Summary & Insights
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0:00:43 Support for this show comes from Odoo.
0:00:50 Running a business is hard enough, so why make it harder with a dozen different apps that don’t talk to each other?
0:00:54 Introducing Odoo. It’s the only business software you’ll ever need.
0:00:58 It’s an all-in-one, fully integrated platform that makes your work easier.
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0:01:12 So why not you?
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0:01:30 Canada can be a global leader in reducing the harm caused by smoking, but it requires actionable steps.
0:01:37 Now is the time to modernize Canadian laws so that adult smokers have information and access to better alternatives.
0:02:04 Overcapacity is seen as a problem from a Western lens, but through China’s lens, this is just something where by producing more than they need and then exporting it at cutthroat prices or even losing money in certain respects,
0:02:06 I mean, they’re just de-industrializing other nations.
0:02:10 And that’s not good for sort of capitalism in the profit sense.
0:02:15 But if you’re using this as industrial statecraft, if not war, profit is not the goal.
0:02:20 Welcome to China Decode. I’m Alice Han.
0:02:22 And I’m James King.
0:02:31 In today’s episode of China Decode, we’re discussing China’s strategy to compete with NVIDIA, why the renminbi remains so undervalued.
0:02:40 And later, we’ll speak with Patrick McGee, author of the fascinating book, Apple and China, the capture of the world’s greatest company, about Apple’s complex relationship with China.
0:02:46 That’s all coming up. But first, let’s do a quick check in with how the Chinese markets are starting the week.
0:02:50 On Monday, the Shanghai A share index rose 0.5 percent.
0:02:55 The Hang Seng H share index closed down 1.2 percent, its largest loss in over two weeks.
0:03:01 Popmart International closed down over 8 percent on continued fears over North American sales trends.
0:03:09 And Chinese chip maker Smic increased 3 percent as investors look to profit off of the budding domestic chip race.
0:03:11 But more on that in just a moment.
0:03:13 All right, let’s get right into it, James.
0:03:16 China’s chip race just opened up a new front.
0:03:25 More Threads, a startup founded by a former NVIDIA executive in China, exploded more than 400 percent on its first trading day in Shanghai,
0:03:34 raising over a billion dollars and instantly becoming Beijing’s latest chip champion in its push to build a homegrown alternative to NVIDIA.
0:03:36 The company isn’t profitable yet.
0:03:43 It’s under U.S. sanctions and it’s still nowhere near the cutting edge relative to, say, Taiwan or the States.
0:03:46 But its monster IPO signals something larger.
0:03:53 China is pouring unprecedented capital and political muscle into manufacturing graphic processing units, or GPUs,
0:03:58 hoping to close the gap and secure another pillar of technological independence.
0:04:09 James, beyond this name being great, more Threads, what strikes me as being fascinating is the fact that you have such a huge gain on its first trading day.
0:04:15 I looked it up relative to, say, NVIDIA or even Smic, and this is orders of magnitude larger.
0:04:19 Smic opened 64 percent on its IPO day stock surge.
0:04:21 Canbera Corn was 230 percent.
0:04:23 This is 425 percent.
0:04:31 Now, we can talk about whether or not it’s overvalued, but what is clear is that there’s a ton of enthusiasm on the mainland for Chinese chip makers.
0:04:34 This is something that we flagged in the past.
0:04:47 But what’s your take very, very quickly on whether or not this is an overvalued stock and why we’ve seen so much frenzy for this new entrant into the domain that is really trying to be the NVIDIA of China?
0:04:52 Yeah, Alice, I mean, it’s really hard to know whether this frenzy is justified at the moment.
0:05:04 But what I think it does speak to is the size of the Chinese semiconductor industry, the size of the sector and, you know, the prospects that this sector has.
0:05:10 Already, China is the world’s biggest market for semiconductors this year.
0:05:17 Maybe there’s going to be more than 200 billion US dollars spent in buying semiconductors in China.
0:05:23 And this company, Moore’s Threads, basically wants to replace NVIDIA.
0:05:26 I mean, this sounds like a like a big aim.
0:05:31 And it may be that, you know, Moore’s Threads will never be the NVIDIA of China.
0:05:42 But at the moment, it looks like the market is betting on, well, maybe that it will partly replace some of NVIDIA’s sales in China.
0:05:52 So that’s a very big thing to say straight off, because NVIDIA sells about 17 billion US dollars in China this year.
0:05:55 That’s about 13 percent of its global revenues.
0:05:59 And as we all know, NVIDIA is the world’s biggest company.
0:06:04 So as usual in our discussions, Alice, we’re painting on a huge canvas here.
0:06:09 The implications of what may or may not happen here are really enormous.
0:06:20 The other thing is that, as you’ve already mentioned, China has a clear and explicit policy to boost sales of domestic chips.
0:06:24 That’s domestically made chips and not imported chips.
0:06:29 And as we’ve seen, China is putting its money where its mouth is.
0:06:31 It’s got something called the Big Fund.
0:06:38 To give it its proper name, it’s called the National Integrated Circuit Industry Investment Fund.
0:06:51 It’s basically around 100 billion US dollars in three tranches that are given as subsidies to promising Chinese semiconductor companies.
0:06:56 And the latest tranche is about 50 billion US dollars.
0:07:08 So the Chinese state is very much behind companies like Moore’s Threads that are aiming to replace foreign companies selling semiconductors into China.
0:07:21 So at the moment, although things seem to be sort of stacked against this small Chinese company or, well, relatively small, I mean, it’s starting from a low base.
0:07:22 It doesn’t make a profit.
0:07:25 It’s on the US export control list.
0:07:31 So there’s a lot of things that are not necessarily arguing that well for it.
0:07:47 But the big picture, the size of the market, the size of the government support, and the fact that it makes a product or makes so-called GPUs, which are intended to directly replace quite a few of NVIDIA’s sales in China.
0:07:55 All of those things, I think, are behind this enormous valuation and the way in which, obviously, investors of China are getting behind it.
0:08:00 But overall, I’d say at the moment, it’s too early to say whether this company will be successful.
0:08:03 What’s your take?
0:08:04 Yeah, I think it’s too early to say.
0:08:07 And just some details about this, to your point, James.
0:08:10 They’ve really expedited the IPO for this company.
0:08:17 They obtained the IPO approval from the Shanghai Stock Exchange in 88 days, and that’s a record in SSE history.
0:08:21 And then we’ve got other listings that are coming down the pipeline as well that’s worth watching.
0:08:29 Apparently, this Shanghai Stock Exchange has approved applications from other chip makers like MetaX, Integrated Circuits, SJ Semiconductor, Shaman UX, IC.
0:08:37 So there’s a whole host, as you’re rightly mentioning, James, within an ecosystem that they’re really trying to rapidly build in chips.
0:08:43 But the bullish case is that it’s going to end up being something like Cambercorn, which is a chip maker for AI accelerators.
0:08:46 And that’s seen a 14-fold surge in revenues in Q3.
0:08:49 Now, the company’s finally profitable after running losses.
0:08:52 But, you know, we were doing the maths together.
