if the listeners know this.
0:05:02 But I’ve got down a rather similar formula to you.
0:05:08 I’ve got one main point, one big vulnerability, and one big crackdown.
0:05:16 The main point is, as you’ve just said, this incredible emphasis on technological self-reliance.
0:05:28 I think China is saying explicitly in one of the most important documents of the political five-year cycle that it wants to overtake the U.S. as a tech power.
0:05:36 To give the quote, it says that China has the opportunity to, quote, seize the commanding heights of technological development.
0:05:38 That really jumped out at me.
0:05:47 And the way in which it intends to do this is to move more towards what I would call technological autarky.
0:05:58 In other words, it not only wants to build up its own prowess as a science and technology leader, it also wants to reduce dependencies on foreign actors.
0:06:01 Now, it hasn’t defined who those foreign actors are.
0:06:11 But if I was a big Western company selling technology into China or making technology in China, I would be quite concerned about that.
0:06:19 It may mean that China wants to slowly ease those guys, well, maybe not out of the market, but to reduce their market share.
0:06:22 So that’s the first big point.
0:06:29 The other two are the big vulnerability is China’s ability to finance its current economic model.
0:06:31 I see big problems there.
0:06:40 And the big crackdown is one that everybody’s talking about, this incredible purge of military officials and lots of other officials, too.
0:06:41 So there’s plenty to talk about.
0:06:45 What are you seeing in terms of the document itself, Alice?
0:06:53 Well, James, I think we’ve come to this discussion with pretty much an aligned set of views on the five-year plan moving forward.
0:06:56 I want to piggyback on what you mentioned about the crackdown.
0:06:58 I think this is extremely significant.
0:07:08 This big political purge of the PLA that has been many years in the running, this process, and again, we can debate the rationale behind it,
0:07:15 of basically cleaning house in the top military brass, both in the PLA, but also in the CMC.
0:07:18 I think that that’s pretty significant.
0:07:28 And even the fact that we had eight members who didn’t show up to this fourth plenum, that is probably an unprecedented number in Xi Jinping’s term.
0:07:40 And that points and indicates to me that he’s probably not happy with the state of affairs in the military, whether it’s their political loyalties to Xi or their battle readiness when it comes to the Taiwan issue.
0:07:43 He’s trying to put in loyal acolytes.
0:07:54 But again, we’ve seen, I think, in the last two, three years, a ramp up in a couple of high-level people like Miao Hua, for instance, or Hu Weidong more recently, who have been ousted.
0:07:56 What’s your take on this?
0:07:58 I’ve read so many different views, so I’m very curious.
0:08:04 I mean, my sense is that this shows that Xi Jinping is in charge.
0:08:09 He can purge who he wants from the military, and the purges have been dramatic.
0:08:14 I mean, some of the biggest military purges that we’ve seen since the days of Chairman Mao.
0:08:21 But I don’t get the sense that these military purges suggest that Xi Jinping’s position is rocky.
0:08:25 Some commentators have been talking about that over the last few months.
0:08:32 I think that this fourth plenum gives all the evidence that we needed to show that Xi Jinping is in charge.
0:08:33 His name is all over it.
0:08:35 It’s his vision.
0:08:40 You know, he’s had this techno-centric view of China’s development for a long time.
0:08:49 So I think, really, he is purging the military of people that he sees either as disloyal or corrupt,
0:08:55 or maybe have engaged in espionage, or they’re just no longer useful for Xi Jinping’s power base.
0:09:04 I just have one other statistic to throw in here, Alice, to show the size of these purges in China.
0:09:10 I think our listeners might be interested to know that last year, the Communist Party of China
0:09:15 disciplined 889,000 people last year.
0:09:19 That was up about nearly 50% from the year before.
0:09:26 It’s the highest annual total since the party began releasing data about two decades ago.
0:09:32 So this shows that there’s enormous stress within the Chinese Communist Party hierarchy.
0:09:36 And, you know, it’s a pretty perilous place to be if you’re a Chinese official.
0:09:46 Well, again, a statistic that listeners will appreciate is eight of these generals have been disciplined in the Central Committee,
0:09:50 and 14 of them are undergoing some kind of investigation.
0:09:51 It’s not yet known.
0:09:55 But 22 generals in total didn’t turn up to this fourth plenum.
0:09:57 And that’s a pretty sizable number.
0:10:03 I think it’s one of the biggest in recent years and certainly biggest purges, at least to my mind, since Chairman Mao.
0:10:08 My view, and then we can pivot, obviously, to Trump’s trip to Asia.
0:10:20 My view is that they are trying to effectively strengthen China’s economy and technological stack as much as possible to reduce what they call the choke point vulnerabilities,
0:10:28 because they are very worried about the recent history of export controls and entity listings coming out of Washington.
0:10:40 So I sense that the next five-year plan is about trying to strong arm the Chinese technological and economic capabilities such that if there is a major showdown, you know, militarily speaking,
0:10:47 that China will not be so severely kneecapped that it doesn’t have alternatives when it comes to chips, when it comes to electronic equipment,
0:10:53 when it comes to even certain chemicals that they still rely on heavily from the U.S.
0:11:01 That is, I think, the biggest takeaway of the five-year plan is that Xi Jinping is effectively trying to bolster China’s economy and technological capabilities.
0:11:11 But this is, I think, a great segue to the second part of this two-part story, which is Trump’s impending meeting with Xi Jinping in South Korea at APEC.
0:11:13 It seems to be happening on Thursday.
0:11:17 The mood music since last week, I think, has improved quite a bit.
0:11:25 Both, I think, are signaling that this meeting is going to be largely positive, that there has been moves towards a framework of a deal.
0:11:32 So to my mind, it seems that both sides are willing to make some kind of concession.
0:11:38 On the U.S. side, it seems to be in the form of potentially not escalating the tariffs.
0:11:42 Now, I remember the next major deadline on tariffs is November 10th.
0:11:46 Another error in which they could concede would be potentially waiving port fees.
0:11:51 That, I think, in the last few days has been flagged as an area of possible cooperation.
0:12:01 There’s also talk about cooperating on fentanyl, for instance, in a task force that, remember, we actually did see happen in the Biden administration for precursors of fentanyl.
0:12:19 And then last but not least, you know, this would be, I think, an extreme bullish case for China, potentially relaxing some of the semiconductor export controls, especially as it pertains to Blackwell chips that are higher up and more advanced than H20s, for instance, coming out of Nvidia.
0:12:34 On the Chinese side, there seems to be room for some concession in the form of agricultural purchases, especially of soybeans, potentially extending, which I think is highly likely the critical minerals export controls, which, again, come in on November 8th.
0:12:39 And then similarly, mutually waiving the port fees that they quickly installed after Washington.
0:12:44 But this is, I think, going to be quite an important meeting.
0:12:49 Markets are already expecting, I think, largely positive mood music from this, if you look at today’s performance.
0:12:58 But my own view is this is maybe a tactical win in the short term, but strategically, it’s hard to see any real deal come out of it.
0:13:06 And I would remind people that, you know, the last major Trump-She meeting was in 2018 in Argentina at G20.
0:13:14 And it took still a year after that meeting for trade war one to end and for a trade effectively deal to be worked out and signed.
0:13:22 So I think we’re still a long way away from an actual deal, but certainly this should be seen as a positive signal to markets.
0:13:27 But what’s your view, James, on this meeting and what do you think will actually come out of it?
0:13:30 Yeah, I’m completely in agreement, Alice.
0:13:38 I think, you know, the danger is that the media reporting on this, when it’s taken place, will be trade deal has been reached.
0:13:48 But what is being spoken about so far is a framework of a potential deal, which will be discussed when President Trump and President Xi meet.
0:13:52 So that is much, much more tentative than a deal.
0:14:02 And many of the elements of the deal, as you’ve already said, are things like China’s deferral of the rare earth mineral export controls.
0:14:14 So the idea is that they will delay for one year while they re-examine, you know, the Chinese export control regime on rare earths that we’ve mentioned a few times in this podcast.
0:14:25 And on the US side, Scott Besant said that he didn’t anticipate that the 100% tariff on Chinese goods threatened by Trump would go into force.
0:14:29 So, you know, the language is really quite vague.