0:08:58 In the first three quarters of this year, revenues are up 181% year-on-year.
0:09:04 But still, in the last three years, Moore’s Threads has run 6 billion NB of losses.
0:09:06 It’s still not yet profitable.
0:09:14 And as we mentioned previously at the top of this episode, October 2023, Moore’s Threads was added to the U.S.’s entity listing.
0:09:17 So there’s a ban on what it can import.
0:09:28 And right now, to your point, James, they’re trying to offer these GPUs within a full stack of chips, networking, and software that is used to run the chips in data centers.
0:09:34 So the goal really is to help in AI training, 3D graphics rendering, and physical simulation.
0:09:39 Whether or not they can get there and be competitive in NVIDIA remains to be seen.
0:09:45 But it certainly is a compelling story, not just because of the government push, but even the background of the founder.
0:09:49 This is a guy who worked at NVIDIA at the China desk for 15 years.
0:09:50 He was the head of China.
0:10:01 He was a computer science graduate from Nanjing University of Science and Technology, worked for HP and Dell before NVIDIA, and now is a newly minted billionaire, along with a lot of his other colleagues.
0:10:06 So we’ll see whether or not he can be the new Jensen Huang of China.
0:10:13 But certainly, I think we agree, James, that there’s a lot of government backing behind this guy, as well as the other companies that are coming up behind them.
0:10:15 That’s it. Absolutely.
0:10:34 And I think quite a few people in the U.S. will be looking at the fact that the founder of this company, Moore’s Threads, used to head up the operations of NVIDIA in China and thinking, you know, how much American technology and know-how is kind of going out the back door to Chinese companies?
0:10:41 I’m not saying this is illegal, but, you know, as China begins to catch up, and you’ve mentioned some of the cases there.
0:10:52 You mentioned Cambricon, and of course, Huawei has got some chips which are now competing and gaining some big contracts in the China market, now competing also with NVIDIA.
0:11:05 I think quite a lot of people in the U.S. are wondering, you know, how do we stop know-how and technology going out of the back door of some of our biggest companies to Chinese competitors?
0:11:14 And I think that this is another case that really will concentrate the minds of policymakers in Washington and other people in the industry as well.
0:11:18 Okay, we’ll be back with more just after a quick break. Stay with us.
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0:13:24 Welcome back. As we head into 2026, one of the biggest open questions in global markets is whether China is finally ready to let the renminbi strengthen in a meaningful way. On paper, the currency is deeply undervalued, and historically so, by as much as 40-50%, depending on the metric you use.
0:13:36 And economists inside and outside China say a stronger yuan could boost household spending, ease trade tensions with the rest of the world, and help Beijing pivot away from its export-led growth model.
0:13:49 But politically, Xi Jinping’s team is caught between wanting global credibility for the yuan and wanting tight control over the exchange rate at a time of deflation, weak domestic demand, and a fragile property sector.
0:14:02 Just to walk this back to first principles, the reason a currency’s value matters relative to other currencies is that it decides the trade competitiveness or cheapness, simply, relative to other currencies.
0:14:13 So if China is, and it has been, devaluing its currency relative to other currencies around the world, it effectively is making its good cheaper relative to other goods around the world.
0:14:19 So that’s why this currency issue remains salient when we’re talking about trade imbalances.
0:14:33 You know, we’ve done some internal calculations over the last few years, and it seems that the currency could be devalued by as much as 20% if you are accounting for internal and external dynamics in the balance of payments.
0:14:40 We can go into the nitty-gritty of the balance of payments and why they diverge so much from the customs data that the Chinese government officially present.
0:14:52 But I found compelling Brad Setz’s point, and Brad Setz is really someone I rate highly in this space, based on the IMF data, we could see the currency being devalued between 18% to 30%, so as much as 30%.
0:15:03 And the reason this matters is because it is fundamental to China’s trade surplus with America, with Europe, with many countries in the rest of the world.
0:15:09 And it’s fundamental to the fact that Chinese economy remains structurally very imbalanced.
0:15:18 You know, when you have a weak currency, it benefits the exporters, it benefits China’s export-led growth model, but it does not benefit everyday households.
0:15:26 Everyday Chinese who are buying and choosing to use the CNY to purchase, say, foreign goods that are relatively then more expensive.
0:15:37 So it’s baffling, I think, to a lot of Western observers why, as China wants to rebalance its economy, it remains still wedded to a low CNY model.
0:15:46 Because at the end of the day, it seems to be a disservice to the rebalancing efforts to support the household, to support domestic demand.
0:15:57 But my own take, and I want to get yours very quickly, James, is that at the end of the day, as much as they talk about rebalancing, this whole economic model is still highly dependent on exports.
0:16:00 It’s still highly dependent on the manufacturing sector.
0:16:09 And if anything, the five-year plan that we’ll see unveiled fully in March seems to suggest that they want to double down on this manufacturing-led growth.
0:16:22 So I think even although they want to talk about, more recently in domestic China, a stronger CNY, it’s hard for me to see them let go of this weaker CNY policy.
0:16:27 But I looked at the data of China’s currency devaluation since about 2021.
0:16:34 We’ve seen it go down 18%, whereas the other currencies like the dollar and the euro have risen since the end of 2021.
0:16:42 And more importantly than that, actually, what we saw this year, in spite of the fact that the currency has been relatively strong to the dollar,
0:16:47 if you look at the trade-weighted basket, and this is important, the CFETS and MEB index,
0:16:53 that’s China’s currency relative to a basket of other trade-related foreign currencies,
0:16:57 it’s been going down since the beginning of this year.
0:17:02 So it’s been depreciating relative to the euro, to the GPY, to a lot of these other trading currencies.
0:17:12 And this is excluding the US, where obviously we’ve seen this weak dollar story that’s driven some degree of relative CNY strength this year.
0:17:15 But James, enough of my rambling about this.
0:17:17 What’s your hot take on the CNY?
0:17:18 And why it matters.
0:17:26 Yeah, no, I mean, we’re speaking just a few hours after China announced its trade surplus for November.
0:17:37 And that means that in the first 11 months of this year, the Chinese trade surplus for goods already is in excess of 1 trillion US dollars.
0:17:43 And that means that for the full year, it might be about 1.2 trillion US dollars,
0:17:51 which, according to various estimates that I’ve been looking at, means that this could be one of the highest trade surpluses in history,
0:17:59 roughly equivalent to some of the huge surpluses we saw the US have in the last years of the Second World War.
0:18:03 So we’re really talking about exceptionally high trade surpluses.
0:18:11 And one of the reasons for that, of course, is that the renminbi, the yuan, the CNY, whatever we call it, is undervalued.
0:18:17 That means that all of China’s exports to the world are much cheaper than they should be,
0:18:21 according to various different estimates that economists make.
0:18:36 And I think the reason that this is so key right now is that some people, just a few, not that many, inside China are starting to talk about a window for renminbi appreciation.
0:18:42 So the person that really came onto my radar was a man called Mao Yen Liang.
0:18:49 He is chief strategist at the China International Capital Corporation, which is a famous investment bank in China.
0:18:51 Some people call it the Goldman Sachs of China.
0:19:02 And he said that because China’s manufacturing competitiveness is so strong, a window for renminbi appreciation is opening.
0:19:13 And then another quite influential Chinese voice, Wei Jian Shan, who is chief executive of a private equity company called PAG.
0:19:15 He’s based in Hong Kong.
0:19:32 He said, and this is even more dramatic, that a gradual appreciation of at least 50% in the value of the renminbi over the next five years would be both feasible and beneficial to China.
0:19:48 So I don’t know if we agree on his estimate there of over 50%, but, you know, in the minds of several economists and some of the data that you’ve just been quoting, the renminbi is severely undervalued.
0:20:01 So if this really does change now, even if there’s a gradual appreciation that goes on for several years to come, so many things will change.
0:20:08 But China’s appetite for imports may well change because it means that imports will become cheaper to Chinese people.
0:20:23 Maybe investors all over the world will say, oh, Chinese assets are going to become more valuable relative to the U.S. dollar as the renminbi climbs against the U.S. dollar.
0:20:26 And so, therefore, let’s buy some of these Chinese stocks.
0:20:29 I mean, I remember I was in Japan in the 80s.
0:20:40 I remember that happening in such a massive way in the 80s after the yen began to appreciate post the Plaza Accord in 1985, I think it was.
0:20:45 And we saw huge tidal waves of capital inflows into the Japanese market.
0:20:47 I’m not saying that’s going to happen this time.
0:20:51 I don’t think that history will repeat itself, but it could rhyme.
0:21:00 You know, we could get a situation in which Chinese assets become more popular, more attractive to investors around the world.
0:21:08 So the last thing I’d mention, which is a slightly humorous thing, is the so-called Big Mac Index.
0:21:18 This is the Economist magazine’s kind of back-of-the-envelope calculation on whether or not a currency is overvalued or undervalued.
0:21:28 And it basically compares the price of a Big Mac sold at McDonald’s in the U.S., let’s say, compared to, in this case, China.
0:21:41 And currently, a Big Mac in McDonald’s in the U.S. costs $6.01, whereas in China, it costs the equivalent of $3.6 U.S.
0:21:49 So you can see that even according to the Big Mac Index of The Economist, the renminbi is severely undervalued.
0:21:52 So, you know, let’s see how this goes.
0:22:01 But there really is no more important price in the whole economy than the price of its currency relative to other currencies.
0:22:05 So if the renminbi does start to appreciate, a lot of things will change.
0:22:13 Yeah, I’m somewhat skeptical that the voices that you mentioned will be the dominant ones in this debate.
0:22:22 As you know, James, for the better part of a decade, we’ve heard a lot of talk about China needing a stronger currency to promote, I mean, be internationalization.
0:22:31 But when we look at the figures, they haven’t really moved that much in terms of the share of global FX reserves, in terms of the share of global payments.
0:22:33 Now, they’ve marginally increased in the share of global payments.
0:22:38 But if you look at the share of FX reserves, the U.S. is still at about 56 percent.
0:22:41 China’s is about 2 percent share of global FX reserves.
0:22:56 And look, if they really cared about strengthening the CNY, this could help actually make CNY more attractive for payments in trade invoicing and for an FX reserve in the share of other countries’ global FX reserves.
0:22:58 So we’ll have to watch this space.
0:22:59 I’m a bit more on the skeptical side.
0:23:12 One thing that I will add, as we’re still in the midst of this phase two of a trade deal between the U.S. and China, when I was in China in November, there was some discussion about,
0:23:23 a quiet Plaza Accord, you know, a la ATEEZ between Japan and the U.S., where Japan quietly appreciated its currency, facing pressure from the Americans to do so.
0:23:28 Similarly, we saw something happen between China and the U.S. in 2016.
0:23:31 There was discussion about a Shanghai Accord.
0:23:45 Look, I think this could be a way in which China helps in the trade negotiations, because ultimately Trump wants a weaker dollar, and he believes that currencies really drive trade imbalances, rightly or wrongly.
0:23:52 So, again, we should watch this space, because I think it’s politically salient in the ongoing trade talks between Washington and Beijing.
0:24:00 Certainly, this administration in the U.S. cares a lot about currencies, so we’ll have to see if there is pressure put on the CNY.
0:24:03 Well, finally, we disagree on something, Alice.
0:24:08 You’re not buying this story of renminbi appreciation as much as me, I think, but that’s interesting.
0:24:10 I mean, let’s see how it goes.
0:24:11 I fully get your point.
0:24:18 This is the dog that didn’t bark on so many occasions, on so many occasions in the last 20, 30 years.
0:24:25 I can remember when everybody outside China was getting really excited about the renminbi appreciation, and often it never happened.
0:24:27 And in some cases, the opposite happened.
0:24:29 The renminbi depreciated.
0:24:34 So, you know, maybe you’re right, but I’m going to stick my neck out this time.
0:24:36 I think it might happen this time.
0:24:51 And I also note that President Emmanuel Macron of France, who was in China just recently, was talking about the threat of potential protectionism in Europe and, you know, things like that.
0:25:04 So maybe it’s on China’s radar that unless it allows the renminbi to appreciate, it could be storing up quite a bit more pressure from some of its most important export markets.
0:25:05 Yeah, definitely.
0:25:10 Okay, let’s take one last quick break, and we’ll be back with Patrick McGee, so stay with us.
0:25:17 Support for this show comes from Odoo.
0:25:23 Running a business is hard enough, so why make it harder with a dozen different apps that don’t talk to each other?
0:25:25 Introducing Odoo.
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0:25:32 It’s an all-in-one, fully integrated platform that makes your work easier.
0:25:36 CRM, accounting, inventory, e-commerce, and more.
0:25:42 And the best part? Odoo replaces multiple expensive platforms for a fraction of the cost.
0:25:45 That’s why over thousands of businesses have made the switch.
0:25:46 So why not you?
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0:25:58 Well, welcome back.
0:26:01 We’re joined now by journalist Patrick McGee.
0:26:09 He is the author of the fascinating book, Apple in China, The Capture of the World’s Greatest Company, which was published earlier this year to widespread acclaim.
0:26:12 Patrick, thanks so much for joining us.
0:26:15 It seems quite fitting that you are our first guest.
0:26:18 I believe there is an FT connection with James as well.
0:26:22 But you are the honorary first guest, so welcome to China Decode.
0:26:24 Amazing. Huge honor. Thank you, Alice. Thank you, James.
0:26:29 Well, let’s go straight into your book, which I am midway reading, and I am absolutely loving it.
0:26:34 Your book takes the reader through the recent history of Apple’s incredible investment in China.
0:26:45 What’s striking to me is that Apple, as a company earning $400 billion in revenues, is unlike most U.S. tech companies, it is very hardware dependent and very China dependent.
0:26:52 And in fact, in the course of its evolution and relationship with China, it’s actually doubled down on its China dependency.
0:27:00 And the iPhone is still its most important product with huge vulnerabilities because of its relationship and ties to China.