0:14:31 I would be on the same page as you.
0:14:40 I would think that what we’re going to perhaps get is something that might be dressed up in the media, to the media as a deal,
0:14:45 but might actually, in concrete terms, take a lot longer to work out.
0:14:56 And I wouldn’t even rule out the possibility that there would be backsliding or reversals in whatever is announced after President Trump and President Xi have met.
0:14:59 So, obviously, it’s an important step forward.
0:15:00 No question about that.
0:15:06 But I think that it is still quite a long way from being a deal, as you say, exactly.
0:15:11 Yeah, my own sense is that TikTok is probably an easy win.
0:15:17 That will likely come out of the meeting for both sides, which we’ve discussed in previous episodes.
0:15:26 China may rhetorically commit, as they did under the Biden presidency, to a task force that deals with fentanyl precursors.
0:15:27 I think that that is likely.
0:15:34 But I do not see Washington decreasing tariffs because that would, remember, bring tariffs below a lot of the Southeast Asian countries,
0:15:41 which I think would defeat the purpose of the Trump administration trying to rebalance the structural trade deficit with China.
0:15:47 And then the next part of it, which I think is still not my base case, but may actually happen,
0:15:50 is China committing at a future date to buy more soybeans.
0:15:54 Remember, they have not bought a single soybean this year for this season.
0:15:58 Instead, they’ve been purchasing massive amounts from Brazil and now Argentina.
0:16:08 And then highly probable in my probability matrix is that China decides to extend that critical minerals export controls beyond November 8.
0:16:12 They’re getting, I think, a lot of whiplash, not just from Washington, but Brussels and other countries.
0:16:16 Now even Japan with Takayashi as prime minister.
0:16:18 So I sense that there may be an extension.
0:16:25 My own feeling about this relationship is, to borrow a terminology used in Chinese debt financing, extend and pretend.
0:16:31 Both sides just keep extending deadlines and pretending like they can actually reach a deal in the short term.
0:16:33 Again, I think we’re a long way away.
0:16:37 And I would add that analogy to the fentanyl side of things as well, Alice.
0:16:41 I did quite a lot of research on fentanyl last year.
0:16:51 And it seems to me that Chinese promises over fentanyl don’t really stack up because a lot of the action in fentanyl comes from not within China’s borders,
0:16:59 But over the border in a lawless part of Myanmar, where Chinese smugglers take the fentanyl out of China’s borders.
0:17:03 And then quite a lot of processing goes on in Myanmar.
0:17:11 And then it goes down the rivers and is smuggled over to parts of Latin America using some of the drug cartels over there.
0:17:19 And so really, China does not have the ability to promise something concrete or watertight on fentanyl.
0:17:23 And I fear that there will be a great deal of optimism that might, you know,
0:17:31 accompany a fentanyl deal in inverted commas, which is then undermined by subsequent reality as we go forward.
0:17:36 Yeah. And likewise for agricultural purchases, where I think they only reached by the end of the Trump presidency,
0:17:42 40 percent of the agreed total agricultural purchases they committed to after the first trade deal.
0:17:47 One last thing that I will add that I think is also really interesting before we pivot is
0:17:53 that if Trump administration agrees to sell Blackwell chips, there’s a good piece by the IFP that suggests that
0:18:00 the Blackwells are 12 times more powerful than age 20s, which currently can be sold to China.
0:18:07 And that if they were to be sold, the U.S.’s advantage over China on compute would be 4x rather than the current level,
0:18:08 which is around 31x.
0:18:15 That, I think, again, to drive this point home, is going to be critical in this broader tech race and AI race.
0:18:19 Okay, we’ll be back with more after a quick break.
0:18:20 So stay with us.
0:18:38 My name is Tom Elias.
0:18:40 I’m one of the co-founders at Bedrock Robotics.
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0:21:18 China’s crypto story is getting more and more complicated.
0:21:28 On the one hand, Beijing is cautiously re-engaging, in fact, encouraging collaboration between Hong Kong and the mainland to build up Web3 stablecoins and blockchain standards.
0:21:41 Hong Kong’s new stablecoin ordinance has put it at the forefront of global regulation, and Beijing is quietly watching, perhaps even testing how far it can go without reopening the crypto floodgates.
0:21:45 But at the same time, there is a darker side of the industry that is playing out.
0:22:05 Chen Zhe, a Chinese-born tycoon, is now accused by the U.S. of running a $14 billion crypto fraud empire out of Cambodia, showing just how murky and unregulated parts of the Chinese-language crypto ecosystem remain, even as officials talk about oversight and legitimacy.
0:22:16 Now, this all raises questions about where China truly stands on crypto and digital finance, and to my mind, somewhere probably between cautious experimentation and global scandal.
0:22:22 James, this is an exciting topic because I’m sure some of our listeners are crypto believers.
0:22:43 But when I was covering this a couple of years ago, what was interesting to me was how radically, I believe in 2020, the summer of 2020, that dark summer, China went from leading the global mining reflected in hash rate of crypto, especially Bitcoin, to basically having virtually zero crypto mining.
0:22:48 Now it’s kind of recovered, and Bitcoin, it’s the third largest miner behind the U.S. and Russia.
0:22:59 But certainly, I think this has been a bit of a 180 in China’s approach to crypto, from completely cracking down and stamping it out to kind of cautiously letting it play out.
0:23:07 And I think the number one driver behind this is that China is quite concerned that the U.S. may be leading in stablecoins.
0:23:21 I think it’s very clear that the Trump administration and the people around him are crypto believers and crypto, to some extent, maximalists, who believe that the U.S. dollar probably benefits from a stablecoin ecosystem led by U.S. stablecoins.
0:23:29 So I think Beijing is sort of cautiously watching and wanting to have at least a horse in the game, because it doesn’t want to be left behind.
0:23:41 This is, I think, driving the sandboxing approach we’re seeing in Hong Kong with stablecoins, but it is also driving a degree of tolerance in domestic mining and trading again in the mainland.
0:23:43 But James, do you have any views on this?
0:23:45 And how was it when you were in China?
0:23:48 What was your view of crypto over the time and the people that you spoke to?
0:23:49 How do they feel about it?
0:23:58 Yeah, I mean, I had quite a lot of friends back in 2021, when I was in Hong Kong, who were engaged in crypto in one form or another.
0:24:03 And so when the ban came at that time, sort of the bottom fell out of their world.
0:24:10 China effectively banned digital tokens such as Bitcoin from all transactions at that time.
0:24:15 But as you said, Alice, things are much more complicated on the ground in China.
0:24:29 And I would echo what you’ve been saying about Hong Kong being currently a sandbox for mainland China to get a sense of how, you know, some of the latest trends in crypto are playing out, how they’re working.
0:24:38 But I think the mainland authorities, and we’ve just seen an announcement today, are sticking to a more hardline approach.
0:25:02 The central bank on Monday reaffirmed its hardline approach towards virtual currencies, warning over the risks of these stable coins in spite of concerns that the U.S. is dominating the industry and U.S. dollar dominance is growing because of the fact that the U.S. dominates the crypto and stable coins industry.
0:25:06 So I think China’s between a rock and a hard place on this one.
0:25:11 They don’t want the U.S. dollar to run away with the stable coin market.
0:25:22 Stable coins, just in case we have listeners that are not sure, are cryptocurrencies that are pegged to a clear and fixed value of an existing currency like the U.S. dollar.
0:25:28 So China doesn’t want the U.S. to run away with the stable coin market globally.
0:25:37 But at the same time, it remains very cautious about allowing stable coins or other forms of crypto within China itself.
0:25:46 And I think the reason for that is clearly stated by Pan Gongsheng, who is governor of the People’s Bank of China in the statement today.
0:25:55 He wants most of the attention to be focused on China’s official digital currency known as the ECNY.
0:26:03 He doesn’t want crypto to steal Beijing’s thunder when it comes to promoting this official digital currency.
0:26:09 So it fears, on one hand, the U.S. running away with the crypto market globally.
0:26:18 But on the other hand, it doesn’t want domestic adoption of stable coins to undermine its own official digital currency.
0:26:22 So I think they’re kind of going back and forward, zigzagging a bit on this.
0:26:25 I really don’t know where this will end up.