0:27:08 Why, to your mind, has China doubled down on this strategy that’s made it even more reliant on China in the last few years and not less?
0:27:23 Well, the subtitle of the book is The Capture of the World’s Greatest Company, and it’s because there just is no other place on the planet where Apple can build products in the quality it needs, but especially at the quantity it needs and, of course, at the cost that it requires.
0:27:28 They’ve been making, you know, investments in China across hundreds of factories for 25 years.
0:27:32 There’s just no other place where those investments would have the same return on investment.
0:27:37 And there’s no other place just capable of achieving what Apple has demanded.
0:27:42 And so the history really is a narrative of how Apple and China sort of came to be partners, right?
0:27:44 There’s sort of a marriage here of skill and scale.
0:27:50 And I think there’s a bit of hubris within Apple that thinks, look at what we did the last 25 years.
0:27:52 Now we can do that in India.
0:28:01 And for a bunch of reasons that, like, I wish were incorrect because I would love to see things take off in India, I just don’t think that copy and paste strategy is really going to work.
0:28:10 I think their fate is really tied to China for a host of reasons and, you know, ideas that they’re going to move production and diversified production to the United States, for instance, I think are fanciful.
0:28:13 And we’re going to have a whole host of bad policies if we think that’s a realistic option.
0:28:18 And just a quick follow up, why is it that it’s so hard to get off this China dependency?
0:28:22 What is it that’s so, so generous and unique about the China case that makes it so captive?
0:28:28 Apple’s products are just really complicated and they’re doing so at huge scale.
0:28:34 So if you remember the first iPhone in 2007, they only made about 5 million of them and it was only a U.S. product, right?
0:28:37 It didn’t even work outside of AT&T networks in the United States.
0:28:42 By 2015, they were building 230 million of them a year, right?
0:28:44 There are a thousand components within each iPhone.
0:28:50 If you’re building up to a million a day in peak season, you’re operating with a billion components per day.
0:28:55 I mean, America just doesn’t have factories to really make any of those components, let alone all of them.
0:29:11 And China introduces in the early 2000s sort of something called next door manufacturing, where, you know, in the previous years, Apple would be building in Taiwan, but relying on a network that would be in Singapore, Thailand, you know, Malaysia, China would be part of it and Japan and Korea.
0:29:15 And, you know, when you were prototyping something, you were literally crossing bodies of water, right?
0:29:20 To sort of do the assembly and then make things work and then crossing all the way back to California to show it to Steve Jobs, right?
0:29:22 This is sort of in the early chapters.
0:29:29 China made that instead of crossing bodies of water and going through customs and all this sort of stuff, it made it a walk down the street, right?
0:29:39 The way that they introduced world-leading ports, eight-lane highways, high-speed rail, the efficiencies in China just aren’t seen on a similar scale anywhere else on the planet.
0:29:48 I mean, I’ve talked to people really senior at Apple in the 2000s who would say, even if we knew Xi Jinping was coming when the iPhone was birthed, where else would you have us go?
0:29:56 There was just no place where you had this sort of, what Kyle Chan has called, absorption capacity to understand and deploy Apple’s lessons.
0:30:04 So, I mean, there’s probably other reasons, but I hope that’s a decent overview as to just why China is so dominant and why Apple has no other choice.
0:30:07 Absolutely, and terrific to have you on, Patrick.
0:30:11 I’m just interested a little bit in the political context of this.
0:30:16 I mean, you started off by showing us how Apple has been captured by China.
0:30:25 Does China’s hold over Apple give China any kind of political influence in Washington or other forms of influence?
0:30:27 What do you think about that?
0:30:28 Well, yes.
0:30:32 I mean, obviously, China’s hold over Apple is just one of many factors.
0:30:35 So maybe it’s difficult to pinpoint that expressly.
0:30:43 But I just think when Donald Trump went after China in Trump 2.0, right, in just the recent months, Beijing didn’t have to do a lot, right?
0:30:46 Sort of lifted its sleeves just to show the muscle.
0:30:53 I mean, the policy of, you know, licensing rare earth minerals for any sort of product wasn’t even something that took effect.
0:30:59 But the mere threat of that essentially was considered a break-the-glass moment, and Washington complained about it.
0:31:00 But essentially, Trump had to back down.
0:31:10 I mean, I think he’s deploying a strategy that might have worked in 2016 and 17, not realizing just how more prepared for it China is this time around, right?
0:31:12 I mean, you think of policies like the Belt and Road Initiative.
0:31:14 I mean, that is many things.
0:31:21 But one thing it is, it’s an initiative to make sure that there are thriving markets outside of Europe, outside of America, where China can send its exports to.
0:31:28 Made in China 2015, I think, has been a wildly successful plan on the part of China to become dominant across 10 different industries.
0:31:39 And the book makes the case that Apple, however, inadvertently, is the biggest supporter of Made in China 2015, which is a fairly stunning claim, but I think one that’s pretty well backed up in the 400-page narrative.
0:31:48 Well, another thing that struck me as interesting, Patrick, in your book is the fact that, in a way, and I’m inferring it, you can’t have Huawei and Xiaomi in China without Apple in China.
0:31:57 That there were, in some of these contracts, embedded within the relationship between the OEM suppliers and Apple, that they couldn’t be the suppliers too dependent on Apple.
0:31:59 Can you walk us through that a little bit?
0:32:11 Because I find that fascinating when we think about the introduction of these Western companies like Apple and Tesla, that, in a way, they kind of kickstart a domestic ecosystem that wouldn’t have existed without them.
0:32:24 Yeah, I mean, this is sort of like a second-order, third-order impact of what it means to have Apple operations in your country, which is that, like, the biggest contribution I think the book makes to Apple history is that Apple doesn’t outsource in the traditional way, right?
0:32:33 If you and I build a product together, or design a product together, the idea of finding an outsourcer is, you know, someone that’s competent in the wherewithal of how to actually build something.
0:32:36 The assumption is that there is a producer available to do that.
0:32:42 In China’s narrative, or Apple in China’s narrative, they don’t find the competence in China.
0:32:44 They build the competence in China.
0:32:52 Literally just engineering 101 with so many Apple engineers that, you know, among the industries Apple disrupts is the airline industry, right?
0:33:00 United begins flying to places like Hangzhou and Chengdu, places that are as furthest away, like, as is possible in United’s entire network.
0:33:08 And they begin flying there three times a week with the understanding that Apple will buy so many first-class tickets that it doesn’t matter if the rest of the plane is empty, right?
0:33:18 So they are having an enormous contribution building up the competencies, in fact, purchasing the machinery and installing it on the production line of all these factories.
0:33:26 And so, you know, that’s just like sort of the biggest takeaway of the book, that Apple had this massive influence on all of these factories.
0:33:37 So once Apple has built up these competencies, what they experience is that, you know, if you remember the first five, six, seven iPhones, there were pretty major changes to those designs.
0:33:47 And so what would happen, basically, is if they obviated the need for certain components, ipso facto, they were obviating the need for that entire supplier.
0:33:52 And because Apple is such a secretive company, that supplier would find out sort of at the last possible second.
0:34:02 And again, if you remember going from 5 million iPhones in 2007 to 230 million by 2015, imagine you’re on the ground floor of that sort of exponential growth.
0:34:08 And then Apple just cuts you off after you’ve made all sorts of investment and you’ve got all sorts of people and real estate and machinery.
0:34:10 I mean, you would just go bankrupt.
0:34:22 I mean, so this was just happening kind of all the time where if Apple made that sort of turn, it was causing all sorts of sort of political problems because they’d be working with, you know, the likes of Fox 100 would be working with who’s on the politics in the ground there.
0:34:32 And so Apple instituted this rule called the 50% rule, which was that they would tell their supplier, however fast you’re growing with us, you need to grow that fast with somebody else.
0:34:34 So it was a self-interested reason.
0:34:35 It gave Apple flexibility, right?
0:34:38 They felt like they could pivot without sort of causing such damage.
0:34:54 But if I’m lens technology in Shenzhen and Apple’s been telling me and teaching me and co-creating, to be clear, you know, facilities and processes to take corning glass that’s cut by the meter and then cut it, temper it, you know, help etch it with multi-touch technology.
0:34:56 Well, what am I going to do with that, with those ideas?
0:34:59 I’m going to teach the local homegrown suppliers.
0:35:01 I’m going to teach Huawei and Oppo and Vivo and Xiaomi.
0:35:11 So Apple, in a sense, built up its own competitors who were able to rely on the very competencies that Apple had brought to the country.
0:35:15 My sort of quip about this is that in the West, we often think that Apple killed Nokia, right?
0:35:19 Nokia wasn’t able to keep up with multi-touch technology and software, the iOS.
0:35:21 I think it’s much more of a hardware story.
0:35:24 But if it’s a hardware story, Apple was never big enough to kill Nokia.
0:35:27 Nokia often had 50% penetration in certain markets.
0:35:29 Apple’s never had more than 20% globally.
0:35:31 So who killed Nokia?
0:35:37 And the answer is the Chinese competitors that Apple had made so good by building up a supply chain that they could all rely on.
0:35:38 Fascinating.
0:35:40 Just looking forward a little bit, Patrick.
0:35:46 I mean, if we try to think forward maybe a decade or five years or something like that,
0:35:57 what hope do you think the rest of the world, I mean, the West, has to loosen China’s capture of Apple and other big tech companies, not just Apple?
0:36:03 I mean, in the case of Apple, there is this attempt to get manufacturing going in India.
0:36:08 I’ve seen various numbers, but there are quite a few iPhones now being made in India.
0:36:11 Do you think that’s a long-term strategy?
0:36:17 Do you think it’s something that could bear fruit over a five, ten-year timescale?
0:36:28 Or are we basically in a world in which China captures Apple, dominates the supply chain for smartphones for the foreseeable future?
0:36:33 It’s such a pessimistic outlook at the end of the book, and it’s unfortunately the one that I still have now.
0:36:41 I’m always hoping that some expert is able to shake me out of my pessimism, and I’ve sort of been asking that, you know, adamantly of all sorts of people that I’ve been meeting over the last six months.
0:36:45 And basically just nobody has been able to do it, and they’re not really even trying.
0:36:55 I mean, the sort of the more you know about the fields, the more you understand about China’s dominance in these sectors and how incapable other places are, not least of which America, but unfortunately India for a host of reasons as well.
0:37:09 So, I mean, look, it’s basically, you know, engineers and executives that are working in India on behalf of Apple or its suppliers like Foxconn and Tata that are the ones that are saying, like, this isn’t working the way that we need it to, right?
0:37:13 If you talk about India speed, you’re not talking about as the equivalent of Shenzhen or China speed.
0:37:15 It’s unfortunately a pejorative term.
0:37:19 India just doesn’t have the same next-door facilities or ecosystems.
0:37:32 They want to have the higher value-added stuff, the sort of things that the Koreans, for instance, are really great at, but they don’t quite get that what makes China so good is having everything, right?
0:37:44 Deeply skilled PhDs at Foxconn coupled with migrant labor, where the job can literally be taught to you in 20 minutes on a Monday, and by Friday, you’re already at the peak of your strength, your abilities to be able to pull that off.
0:37:54 India sort of doesn’t want to play those roles, or rather the ministers driving the change in certain provinces like Tamil Nadu and Karnataka don’t want to play those roles, and yet, if they don’t, they’re never going to compete with China.
0:38:09 So, unfortunately, I’m quite pessimistic about our chances, and I would maybe just point to basic statistics and projections, like, from the United Nations that would say China today has roughly one-third of the value-added in manufacturing, and their projection for 2030 is that China will have 45% of it.
0:38:15 I want to be more optimistic, but when that’s the sort of broader paradigm that we’re working in, where is the optimism coming from?
0:38:16 Absolutely.
0:38:19 If I could just have a quick follow-up.
0:38:23 I mean, what kind of geopolitical power does this give China?
0:38:30 I mean, if China’s making 45% of the world’s manufacturing value added by 2035, was it?
0:38:43 And there’s another reference to a scholar calling China the OPEC of intermediate products, because it makes so many of the components that the world needs to make just about everything.
0:38:47 What sort of geopolitical power does that give China going forward?
0:38:59 I mean, does that mean that China can basically hold everybody to ransom, indulge in a bit of economic coercion when it wants to get its way in the world, either politically or in economic matters?
0:39:00 Yeah.
0:39:01 I mean, aren’t we already seeing that?
0:39:05 I mean, that’s sort of the lesson, I think, over the last six months or so.
0:39:08 So I would sort of say we’re just watching that play out, right?
0:39:13 I mean, even before Trump 2.0, it was Biden that put 100% tariffs on EVs coming from China.
0:39:19 And if Europe sort of doesn’t impose that sort of policy, you’re just going to see more and more electric vehicles taking over.
0:39:30 There’s this line from Noah Smith that I really like, you know, the economist, who talks about how overcapacity is seen as a problem from a Western lens.
0:39:41 But through China’s lens, this is just something where by producing more than they need and then exporting it at cutthroat prices or even losing money in certain respects, I mean, they’re just deindustrializing other nations.
0:39:45 And that’s not good for sort of capitalism in the profit sense.
0:39:50 But if you’re using this as industrial statecraft, if not war, profit is not the goal.
0:39:52 That’s a great way to think about it.
0:39:54 Patrick McGee, thank you so much.
0:39:58 This is a great case study for how hard it is to actually decouple from China.
0:40:00 Patrick McGee is the author of Apple in China.
0:40:02 Patrick, thank you so much for your time.
0:40:03 Thank you.
0:40:03 Appreciate it.
0:40:08 All right, James, it’s predictions time.
0:40:10 What’s your prediction for the week?
0:40:12 Well, I’m going to stick with the renminbi.
0:40:16 And as I say, I’m going to nail my colors to the mast.
0:40:22 I’ll almost certainly be wrong because I think every currency prediction I’ve ever come across has been wrong in some way.
0:40:34 But I’d like to say, because I think it’s so important, that I think next year, 2026, the renminbi will appreciate by 10% against the US dollar.