0:26:27 Have you heard anything from your sources?
0:26:34 So I was there about a month ago speaking to people who are involved in the crypto market between the U.S. and China.
0:26:40 And their own attitude about Beijing was that Beijing is definitely playing a cautious wait-and-see approach.
0:26:49 It has realized that ECNY hasn’t fulfilled its, to some extent, domestic and global ambitions, which we can go into just a bit.
0:26:55 And it understands that the U.S. is the leader in stable coin ecosystem.
0:27:03 China, I think, wants to find ways to increase its share of global finance and payments.
0:27:16 And it believes that maybe an investment or at least paying attention to blockchain technologies will maybe enable that or create a leapfrogging opportunity.
0:27:18 But it doesn’t really know how that’s going to happen.
0:27:21 So hence the sandboxing that I see in Hong Kong.
0:27:26 China currently, by BIS estimates, is still under 3%.
0:27:33 Its currency, the RMB, is still under 3% of global payments and about 8.5% of global finance.
0:27:39 For a ton of structural reasons, I think it’s hard for the CNY to displace the dollar anytime soon.
0:27:51 But certainly, my feeling of the reason behind a more tolerant approach to blockchain and crypto is because they still don’t know how this is going to play out in a larger race of currencies.
0:27:59 And they’re still very much fixated on trying to internationalize the currency and increase its share of global payments and trading.
0:28:11 I think what is quite significant more recently that we’ve seen is the pressure that they put on BHP to do 30% of their iron ore spot prices trading in CNY.
0:28:15 I think that may be a stratagem moving forward.
0:28:25 But certainly, to my mind, they’re putting their foot off the neck of crypto largely because they want to see how it may further advance maybe internationalization.
0:28:31 And they’re concerned that the U.S. may be leading far too much in the stablecoin and currency race.
0:28:47 But just to backtrack a bit, I thought it was interesting that Eric Trump, when he was at Bitcoin Asia 2025 in Hong Kong, delivered a speech in August stating that Bitcoin is on track to reach 1 million per coin and describes China as, quote-unquote, a hell of a power.
0:28:53 I think the mood music in China and Hong Kong has improved largely around crypto.
0:28:55 We’re seeing much more trading than we did in previous years.
0:29:00 So I’ve been following a little bit of the story about this crypto tycoon.
0:29:06 He sounds like a bond villain running this crypto fraud empire out of Cambodia.
0:29:17 We talked previously just now about this black market for precursors of fentanyl coming out of Cambodia, but it seems to also be a bit of a front for crypto trading and fraud.
0:29:20 Have you been following in this and what’s your take on it?
0:29:21 Yeah, absolutely.
0:29:34 I mean, I’ve spent quite a bit of time traveling around Cambodia and Laos and some of those other areas in what’s sometimes called the Golden Triangle down there on China’s southwest border region.
0:29:36 And it really is a lawless place.
0:29:41 As you’ve mentioned, there’s a ton of fentanyl smuggling going on down there.
0:29:47 There’s a lot of gambling and big casinos, which, of course, is banned inside mainland China.
0:29:57 And there’s a lot of this crypto trading going on, too, because the characteristic of crypto is that you don’t need an official settlement, obviously, to move money.
0:30:04 If you want to move renminbi in and out of China, then you have to go through an official settlement process.
0:30:12 And that allows the government to know how much money is left or come into the country, and they can control it in that way.
0:30:14 But crypto does not require this.
0:30:25 And therefore, it is the perfect way to smuggle money around the world and to use that money to assist all kinds of other smuggling or illicit activities.
0:30:36 So I think that the case of Chen Zhe, who, as you say, sounds like an extraordinary figure, is very instructive in this regard.
0:30:44 He’s accused by the U.S. of running a 14 billion U.S. dollar crypto fraud empire out of Cambodia.
0:30:49 And he was also involved in the casinos down there and several other industries of that type.
0:30:53 So it gives a sense of how large this problem is.
0:30:59 There’s one other number I would just throw out there, and that is related to Chinese capital flight.
0:31:06 This is money that leaves China through illicit channels and flows all over the world.
0:31:10 Again, it can be used in smuggling or several other activities.
0:31:23 Last year, some economists have estimated that the total of capital leaving China in this illicit way could have been in excess of 500 billion U.S. dollars.
0:31:34 So you can understand why the Chinese government is really concerned about crypto, because it gives smugglers an easy way to move money across borders without being detected.
0:31:42 And I think that lies at the roots of Beijing’s concerns about adopting crypto in a more general sense throughout the country.
0:31:49 Yeah, and it’s a good reminder that crypto, to some extent, is the antithesis of the control that Beijing is looking for.
0:31:51 All right, let’s take a break.
0:31:52 Stay with us.
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0:32:34 Italy is taking aim at China’s fast-fashion juggernaut.
0:32:41 Rome plans to slap new tariffs on low-cost imports from platforms like Sheen and Temu,
0:32:45 saying that China’s ultra-cheap goods are flooding European markets,
0:32:48 undercutting Italian brands, and exploiting workers.
0:32:56 It’s part of a wider European backlash, as Chinese exporters reroute products from the U.S. to EU markets after Trump’s tariffs.
0:33:02 But while Italy moves to defend Made in Italy, Chinese brands are hardly slowing down.
0:33:12 Labels like Urban Revivo are going global, opening flagship stores in London and New York, and taking direct aim at Zara and H&M.
0:33:14 What’s China’s message?
0:33:20 Well, it’s if Europe won’t welcome its factories, it’ll send over its fashion houses instead.
0:33:25 It’s a showdown between slow craftsmanship and hyper-speed globalization,
0:33:32 and a test of how far Europe can go to protect its own style without sparking another trade war.
0:33:39 It seems to my mind that one of the biggest success stories in fast fashion coming out of China in recent years is Sheen.
0:33:47 When I look at its business model of sort of real-time AI-driven data, micro-influencer-based marketing,
0:33:52 their ability to know exactly what the market wants and the volumes that the market wants,
0:33:56 and immediately send those signals to factories to then get delivered to stores,
0:34:01 it’s hard for any other fast fashion brand to compete with that business model.
0:34:08 And now we’re hearing stories about China making inroads through Sheen and Temu in European markets,
0:34:13 where traditionally you’ve got big European conglomerates dominating fast fashion.
0:34:16 So I’m thinking H&M and Zara.
0:34:22 Most of these European brands have factories or manufacturing traditionally in China,
0:34:25 now increasingly to South Asia and Southeast Asia.
0:34:32 But if these Chinese brands can effectively use the same competitive advantage they have in manufacturing out of China,
0:34:37 but then also understand the market, use AI, use social media to great effect,
0:34:43 I think it’s going to be very, very disruptive for these European fast fashion conglomerates.
0:34:48 I would be very, very concerned if I were the CEO of Zara or the CEO of H&M.
0:34:56 But Europe has already been taking steps, it seems, to curb some of Sheen and Temu’s impact on European markets.
0:35:04 Currently, they’re preparing to implement a flat two euro fee on all low value packages from marketplaces like Sheen and Temu.
0:35:12 Remember that the US administration has already changed the de minimis regulations on low ticket price goods as well going into the US.
0:35:20 And consumer watchdogs in the EU have also filed complaints against Sheen in relation to alleged dark practices,
0:35:24 including the shaming of customers into buying more than they can afford.
0:35:32 This, I think, is a story that largely, I think, shows us the impact of China’s overcapacity,
0:35:40 of China’s manufacturing powerhouse, and also the fact that EU-China relations, I think, will continue to be quite rocky
0:35:45 because structurally, the EU and China are both trade surplus-running countries.
0:35:48 They’re going to have to compete on a lot of these goods.
0:35:54 Because China can do it cheaper and faster, it’s hard to see how the Europeans stay in business.
0:35:55 What’s your take, James?
0:35:58 Yeah, I mean, I can’t be a hypocrite on this.
0:36:03 As we speak, Alice, I have a box from Temu sitting in my kitchen.
0:36:04 Oh, okay.
0:36:06 What did you order from Temu?
0:36:08 Actually, I ordered some storage boxes.
0:36:10 I didn’t order fast fashion.
0:36:14 But anyway, I have exactly the same feeling as you.