0:40:48 And this will have enormous impacts all over the world, both in flows of capital into China and potentially, you know, the interest that Chinese people show in buying foreign imports as well.
0:40:50 So that’s my prediction, Alice.
0:40:52 I know it’s a bold one.
0:41:00 I may not be right, but I do think that, you know, what I’m trying to get at is the direction that I think this is going to take.
0:41:01 I do think the renminbi will appreciate.
0:41:04 Well, James, it’s good to put your money where your mouth is.
0:41:09 And so we’ll see at the end of next year whether or not we drink a toast to that trade.
0:41:17 OK, so my prediction is more on the back of French President Emmanuel Macron’s recent trip to China, which felt very Gaullist.
0:41:21 You know, if you’re a student in history and the 60s, you’ll understand why.
0:41:24 The fandom that he received in China was pretty incredible.
0:41:32 But I think it’s paint over a relationship that is deteriorating between Europe and China.
0:41:37 Europe runs a huge deficit with China to the tune of $350 billion in 2024.
0:41:41 I could see the Chinese offer olive branches, so to speak.
0:41:42 There were Airbus officials there.
0:41:46 Now, in the past, they’ve had Airbus officials in previous trade meetings.
0:41:52 But I think that the Chinese could potentially offer the olive branch of buying more Airbus planes.
0:41:59 I could see them dropping certain investigations into, say, European pork, again, to help the relationship.
0:42:02 They’ve certainly started to do this French cognac.
0:42:06 But on the flip side, I sense in Europe, and I want to get your quick take on this too,
0:42:13 my prediction in the European context is that we’re going to see a lot more in the form of trade investigations,
0:42:21 tariffs and non-tariff barriers against Chinese goods, and a more concerted effort to de-risk from China.
0:42:25 And I think the critical minerals part is a big part of this as well.
0:42:29 So I think we’re going to have a two-pronged nature to this relationship.
0:42:31 On the one hand, China trying to make nice.
0:42:36 On the other hand, the Europeans on a totally different planet where they’re very, very concerned about the dependency on China.
0:42:45 Yeah, I mean, I think that Europe is certainly getting very hot under the collar about the size of its deficit with China,
0:42:47 its trade deficit in particular.
0:42:50 But I think tariffs will be difficult for Europe.
0:42:56 What will be easier and what I expect to see much more of is non-tariff barriers.
0:43:03 And I think 2026, you know, which chimes with your prediction, may well be the year of non-tariff barriers in Europe,
0:43:10 aimed at keeping these super hyper-competitive Chinese exports out to some degree.
0:43:12 Definitely watch this space.
0:43:15 And I know you’re heading to Europe, so we’ll definitely touch base next week.
0:43:17 All right, that’s all for this episode.
0:43:20 Thank you so much for listening to China Decode.
0:43:22 This is a production of Prof G Media.
0:43:24 Our producer is David Toledo.
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0:43:40 And our executive producer is Catherine Dillon.
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0:02:04 Overcapacity is seen as a problem from a Western lens, but through China’s lens, this is just something where by producing more than they need and then exporting it at cutthroat prices or even losing money in certain respects,
0:02:06 I mean, they’re just de-industrializing other nations.
0:02:10 And that’s not good for sort of capitalism in the profit sense.
0:02:15 But if you’re using this as industrial statecraft, if not war, profit is not the goal.
0:02:20 Welcome to China Decode. I’m Alice Han.
0:02:22 And I’m James King.
0:02:31 In today’s episode of China Decode, we’re discussing China’s strategy to compete with NVIDIA, why the renminbi remains so undervalued.
0:02:40 And later, we’ll speak with Patrick McGee, author of the fascinating book, Apple and China, the capture of the world’s greatest company, about Apple’s complex relationship with China.
0:02:46 That’s all coming up. But first, let’s do a quick check in with how the Chinese markets are starting the week.
0:02:50 On Monday, the Shanghai A share index rose 0.5 percent.
0:02:55 The Hang Seng H share index closed down 1.2 percent, its largest loss in over two weeks.
0:03:01 Popmart International closed down over 8 percent on continued fears over North American sales trends.
0:03:09 And Chinese chip maker Smic increased 3 percent as investors look to profit off of the budding domestic chip race.
0:03:11 But more on that in just a moment.
0:03:13 All right, let’s get right into it, James.
0:03:16 China’s chip race just opened up a new front.
0:03:25 More Threads, a startup founded by a former NVIDIA executive in China, exploded more than 400 percent on its first trading day in Shanghai,
0:03:34 raising over a billion dollars and instantly becoming Beijing’s latest chip champion in its push to build a homegrown alternative to NVIDIA.
0:03:36 The company isn’t profitable yet.
0:03:43 It’s under U.S. sanctions and it’s still nowhere near the cutting edge relative to, say, Taiwan or the States.
0:03:46 But its monster IPO signals something larger.
0:03:53 China is pouring unprecedented capital and political muscle into manufacturing graphic processing units, or GPUs,
0:03:58 hoping to close the gap and secure another pillar of technological independence.
0:04:09 James, beyond this name being great, more Threads, what strikes me as being fascinating is the fact that you have such a huge gain on its first trading day.
0:04:15 I looked it up relative to, say, NVIDIA or even Smic, and this is orders of magnitude larger.
0:04:19 Smic opened 64 percent on its IPO day stock surge.
0:04:21 Canbera Corn was 230 percent.
0:04:23 This is 425 percent.
0:04:31 Now, we can talk about whether or not it’s overvalued, but what is clear is that there’s a ton of enthusiasm on the mainland for Chinese chip makers.
0:04:34 This is something that we flagged in the past.
0:04:47 But what’s your take very, very quickly on whether or not this is an overvalued stock and why we’ve seen so much frenzy for this new entrant into the domain that is really trying to be the NVIDIA of China?
0:04:52 Yeah, Alice, I mean, it’s really hard to know whether this frenzy is justified at the moment.
0:05:04 But what I think it does speak to is the size of the Chinese semiconductor industry, the size of the sector and, you know, the prospects that this sector has.
0:05:10 Already, China is the world’s biggest market for semiconductors this year.
0:05:17 Maybe there’s going to be more than 200 billion US dollars spent in buying semiconductors in China.
0:05:23 And this company, Moore’s Threads, basically wants to replace NVIDIA.
0:05:26 I mean, this sounds like a like a big aim.
0:05:31 And it may be that, you know, Moore’s Threads will never be the NVIDIA of China.
0:05:42 But at the moment, it looks like the market is betting on, well, maybe that it will partly replace some of NVIDIA’s sales in China.
0:05:52 So that’s a very big thing to say straight off, because NVIDIA sells about 17 billion US dollars in China this year.
0:05:55 That’s about 13 percent of its global revenues.
0:05:59 And as we all know, NVIDIA is the world’s biggest company.
0:06:04 So as usual in our discussions, Alice, we’re painting on a huge canvas here.
0:06:09 The implications of what may or may not happen here are really enormous.
0:06:20 The other thing is that, as you’ve already mentioned, China has a clear and explicit policy to boost sales of domestic chips.