0:36:17 I think that, in a way, the game is up.
0:36:27 These Chinese retailers, they’re basically employing very similar strategies to those of European fast fashion.
0:36:32 They’re using the same raw materials, mostly, but they’re selling at much lower prices.
0:36:43 And I think that’s why we’ve seen Temu, for example, increase its growth in the EU by about 63% so far and 38% in the UK.
0:36:49 I think that these European fashion brands have really got a fight on their hands.
0:36:57 We normally talk about Chinese high-tech flooding into Europe with examples such as wind power or electric vehicles.
0:37:08 But now we see that at the other end of the scale, you know, relatively inexpensive fast fashion, the Chinese appear to be mounting very stiff competition as well.
0:37:17 Just one more number, Sheen added over 15 million new European users in the first half of this year.
0:37:21 So it’s a major headache for European fashion brands.
0:37:24 I think they’re being undercut.
0:37:28 I think their market share is really under-challenged.
0:37:31 And, you know, I’m not sure where this ends up.
0:37:45 It doesn’t sound to me as if a flat two-euro fee that you mentioned, Alice, is going to be enough to maintain the competitiveness of those European brands that are fighting against Sheen and Temu.
0:37:49 I think this looks bad for European fashion companies, I must say.
0:37:51 Yeah, I definitely agree.
0:38:04 And I think one of the lessons from earlier this year when Trump launched those massive tariffs north of 100% on China is that these fast fashion or cheap goods platforms like Temu were remarkably resilient.
0:38:16 Now, they did do, and I know this for a fact because I spoke to some of these tech companies in China, they did slash prices or offer coupons to some of the consumers to offset some of the tariff impact.
0:38:26 But even with tariffs north of 100%, I was hearing that their goods are still cheaper than the equivalent products that would be produced in the U.S. or outside of China.
0:38:36 And, in fact, for many products, you know, outside of fast fashion, for many products in the electronics or consumer goods spaces, there aren’t direct equivalents or substitutes.
0:39:06 So, again, I think this is a great story to reflect on the importance of China’s manufacturing overcapacity and the fact that if, again, we go back to the five-year plan that was just announced, the fact that they want to double down on this and they want to be a, quote-unquote, and I’m quoting here from the communique, a manufacturing powerhouse, suggests that this story is actually going to be one of many and going to quickly, I think, amplify not just for European markets but other markets globally.
0:39:16 And, again, I agree, James, I find it very hard to see how even tariffs will actually block the floodgates of Chinese cheap goods.
0:39:20 All right, James, this is my favorite time of the episode.
0:39:22 It’s prediction time.
0:39:23 I’m very curious.
0:39:24 What do you have to say?
0:39:25 What’s your prediction?
0:39:26 Okay.
0:39:35 Well, Alice, first of all, I need to say that you correctly predicted that Trump and Xi would meet at the end of this month quite a while before that was known.
0:39:39 So we need to recognize that success at the outset.
0:39:51 My prediction this time is it sounds a little bit wonky, but it couldn’t be more important, especially given what you’ve just mentioned about cheap Chinese products going all over the world.
0:40:00 So, so far, we’ve seen in terms of the producer price index, that’s the average price of wholesale goods.
0:40:05 These have been negative in China for 36 months already.
0:40:11 My first prediction is that that will extend into a 37th month in October.
0:40:20 And, therefore, the export price index of things that China exports all over the world will also be negative in October.
0:40:28 So there will be no respite for European companies that are competing against Chinese challengers.
0:40:43 But the main thing that I want to come to is that this is somewhat tentative, but it may well be that what’s called the consumer price index, which is retail prices in China, also turn negative in October.
0:40:46 They were negative for the first time in quite a while in September.
0:40:55 And I think that if the consumer price index continues to be negative in October, it will crystallize the government’s thinking.
0:41:02 And we will begin to see monetary policy becoming more accommodative in China.
0:41:08 I’m not predicting straight interest rate cuts because monetary policy in China is quite a complicated thing.
0:41:18 But there are other levers that the government can pull to soften monetary policy and slightly boost the stimulus behind consumer spending.
0:41:20 Thanks, James.
0:41:26 That certainly chimes with a key pillar of the communique, the five-year plan, which is to boost consumer demand.
0:41:32 My prediction, again, if I can sneak one in, I’d probably do a two-part prediction.
0:41:42 One for this week is I suspect that the Chinese will likely extend their rare earths export controls beyond the November 8 deadline for the five other rare earths that they added to that list.
0:41:47 And I suspect that that probably will be announced after the Trump-Xi meeting.
0:41:50 So watch this space.
0:42:00 And then the second one I’m probably more convinced about is that China will start to invest, I think, a great deal more in the data center space and make it very, very publicly known.
0:42:13 I think around early Q1, maybe around about the March NPC meeting, you know, China recently announced something that’s about a fifth of the $500 billion U.S. Stargate project for AI data centers.
0:42:15 I think they need to rapidly ramp up.
0:42:18 Their capacity is still lower than the U.S.’s.
0:42:29 So I think that the AI data center space is going to be very, very hot next year with obvious implications for upstream commodities and downstream AI applications and semiconductors.
0:42:33 So again, watch that probably manifesting in early 2026.
0:42:34 Okay.
0:42:34 Okay.
0:42:35 All right.
0:42:37 That’s all for this episode.
0:42:39 Thank you for listening to China Decode.
0:42:41 This is a production of Prof G Media.
0:42:43 Our producer is David Toledo.
0:42:46 Our associate producer is Eric Janikas.
0:42:49 Our research associate is Dan Chalan.
0:42:52 Our technical director is Drew Burrows.
0:42:54 Our engineer is William Flynn.
0:42:57 And our executive producer is Catherine Dillon.
0:43:02 Make sure to follow us wherever you get your podcasts so you don’t miss an episode.
0:43:04 Talk to you again next week.
0:43:05 Bye.
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0:00:32 Fifteen years ago, I was very pessimistic.
0:00:37 I was very much in that we’re all doomed because of climate change and there’s no way we’re going to solve this.
0:00:42 Now I’m framed as the kind of optimistic person on climate.
0:00:45 A lot of it has come from stepping back to look at the data.
0:00:47 So what does that data look like?
0:00:52 Find out this week on The Gray Area, hosted by me, Sean Elling.
0:00:56 New episodes every Monday, available everywhere.
0:01:03 This week on Version History, The Verge’s new chat show about old technology, we’re talking Guitar Hero.
0:01:10 You know, the game that we all spent countless hours standing in our living rooms, hammering away on a plastic guitar, just trying to be rock stars.
0:01:11 And you know what?
0:01:12 We were rock stars.
0:01:18 On this episode, we go through the whole history of the game, from its origins in arcades in Japan,
0:01:26 to its incredible ascent in the music industry, all the way to a somewhat surprising place you can still see remnants of Guitar Hero.
0:01:30 All that on Version History, on YouTube, or wherever you get podcasts.
0:01:38 You know, the last major Trump-Xi meeting was in 2018 in Argentina at G20.
0:01:47 And it took still a year after that meeting for Trade War 1 to end and for a trade, effectively, deal to be worked out and signed.
0:01:55 So I think we’re still a long way away from an actual deal, but certainly this should be seen as a positive signal to markets.
0:02:03 Welcome to China Decode, I’m Alice Han.
0:02:04 And I’m James King.
0:02:10 In today’s episode of China Decode, we are discussing Trump’s trip to Asia and a possible trade truce,
0:02:16 the state of crypto in China, and Europe trying to curb China’s fast fashion dominance.
0:02:18 All right, let’s get right into it.
0:02:22 The last few weeks have been a bit of a wild ride, I think, for US-China relations.
0:02:27 China just wrapped up a major four-day meeting, and the message couldn’t be clearer.
0:02:34 Tighten control, doubled down on manufacturing, and purged disloyalty, especially in the military top brass.
0:02:41 Beijing’s new five-year plan, to my mind, leans heavily on technological self-reliance and manufacturing strength,
0:02:47 even as its economy strains under high debt levels and weak domestic demand.
0:02:53 Chinese President Xi Jinping has also launched one of the biggest military purges in decades,
0:02:58 ousting nine top generals and promoting a trusted enforcer in the PLA.