0:06:24 That’s domestically made chips and not imported chips.
0:06:29 And as we’ve seen, China is putting its money where its mouth is.
0:06:31 It’s got something called the Big Fund.
0:06:38 To give it its proper name, it’s called the National Integrated Circuit Industry Investment Fund.
0:06:51 It’s basically around 100 billion US dollars in three tranches that are given as subsidies to promising Chinese semiconductor companies.
0:06:56 And the latest tranche is about 50 billion US dollars.
0:07:08 So the Chinese state is very much behind companies like Moore’s Threads that are aiming to replace foreign companies selling semiconductors into China.
0:07:21 So at the moment, although things seem to be sort of stacked against this small Chinese company or, well, relatively small, I mean, it’s starting from a low base.
0:07:22 It doesn’t make a profit.
0:07:25 It’s on the US export control list.
0:07:31 So there’s a lot of things that are not necessarily arguing that well for it.
0:07:47 But the big picture, the size of the market, the size of the government support, and the fact that it makes a product or makes so-called GPUs, which are intended to directly replace quite a few of NVIDIA’s sales in China.
0:07:55 All of those things, I think, are behind this enormous valuation and the way in which, obviously, investors of China are getting behind it.
0:08:00 But overall, I’d say at the moment, it’s too early to say whether this company will be successful.
0:08:03 What’s your take?
0:08:04 Yeah, I think it’s too early to say.
0:08:07 And just some details about this, to your point, James.
0:08:10 They’ve really expedited the IPO for this company.
0:08:17 They obtained the IPO approval from the Shanghai Stock Exchange in 88 days, and that’s a record in SSE history.
0:08:21 And then we’ve got other listings that are coming down the pipeline as well that’s worth watching.
0:08:29 Apparently, this Shanghai Stock Exchange has approved applications from other chip makers like MetaX, Integrated Circuits, SJ Semiconductor, Shaman UX, IC.
0:08:37 So there’s a whole host, as you’re rightly mentioning, James, within an ecosystem that they’re really trying to rapidly build in chips.
0:08:43 But the bullish case is that it’s going to end up being something like Cambercorn, which is a chip maker for AI accelerators.
0:08:46 And that’s seen a 14-fold surge in revenues in Q3.
0:08:49 Now, the company’s finally profitable after running losses.
0:08:52 But, you know, we were doing the maths together.
0:08:58 In the first three quarters of this year, revenues are up 181% year-on-year.
0:09:04 But still, in the last three years, Moore’s Threads has run 6 billion NB of losses.
0:09:06 It’s still not yet profitable.
0:09:14 And as we mentioned previously at the top of this episode, October 2023, Moore’s Threads was added to the U.S.’s entity listing.
0:09:17 So there’s a ban on what it can import.
0:09:28 And right now, to your point, James, they’re trying to offer these GPUs within a full stack of chips, networking, and software that is used to run the chips in data centers.
0:09:34 So the goal really is to help in AI training, 3D graphics rendering, and physical simulation.
0:09:39 Whether or not they can get there and be competitive in NVIDIA remains to be seen.
0:09:45 But it certainly is a compelling story, not just because of the government push, but even the background of the founder.
0:09:49 This is a guy who worked at NVIDIA at the China desk for 15 years.
0:09:50 He was the head of China.
0:10:01 He was a computer science graduate from Nanjing University of Science and Technology, worked for HP and Dell before NVIDIA, and now is a newly minted billionaire, along with a lot of his other colleagues.
0:10:06 So we’ll see whether or not he can be the new Jensen Huang of China.
0:10:13 But certainly, I think we agree, James, that there’s a lot of government backing behind this guy, as well as the other companies that are coming up behind them.
0:10:15 That’s it. Absolutely.
0:10:34 And I think quite a few people in the U.S. will be looking at the fact that the founder of this company, Moore’s Threads, used to head up the operations of NVIDIA in China and thinking, you know, how much American technology and know-how is kind of going out the back door to Chinese companies?
0:10:41 I’m not saying this is illegal, but, you know, as China begins to catch up, and you’ve mentioned some of the cases there.
0:10:52 You mentioned Cambricon, and of course, Huawei has got some chips which are now competing and gaining some big contracts in the China market, now competing also with NVIDIA.
0:11:05 I think quite a lot of people in the U.S. are wondering, you know, how do we stop know-how and technology going out of the back door of some of our biggest companies to Chinese competitors?
0:11:14 And I think that this is another case that really will concentrate the minds of policymakers in Washington and other people in the industry as well.
0:11:18 Okay, we’ll be back with more just after a quick break. Stay with us.
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0:13:24 Welcome back. As we head into 2026, one of the biggest open questions in global markets is whether China is finally ready to let the renminbi strengthen in a meaningful way. On paper, the currency is deeply undervalued, and historically so, by as much as 40-50%, depending on the metric you use.
0:13:36 And economists inside and outside China say a stronger yuan could boost household spending, ease trade tensions with the rest of the world, and help Beijing pivot away from its export-led growth model.
0:13:49 But politically, Xi Jinping’s team is caught between wanting global credibility for the yuan and wanting tight control over the exchange rate at a time of deflation, weak domestic demand, and a fragile property sector.
0:14:02 Just to walk this back to first principles, the reason a currency’s value matters relative to other currencies is that it decides the trade competitiveness or cheapness, simply, relative to other currencies.
0:14:13 So if China is, and it has been, devaluing its currency relative to other currencies around the world, it effectively is making its good cheaper relative to other goods around the world.
0:14:19 So that’s why this currency issue remains salient when we’re talking about trade imbalances.
0:14:33 You know, we’ve done some internal calculations over the last few years, and it seems that the currency could be devalued by as much as 20% if you are accounting for internal and external dynamics in the balance of payments.
0:14:40 We can go into the nitty-gritty of the balance of payments and why they diverge so much from the customs data that the Chinese government officially present.
0:14:52 But I found compelling Brad Setz’s point, and Brad Setz is really someone I rate highly in this space, based on the IMF data, we could see the currency being devalued between 18% to 30%, so as much as 30%.
0:15:03 And the reason this matters is because it is fundamental to China’s trade surplus with America, with Europe, with many countries in the rest of the world.
0:15:09 And it’s fundamental to the fact that Chinese economy remains structurally very imbalanced.
0:15:18 You know, when you have a weak currency, it benefits the exporters, it benefits China’s export-led growth model, but it does not benefit everyday households.
0:15:26 Everyday Chinese who are buying and choosing to use the CNY to purchase, say, foreign goods that are relatively then more expensive.
0:15:37 So it’s baffling, I think, to a lot of Western observers why, as China wants to rebalance its economy, it remains still wedded to a low CNY model.
0:15:46 Because at the end of the day, it seems to be a disservice to the rebalancing efforts to support the household, to support domestic demand.
0:15:57 But my own take, and I want to get yours very quickly, James, is that at the end of the day, as much as they talk about rebalancing, this whole economic model is still highly dependent on exports.
0:16:00 It’s still highly dependent on the manufacturing sector.