0:03:05 Meanwhile, President Trump is on a huge Asia diplomatic tour, fresh off a visit with Japan’s emperor,
0:03:10 and is heading to a summit meeting with Xi Jinping, likely on Thursday.
0:03:14 US and Chinese negotiators have teed up a series of easy wins.
0:03:19 China, for instance, buying soybeans again, Washington dialing back on tariffs,
0:03:24 and a potential extension of the critical minerals export controls.
0:03:29 But the deeper fights over technology and national security remain unresolved.
0:03:30 It’s a one-to-play.
0:03:36 Xi is consolidating power at home, and Trump is chasing quick diplomatic wins abroad,
0:03:38 both eyeing a long standoff ahead.
0:03:43 James, this is, I think, a really exciting episode in US-China relations.
0:03:48 I want to start first with the fourth plenum and the five-year plan,
0:03:52 because I think that that document, the communique for the five-year plan,
0:03:56 is potentially one of the most important documents to come out of Beijing this year.
0:04:01 My own take is that there are three main elements to keep in mind.
0:04:05 Number one is China wants to have complete technological self-reliance,
0:04:09 whether it extends to semiconductors or biotech or aviation equipment.
0:04:13 It also wants to double down on its manufacturing output.
0:04:18 And the third element, which is boosting domestic demand or consumption,
0:04:22 that is going to be a key part of this longer-term rebalancing strategy.
0:04:25 But James, I’d love to get your thoughts on this.
0:04:28 Do you agree that this is probably the most important document this year?
0:04:30 Yeah, absolutely.
0:04:32 I mean, I rarely reach for hyperbole,
0:04:37 but I really do think that this could even be a historic document.
0:04:40 I think this fourth plenum, which, of course,
0:04:45 tees up the five-year plan, which we announced next spring, is really important.
0:04:49 A lot of it builds on things that China has been doing for a while,
0:04:52 but some of the phrasing is different.
0:04:53 Some of the emphasis is different.
0:04:57 And, you know, Alice, you and I don’t compare notes before this.
0:04:59 I’m not sure if the listeners know this.
0:05:02 But I’ve got down a rather similar formula to you.
0:05:08 I’ve got one main point, one big vulnerability, and one big crackdown.
0:05:16 The main point is, as you’ve just said, this incredible emphasis on technological self-reliance.
0:05:28 I think China is saying explicitly in one of the most important documents of the political five-year cycle that it wants to overtake the U.S. as a tech power.
0:05:36 To give the quote, it says that China has the opportunity to, quote, seize the commanding heights of technological development.
0:05:38 That really jumped out at me.
0:05:47 And the way in which it intends to do this is to move more towards what I would call technological autarky.
0:05:58 In other words, it not only wants to build up its own prowess as a science and technology leader, it also wants to reduce dependencies on foreign actors.
0:06:01 Now, it hasn’t defined who those foreign actors are.
0:06:11 But if I was a big Western company selling technology into China or making technology in China, I would be quite concerned about that.
0:06:19 It may mean that China wants to slowly ease those guys, well, maybe not out of the market, but to reduce their market share.
0:06:22 So that’s the first big point.
0:06:29 The other two are the big vulnerability is China’s ability to finance its current economic model.
0:06:31 I see big problems there.
0:06:40 And the big crackdown is one that everybody’s talking about, this incredible purge of military officials and lots of other officials, too.
0:06:41 So there’s plenty to talk about.
0:06:45 What are you seeing in terms of the document itself, Alice?
0:06:53 Well, James, I think we’ve come to this discussion with pretty much an aligned set of views on the five-year plan moving forward.
0:06:56 I want to piggyback on what you mentioned about the crackdown.
0:06:58 I think this is extremely significant.
0:07:08 This big political purge of the PLA that has been many years in the running, this process, and again, we can debate the rationale behind it,
0:07:15 of basically cleaning house in the top military brass, both in the PLA, but also in the CMC.
0:07:18 I think that that’s pretty significant.
0:07:28 And even the fact that we had eight members who didn’t show up to this fourth plenum, that is probably an unprecedented number in Xi Jinping’s term.
0:07:40 And that points and indicates to me that he’s probably not happy with the state of affairs in the military, whether it’s their political loyalties to Xi or their battle readiness when it comes to the Taiwan issue.
0:07:43 He’s trying to put in loyal acolytes.
0:07:54 But again, we’ve seen, I think, in the last two, three years, a ramp up in a couple of high-level people like Miao Hua, for instance, or Hu Weidong more recently, who have been ousted.
0:07:56 What’s your take on this?
0:07:58 I’ve read so many different views, so I’m very curious.
0:08:04 I mean, my sense is that this shows that Xi Jinping is in charge.
0:08:09 He can purge who he wants from the military, and the purges have been dramatic.
0:08:14 I mean, some of the biggest military purges that we’ve seen since the days of Chairman Mao.
0:08:21 But I don’t get the sense that these military purges suggest that Xi Jinping’s position is rocky.
0:08:25 Some commentators have been talking about that over the last few months.
0:08:32 I think that this fourth plenum gives all the evidence that we needed to show that Xi Jinping is in charge.
0:08:33 His name is all over it.
0:08:35 It’s his vision.
0:08:40 You know, he’s had this techno-centric view of China’s development for a long time.
0:08:49 So I think, really, he is purging the military of people that he sees either as disloyal or corrupt,
0:08:55 or maybe have engaged in espionage, or they’re just no longer useful for Xi Jinping’s power base.
0:09:04 I just have one other statistic to throw in here, Alice, to show the size of these purges in China.
0:09:10 I think our listeners might be interested to know that last year, the Communist Party of China
0:09:15 disciplined 889,000 people last year.
0:09:19 That was up about nearly 50% from the year before.
0:09:26 It’s the highest annual total since the party began releasing data about two decades ago.
0:09:32 So this shows that there’s enormous stress within the Chinese Communist Party hierarchy.
0:09:36 And, you know, it’s a pretty perilous place to be if you’re a Chinese official.
0:09:46 Well, again, a statistic that listeners will appreciate is eight of these generals have been disciplined in the Central Committee,
0:09:50 and 14 of them are undergoing some kind of investigation.
0:09:51 It’s not yet known.
0:09:55 But 22 generals in total didn’t turn up to this fourth plenum.
0:09:57 And that’s a pretty sizable number.
0:10:03 I think it’s one of the biggest in recent years and certainly biggest purges, at least to my mind, since Chairman Mao.
0:10:08 My view, and then we can pivot, obviously, to Trump’s trip to Asia.
0:10:20 My view is that they are trying to effectively strengthen China’s economy and technological stack as much as possible to reduce what they call the choke point vulnerabilities,
0:10:28 because they are very worried about the recent history of export controls and entity listings coming out of Washington.
0:10:40 So I sense that the next five-year plan is about trying to strong arm the Chinese technological and economic capabilities such that if there is a major showdown, you know, militarily speaking,
0:10:47 that China will not be so severely kneecapped that it doesn’t have alternatives when it comes to chips, when it comes to electronic equipment,
0:10:53 when it comes to even certain chemicals that they still rely on heavily from the U.S.
0:11:01 That is, I think, the biggest takeaway of the five-year plan is that Xi Jinping is effectively trying to bolster China’s economy and technological capabilities.
0:11:11 But this is, I think, a great segue to the second part of this two-part story, which is Trump’s impending meeting with Xi Jinping in South Korea at APEC.
0:11:13 It seems to be happening on Thursday.
0:11:17 The mood music since last week, I think, has improved quite a bit.
0:11:25 Both, I think, are signaling that this meeting is going to be largely positive, that there has been moves towards a framework of a deal.
0:11:32 So to my mind, it seems that both sides are willing to make some kind of concession.
0:11:38 On the U.S. side, it seems to be in the form of potentially not escalating the tariffs.
0:11:42 Now, I remember the next major deadline on tariffs is November 10th.
0:11:46 Another error in which they could concede would be potentially waiving port fees.
0:11:51 That, I think, in the last few days has been flagged as an area of possible cooperation.
0:12:01 There’s also talk about cooperating on fentanyl, for instance, in a task force that, remember, we actually did see happen in the Biden administration for precursors of fentanyl.
0:12:19 And then last but not least, you know, this would be, I think, an extreme bullish case for China, potentially relaxing some of the semiconductor export controls, especially as it pertains to Blackwell chips that are higher up and more advanced than H20s, for instance, coming out of Nvidia.
0:12:34 On the Chinese side, there seems to be room for some concession in the form of agricultural purchases, especially of soybeans, potentially extending, which I think is highly likely the critical minerals export controls, which, again, come in on November 8th.
0:12:39 And then similarly, mutually waiving the port fees that they quickly installed after Washington.
0:12:44 But this is, I think, going to be quite an important meeting.
0:12:49 Markets are already expecting, I think, largely positive mood music from this, if you look at today’s performance.
0:12:58 But my own view is this is maybe a tactical win in the short term, but strategically, it’s hard to see any real deal come out of it.
0:13:06 And I would remind people that, you know, the last major Trump-She meeting was in 2018 in Argentina at G20.
0:13:14 And it took still a year after that meeting for trade war one to end and for a trade effectively deal to be worked out and signed.
0:13:22 So I think we’re still a long way away from an actual deal, but certainly this should be seen as a positive signal to markets.
0:13:27 But what’s your view, James, on this meeting and what do you think will actually come out of it?
0:13:30 Yeah, I’m completely in agreement, Alice.
0:13:38 I think, you know, the danger is that the media reporting on this, when it’s taken place, will be trade deal has been reached.
0:13:48 But what is being spoken about so far is a framework of a potential deal, which will be discussed when President Trump and President Xi meet.
0:13:52 So that is much, much more tentative than a deal.
0:14:02 And many of the elements of the deal, as you’ve already said, are things like China’s deferral of the rare earth mineral export controls.
0:14:14 So the idea is that they will delay for one year while they re-examine, you know, the Chinese export control regime on rare earths that we’ve mentioned a few times in this podcast.
0:14:25 And on the US side, Scott Besant said that he didn’t anticipate that the 100% tariff on Chinese goods threatened by Trump would go into force.
0:14:29 So, you know, the language is really quite vague.
0:14:31 I would be on the same page as you.
0:14:40 I would think that what we’re going to perhaps get is something that might be dressed up in the media, to the media as a deal,
0:14:45 but might actually, in concrete terms, take a lot longer to work out.
0:14:56 And I wouldn’t even rule out the possibility that there would be backsliding or reversals in whatever is announced after President Trump and President Xi have met.
0:14:59 So, obviously, it’s an important step forward.
0:15:00 No question about that.
0:15:06 But I think that it is still quite a long way from being a deal, as you say, exactly.
0:15:11 Yeah, my own sense is that TikTok is probably an easy win.
0:15:17 That will likely come out of the meeting for both sides, which we’ve discussed in previous episodes.
0:15:26 China may rhetorically commit, as they did under the Biden presidency, to a task force that deals with fentanyl precursors.
0:15:27 I think that that is likely.
0:15:34 But I do not see Washington decreasing tariffs because that would, remember, bring tariffs below a lot of the Southeast Asian countries,
0:15:41 which I think would defeat the purpose of the Trump administration trying to rebalance the structural trade deficit with China.
0:15:47 And then the next part of it, which I think is still not my base case, but may actually happen,
0:15:50 is China committing at a future date to buy more soybeans.
0:15:54 Remember, they have not bought a single soybean this year for this season.
0:15:58 Instead, they’ve been purchasing massive amounts from Brazil and now Argentina.
0:16:08 And then highly probable in my probability matrix is that China decides to extend that critical minerals export controls beyond November 8.
0:16:12 They’re getting, I think, a lot of whiplash, not just from Washington, but Brussels and other countries.
0:16:16 Now even Japan with Takayashi as prime minister.
0:16:18 So I sense that there may be an extension.
0:16:25 My own feeling about this relationship is, to borrow a terminology used in Chinese debt financing, extend and pretend.
0:16:31 Both sides just keep extending deadlines and pretending like they can actually reach a deal in the short term.
0:16:33 Again, I think we’re a long way away.
0:16:37 And I would add that analogy to the fentanyl side of things as well, Alice.
0:16:41 I did quite a lot of research on fentanyl last year.
0:16:51 And it seems to me that Chinese promises over fentanyl don’t really stack up because a lot of the action in fentanyl comes from not within China’s borders,
0:16:59 But over the border in a lawless part of Myanmar, where Chinese smugglers take the fentanyl out of China’s borders.
0:17:03 And then quite a lot of processing goes on in Myanmar.
0:17:11 And then it goes down the rivers and is smuggled over to parts of Latin America using some of the drug cartels over there.
0:17:19 And so really, China does not have the ability to promise something concrete or watertight on fentanyl.
0:17:23 And I fear that there will be a great deal of optimism that might, you know,
0:17:31 accompany a fentanyl deal in inverted commas, which is then undermined by subsequent reality as we go forward.
0:17:36 Yeah. And likewise for agricultural purchases, where I think they only reached by the end of the Trump presidency,
0:17:42 40 percent of the agreed total agricultural purchases they committed to after the first trade deal.
0:17:47 One last thing that I will add that I think is also really interesting before we pivot is
0:17:53 that if Trump administration agrees to sell Blackwell chips, there’s a good piece by the IFP that suggests that
0:18:00 the Blackwells are 12 times more powerful than age 20s, which currently can be sold to China.
0:18:07 And that if they were to be sold, the U.S.’s advantage over China on compute would be 4x rather than the current level,
0:18:08 which is around 31x.
0:18:15 That, I think, again, to drive this point home, is going to be critical in this broader tech race and AI race.
0:18:19 Okay, we’ll be back with more after a quick break.
0:18:20 So stay with us.
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0:21:18 China’s crypto story is getting more and more complicated.
0:21:28 On the one hand, Beijing is cautiously re-engaging, in fact, encouraging collaboration between Hong Kong and the mainland to build up Web3 stablecoins and blockchain standards.
0:21:41 Hong Kong’s new stablecoin ordinance has put it at the forefront of global regulation, and Beijing is quietly watching, perhaps even testing how far it can go without reopening the crypto floodgates.
0:21:45 But at the same time, there is a darker side of the industry that is playing out.
0:22:05 Chen Zhe, a Chinese-born tycoon, is now accused by the U.S. of running a $14 billion crypto fraud empire out of Cambodia, showing just how murky and unregulated parts of the Chinese-language crypto ecosystem remain, even as officials talk about oversight and legitimacy.
0:22:16 Now, this all raises questions about where China truly stands on crypto and digital finance, and to my mind, somewhere probably between cautious experimentation and global scandal.
0:22:22 James, this is an exciting topic because I’m sure some of our listeners are crypto believers.
0:22:43 But when I was covering this a couple of years ago, what was interesting to me was how radically, I believe in 2020, the summer of 2020, that dark summer, China went from leading the global mining reflected in hash rate of crypto, especially Bitcoin, to basically having virtually zero crypto mining.
0:22:48 Now it’s kind of recovered, and Bitcoin, it’s the third largest miner behind the U.S. and Russia.
0:22:59 But certainly, I think this has been a bit of a 180 in China’s approach to crypto, from completely cracking down and stamping it out to kind of cautiously letting it play out.
0:23:07 And I think the number one driver behind this is that China is quite concerned that the U.S. may be leading in stablecoins.
0:23:21 I think it’s very clear that the Trump administration and the people around him are crypto believers and crypto, to some extent, maximalists, who believe that the U.S. dollar probably benefits from a stablecoin ecosystem led by U.S. stablecoins.
0:23:29 So I think Beijing is sort of cautiously watching and wanting to have at least a horse in the game, because it doesn’t want to be left behind.
0:23:41 This is, I think, driving the sandboxing approach we’re seeing in Hong Kong with stablecoins, but it is also driving a degree of tolerance in domestic mining and trading again in the mainland.
0:23:43 But James, do you have any views on this?
0:23:45 And how was it when you were in China?
0:23:48 What was your view of crypto over the time and the people that you spoke to?
0:23:49 How do they feel about it?
0:23:58 Yeah, I mean, I had quite a lot of friends back in 2021, when I was in Hong Kong, who were engaged in crypto in one form or another.
0:24:03 And so when the ban came at that time, sort of the bottom fell out of their world.
0:24:10 China effectively banned digital tokens such as Bitcoin from all transactions at that time.
0:24:15 But as you said, Alice, things are much more complicated on the ground in China.
0:24:29 And I would echo what you’ve been saying about Hong Kong being currently a sandbox for mainland China to get a sense of how, you know, some of the latest trends in crypto are playing out, how they’re working.
0:24:38 But I think the mainland authorities, and we’ve just seen an announcement today, are sticking to a more hardline approach.
0:25:02 The central bank on Monday reaffirmed its hardline approach towards virtual currencies, warning over the risks of these stable coins in spite of concerns that the U.S. is dominating the industry and U.S. dollar dominance is growing because of the fact that the U.S. dominates the crypto and stable coins industry.
0:25:06 So I think China’s between a rock and a hard place on this one.
0:25:11 They don’t want the U.S. dollar to run away with the stable coin market.
0:25:22 Stable coins, just in case we have listeners that are not sure, are cryptocurrencies that are pegged to a clear and fixed value of an existing currency like the U.S. dollar.
0:25:28 So China doesn’t want the U.S. to run away with the stable coin market globally.
0:25:37 But at the same time, it remains very cautious about allowing stable coins or other forms of crypto within China itself.
0:25:46 And I think the reason for that is clearly stated by Pan Gongsheng, who is governor of the People’s Bank of China in the statement today.
0:25:55 He wants most of the attention to be focused on China’s official digital currency known as the ECNY.
0:26:03 He doesn’t want crypto to steal Beijing’s thunder when it comes to promoting this official digital currency.
0:26:09 So it fears, on one hand, the U.S. running away with the crypto market globally.
0:26:18 But on the other hand, it doesn’t want domestic adoption of stable coins to undermine its own official digital currency.
0:26:22 So I think they’re kind of going back and forward, zigzagging a bit on this.
0:26:25 I really don’t know where this will end up.
0:26:27 Have you heard anything from your sources?
0:26:34 So I was there about a month ago speaking to people who are involved in the crypto market between the U.S. and China.
0:26:40 And their own attitude about Beijing was that Beijing is definitely playing a cautious wait-and-see approach.
0:26:49 It has realized that ECNY hasn’t fulfilled its, to some extent, domestic and global ambitions, which we can go into just a bit.
0:26:55 And it understands that the U.S. is the leader in stable coin ecosystem.
0:27:03 China, I think, wants to find ways to increase its share of global finance and payments.
0:27:16 And it believes that maybe an investment or at least paying attention to blockchain technologies will maybe enable that or create a leapfrogging opportunity.
0:27:18 But it doesn’t really know how that’s going to happen.
0:27:21 So hence the sandboxing that I see in Hong Kong.
0:27:26 China currently, by BIS estimates, is still under 3%.
0:27:33 Its currency, the RMB, is still under 3% of global payments and about 8.5% of global finance.
0:27:39 For a ton of structural reasons, I think it’s hard for the CNY to displace the dollar anytime soon.
0:27:51 But certainly, my feeling of the reason behind a more tolerant approach to blockchain and crypto is because they still don’t know how this is going to play out in a larger race of currencies.
0:27:59 And they’re still very much fixated on trying to internationalize the currency and increase its share of global payments and trading.
0:28:11 I think what is quite significant more recently that we’ve seen is the pressure that they put on BHP to do 30% of their iron ore spot prices trading in CNY.
0:28:15 I think that may be a stratagem moving forward.
0:28:25 But certainly, to my mind, they’re putting their foot off the neck of crypto largely because they want to see how it may further advance maybe internationalization.
0:28:31 And they’re concerned that the U.S. may be leading far too much in the stablecoin and currency race.
0:28:47 But just to backtrack a bit, I thought it was interesting that Eric Trump, when he was at Bitcoin Asia 2025 in Hong Kong, delivered a speech in August stating that Bitcoin is on track to reach 1 million per coin and describes China as, quote-unquote, a hell of a power.
0:28:53 I think the mood music in China and Hong Kong has improved largely around crypto.
0:28:55 We’re seeing much more trading than we did in previous years.
0:29:00 So I’ve been following a little bit of the story about this crypto tycoon.
0:29:06 He sounds like a bond villain running this crypto fraud empire out of Cambodia.
0:29:17 We talked previously just now about this black market for precursors of fentanyl coming out of Cambodia, but it seems to also be a bit of a front for crypto trading and fraud.
0:29:20 Have you been following in this and what’s your take on it?
0:29:21 Yeah, absolutely.
0:29:34 I mean, I’ve spent quite a bit of time traveling around Cambodia and Laos and some of those other areas in what’s sometimes called the Golden Triangle down there on China’s southwest border region.
0:29:36 And it really is a lawless place.
0:29:41 As you’ve mentioned, there’s a ton of fentanyl smuggling going on down there.
0:29:47 There’s a lot of gambling and big casinos, which, of course, is banned inside mainland China.
0:29:57 And there’s a lot of this crypto trading going on, too, because the characteristic of crypto is that you don’t need an official settlement, obviously, to move money.
0:30:04 If you want to move renminbi in and out of China, then you have to go through an official settlement process.
0:30:12 And that allows the government to know how much money is left or come into the country, and they can control it in that way.
0:30:14 But crypto does not require this.
0:30:25 And therefore, it is the perfect way to smuggle money around the world and to use that money to assist all kinds of other smuggling or illicit activities.
0:30:36 So I think that the case of Chen Zhe, who, as you say, sounds like an extraordinary figure, is very instructive in this regard.
0:30:44 He’s accused by the U.S. of running a 14 billion U.S. dollar crypto fraud empire out of Cambodia.
0:30:49 And he was also involved in the casinos down there and several other industries of that type.
0:30:53 So it gives a sense of how large this problem is.
0:30:59 There’s one other number I would just throw out there, and that is related to Chinese capital flight.
0:31:06 This is money that leaves China through illicit channels and flows all over the world.
0:31:10 Again, it can be used in smuggling or several other activities.
0:31:23 Last year, some economists have estimated that the total of capital leaving China in this illicit way could have been in excess of 500 billion U.S. dollars.
0:31:34 So you can understand why the Chinese government is really concerned about crypto, because it gives smugglers an easy way to move money across borders without being detected.
0:31:42 And I think that lies at the roots of Beijing’s concerns about adopting crypto in a more general sense throughout the country.
0:31:49 Yeah, and it’s a good reminder that crypto, to some extent, is the antithesis of the control that Beijing is looking for.
0:31:51 All right, let’s take a break.
0:31:52 Stay with us.
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0:32:34 Italy is taking aim at China’s fast-fashion juggernaut.
0:32:41 Rome plans to slap new tariffs on low-cost imports from platforms like Sheen and Temu,
0:32:45 saying that China’s ultra-cheap goods are flooding European markets,
0:32:48 undercutting Italian brands, and exploiting workers.
0:32:56 It’s part of a wider European backlash, as Chinese exporters reroute products from the U.S. to EU markets after Trump’s tariffs.
0:33:02 But while Italy moves to defend Made in Italy, Chinese brands are hardly slowing down.
0:33:12 Labels like Urban Revivo are going global, opening flagship stores in London and New York, and taking direct aim at Zara and H&M.
0:33:14 What’s China’s message?
0:33:20 Well, it’s if Europe won’t welcome its factories, it’ll send over its fashion houses instead.
0:33:25 It’s a showdown between slow craftsmanship and hyper-speed globalization,
0:33:32 and a test of how far Europe can go to protect its own style without sparking another trade war.
0:33:39 It seems to my mind that one of the biggest success stories in fast fashion coming out of China in recent years is Sheen.
0:33:47 When I look at its business model of sort of real-time AI-driven data, micro-influencer-based marketing,
0:33:52 their ability to know exactly what the market wants and the volumes that the market wants,
0:33:56 and immediately send those signals to factories to then get delivered to stores,
0:34:01 it’s hard for any other fast fashion brand to compete with that business model.
0:34:08 And now we’re hearing stories about China making inroads through Sheen and Temu in European markets,
0:34:13 where traditionally you’ve got big European conglomerates dominating fast fashion.
0:34:16 So I’m thinking H&M and Zara.
0:34:22 Most of these European brands have factories or manufacturing traditionally in China,
0:34:25 now increasingly to South Asia and Southeast Asia.
0:34:32 But if these Chinese brands can effectively use the same competitive advantage they have in manufacturing out of China,
0:34:37 but then also understand the market, use AI, use social media to great effect,
0:34:43 I think it’s going to be very, very disruptive for these European fast fashion conglomerates.
0:34:48 I would be very, very concerned if I were the CEO of Zara or the CEO of H&M.
0:34:56 But Europe has already been taking steps, it seems, to curb some of Sheen and Temu’s impact on European markets.
0:35:04 Currently, they’re preparing to implement a flat two euro fee on all low value packages from marketplaces like Sheen and Temu.
0:35:12 Remember that the US administration has already changed the de minimis regulations on low ticket price goods as well going into the US.
0:35:20 And consumer watchdogs in the EU have also filed complaints against Sheen in relation to alleged dark practices,
0:35:24 including the shaming of customers into buying more than they can afford.
0:35:32 This, I think, is a story that largely, I think, shows us the impact of China’s overcapacity,
0:35:40 of China’s manufacturing powerhouse, and also the fact that EU-China relations, I think, will continue to be quite rocky
0:35:45 because structurally, the EU and China are both trade surplus-running countries.
0:35:48 They’re going to have to compete on a lot of these goods.
0:35:54 Because China can do it cheaper and faster, it’s hard to see how the Europeans stay in business.
0:35:55 What’s your take, James?
0:35:58 Yeah, I mean, I can’t be a hypocrite on this.
0:36:03 As we speak, Alice, I have a box from Temu sitting in my kitchen.
0:36:04 Oh, okay.
0:36:06 What did you order from Temu?
0:36:08 Actually, I ordered some storage boxes.
0:36:10 I didn’t order fast fashion.
0:36:14 But anyway, I have exactly the same feeling as you.
0:36:17 I think that, in a way, the game is up.
0:36:27 These Chinese retailers, they’re basically employing very similar strategies to those of European fast fashion.
0:36:32 They’re using the same raw materials, mostly, but they’re selling at much lower prices.
0:36:43 And I think that’s why we’ve seen Temu, for example, increase its growth in the EU by about 63% so far and 38% in the UK.
0:36:49 I think that these European fashion brands have really got a fight on their hands.
0:36:57 We normally talk about Chinese high-tech flooding into Europe with examples such as wind power or electric vehicles.
0:37:08 But now we see that at the other end of the scale, you know, relatively inexpensive fast fashion, the Chinese appear to be mounting very stiff competition as well.
0:37:17 Just one more number, Sheen added over 15 million new European users in the first half of this year.
0:37:21 So it’s a major headache for European fashion brands.
0:37:24 I think they’re being undercut.
0:37:28 I think their market share is really under-challenged.
0:37:31 And, you know, I’m not sure where this ends up.
0:37:45 It doesn’t sound to me as if a flat two-euro fee that you mentioned, Alice, is going to be enough to maintain the competitiveness of those European brands that are fighting against Sheen and Temu.
0:37:49 I think this looks bad for European fashion companies, I must say.
0:37:51 Yeah, I definitely agree.
0:38:04 And I think one of the lessons from earlier this year when Trump launched those massive tariffs north of 100% on China is that these fast fashion or cheap goods platforms like Temu were remarkably resilient.
0:38:16 Now, they did do, and I know this for a fact because I spoke to some of these tech companies in China, they did slash prices or offer coupons to some of the consumers to offset some of the tariff impact.
0:38:26 But even with tariffs north of 100%, I was hearing that their goods are still cheaper than the equivalent products that would be produced in the U.S. or outside of China.
0:38:36 And, in fact, for many products, you know, outside of fast fashion, for many products in the electronics or consumer goods spaces, there aren’t direct equivalents or substitutes.
0:39:06 So, again, I think this is a great story to reflect on the importance of China’s manufacturing overcapacity and the fact that if, again, we go back to the five-year plan that was just announced, the fact that they want to double down on this and they want to be a, quote-unquote, and I’m quoting here from the communique, a manufacturing powerhouse, suggests that this story is actually going to be one of many and going to quickly, I think, amplify not just for European markets but other markets globally.
0:39:16 And, again, I agree, James, I find it very hard to see how even tariffs will actually block the floodgates of Chinese cheap goods.
0:39:20 All right, James, this is my favorite time of the episode.
0:39:22 It’s prediction time.
0:39:23 I’m very curious.
0:39:24 What do you have to say?
0:39:25 What’s your prediction?
0:39:26 Okay.
0:39:35 Well, Alice, first of all, I need to say that you correctly predicted that Trump and Xi would meet at the end of this month quite a while before that was known.
0:39:39 So we need to recognize that success at the outset.
0:39:51 My prediction this time is it sounds a little bit wonky, but it couldn’t be more important, especially given what you’ve just mentioned about cheap Chinese products going all over the world.
0:40:00 So, so far, we’ve seen in terms of the producer price index, that’s the average price of wholesale goods.
0:40:05 These have been negative in China for 36 months already.
0:40:11 My first prediction is that that will extend into a 37th month in October.
0:40:20 And, therefore, the export price index of things that China exports all over the world will also be negative in October.
0:40:28 So there will be no respite for European companies that are competing against Chinese challengers.
0:40:43 But the main thing that I want to come to is that this is somewhat tentative, but it may well be that what’s called the consumer price index, which is retail prices in China, also turn negative in October.
0:40:46 They were negative for the first time in quite a while in September.
0:40:55 And I think that if the consumer price index continues to be negative in October, it will crystallize the government’s thinking.
0:41:02 And we will begin to see monetary policy becoming more accommodative in China.
0:41:08 I’m not predicting straight interest rate cuts because monetary policy in China is quite a complicated thing.
0:41:18 But there are other levers that the government can pull to soften monetary policy and slightly boost the stimulus behind consumer spending.
0:41:20 Thanks, James.
0:41:26 That certainly chimes with a key pillar of the communique, the five-year plan, which is to boost consumer demand.
0:41:32 My prediction, again, if I can sneak one in, I’d probably do a two-part prediction.
0:41:42 One for this week is I suspect that the Chinese will likely extend their rare earths export controls beyond the November 8 deadline for the five other rare earths that they added to that list.
0:41:47 And I suspect that that probably will be announced after the Trump-Xi meeting.
0:41:50 So watch this space.
0:42:00 And then the second one I’m probably more convinced about is that China will start to invest, I think, a great deal more in the data center space and make it very, very publicly known.
0:42:13 I think around early Q1, maybe around about the March NPC meeting, you know, China recently announced something that’s about a fifth of the $500 billion U.S. Stargate project for AI data centers.
0:42:15 I think they need to rapidly ramp up.
0:42:18 Their capacity is still lower than the U.S.’s.
0:42:29 So I think that the AI data center space is going to be very, very hot next year with obvious implications for upstream commodities and downstream AI applications and semiconductors.
0:42:33 So again, watch that probably manifesting in early 2026.
0:42:34 Okay.
0:42:34 Okay.
0:42:35 All right.
0:42:37 That’s all for this episode.
0:42:39 Thank you for listening to China Decode.
0:42:41 This is a production of Prof G Media.
0:42:43 Our producer is David Toledo.
0:42:46 Our associate producer is Eric Janikas.
0:42:49 Our research associate is Dan Chalan.
0:42:52 Our technical director is Drew Burrows.
0:42:54 Our engineer is William Flynn.
0:42:57 And our executive producer is Catherine Dillon.
0:43:02 Make sure to follow us wherever you get your podcasts so you don’t miss an episode.
0:43:04 Talk to you again next week.
0:43:05 Bye.
In this episode of China Decode, hosts Alice Han and James Kynge dive into Trump’s trip across Asia — and what it means as Xi Jinping tightens his grip at home. Are the U.S. and China inching toward a truce, or gearing up for another long standoff? Then, they decode China’s crypto paradox — a country that bans trading on the mainland but cheers on Hong Kong’s Web3 boom. And finally, Italy takes aim at Shein and Temu with new levies, but can it really rein in China’s fast-fashion giants without alienating its own shoppers?
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