0:16:09 And if anything, the five-year plan that we’ll see unveiled fully in March seems to suggest that they want to double down on this manufacturing-led growth.
0:16:22 So I think even although they want to talk about, more recently in domestic China, a stronger CNY, it’s hard for me to see them let go of this weaker CNY policy.
0:16:27 But I looked at the data of China’s currency devaluation since about 2021.
0:16:34 We’ve seen it go down 18%, whereas the other currencies like the dollar and the euro have risen since the end of 2021.
0:16:42 And more importantly than that, actually, what we saw this year, in spite of the fact that the currency has been relatively strong to the dollar,
0:16:47 if you look at the trade-weighted basket, and this is important, the CFETS and MEB index,
0:16:53 that’s China’s currency relative to a basket of other trade-related foreign currencies,
0:16:57 it’s been going down since the beginning of this year.
0:17:02 So it’s been depreciating relative to the euro, to the GPY, to a lot of these other trading currencies.
0:17:12 And this is excluding the US, where obviously we’ve seen this weak dollar story that’s driven some degree of relative CNY strength this year.
0:17:15 But James, enough of my rambling about this.
0:17:17 What’s your hot take on the CNY?
0:17:18 And why it matters.
0:17:26 Yeah, no, I mean, we’re speaking just a few hours after China announced its trade surplus for November.
0:17:37 And that means that in the first 11 months of this year, the Chinese trade surplus for goods already is in excess of 1 trillion US dollars.
0:17:43 And that means that for the full year, it might be about 1.2 trillion US dollars,
0:17:51 which, according to various estimates that I’ve been looking at, means that this could be one of the highest trade surpluses in history,
0:17:59 roughly equivalent to some of the huge surpluses we saw the US have in the last years of the Second World War.
0:18:03 So we’re really talking about exceptionally high trade surpluses.
0:18:11 And one of the reasons for that, of course, is that the renminbi, the yuan, the CNY, whatever we call it, is undervalued.
0:18:17 That means that all of China’s exports to the world are much cheaper than they should be,
0:18:21 according to various different estimates that economists make.
0:18:36 And I think the reason that this is so key right now is that some people, just a few, not that many, inside China are starting to talk about a window for renminbi appreciation.
0:18:42 So the person that really came onto my radar was a man called Mao Yen Liang.
0:18:49 He is chief strategist at the China International Capital Corporation, which is a famous investment bank in China.
0:18:51 Some people call it the Goldman Sachs of China.
0:19:02 And he said that because China’s manufacturing competitiveness is so strong, a window for renminbi appreciation is opening.
0:19:13 And then another quite influential Chinese voice, Wei Jian Shan, who is chief executive of a private equity company called PAG.
0:19:15 He’s based in Hong Kong.
0:19:32 He said, and this is even more dramatic, that a gradual appreciation of at least 50% in the value of the renminbi over the next five years would be both feasible and beneficial to China.
0:19:48 So I don’t know if we agree on his estimate there of over 50%, but, you know, in the minds of several economists and some of the data that you’ve just been quoting, the renminbi is severely undervalued.
0:20:01 So if this really does change now, even if there’s a gradual appreciation that goes on for several years to come, so many things will change.
0:20:08 But China’s appetite for imports may well change because it means that imports will become cheaper to Chinese people.
0:20:23 Maybe investors all over the world will say, oh, Chinese assets are going to become more valuable relative to the U.S. dollar as the renminbi climbs against the U.S. dollar.
0:20:26 And so, therefore, let’s buy some of these Chinese stocks.
0:20:29 I mean, I remember I was in Japan in the 80s.
0:20:40 I remember that happening in such a massive way in the 80s after the yen began to appreciate post the Plaza Accord in 1985, I think it was.
0:20:45 And we saw huge tidal waves of capital inflows into the Japanese market.
0:20:47 I’m not saying that’s going to happen this time.
0:20:51 I don’t think that history will repeat itself, but it could rhyme.
0:21:00 You know, we could get a situation in which Chinese assets become more popular, more attractive to investors around the world.
0:21:08 So the last thing I’d mention, which is a slightly humorous thing, is the so-called Big Mac Index.
0:21:18 This is the Economist magazine’s kind of back-of-the-envelope calculation on whether or not a currency is overvalued or undervalued.
0:21:28 And it basically compares the price of a Big Mac sold at McDonald’s in the U.S., let’s say, compared to, in this case, China.
0:21:41 And currently, a Big Mac in McDonald’s in the U.S. costs $6.01, whereas in China, it costs the equivalent of $3.6 U.S.
0:21:49 So you can see that even according to the Big Mac Index of The Economist, the renminbi is severely undervalued.
0:21:52 So, you know, let’s see how this goes.
0:22:01 But there really is no more important price in the whole economy than the price of its currency relative to other currencies.
0:22:05 So if the renminbi does start to appreciate, a lot of things will change.
0:22:13 Yeah, I’m somewhat skeptical that the voices that you mentioned will be the dominant ones in this debate.
0:22:22 As you know, James, for the better part of a decade, we’ve heard a lot of talk about China needing a stronger currency to promote, I mean, be internationalization.
0:22:31 But when we look at the figures, they haven’t really moved that much in terms of the share of global FX reserves, in terms of the share of global payments.
0:22:33 Now, they’ve marginally increased in the share of global payments.
0:22:38 But if you look at the share of FX reserves, the U.S. is still at about 56 percent.
0:22:41 China’s is about 2 percent share of global FX reserves.
0:22:56 And look, if they really cared about strengthening the CNY, this could help actually make CNY more attractive for payments in trade invoicing and for an FX reserve in the share of other countries’ global FX reserves.
0:22:58 So we’ll have to watch this space.
0:22:59 I’m a bit more on the skeptical side.
0:23:12 One thing that I will add, as we’re still in the midst of this phase two of a trade deal between the U.S. and China, when I was in China in November, there was some discussion about,
0:23:23 a quiet Plaza Accord, you know, a la ATEEZ between Japan and the U.S., where Japan quietly appreciated its currency, facing pressure from the Americans to do so.
0:23:28 Similarly, we saw something happen between China and the U.S. in 2016.
0:23:31 There was discussion about a Shanghai Accord.
0:23:45 Look, I think this could be a way in which China helps in the trade negotiations, because ultimately Trump wants a weaker dollar, and he believes that currencies really drive trade imbalances, rightly or wrongly.
0:23:52 So, again, we should watch this space, because I think it’s politically salient in the ongoing trade talks between Washington and Beijing.
0:24:00 Certainly, this administration in the U.S. cares a lot about currencies, so we’ll have to see if there is pressure put on the CNY.
0:24:03 Well, finally, we disagree on something, Alice.
0:24:08 You’re not buying this story of renminbi appreciation as much as me, I think, but that’s interesting.
0:24:10 I mean, let’s see how it goes.
0:24:11 I fully get your point.
0:24:18 This is the dog that didn’t bark on so many occasions, on so many occasions in the last 20, 30 years.
0:24:25 I can remember when everybody outside China was getting really excited about the renminbi appreciation, and often it never happened.
0:24:27 And in some cases, the opposite happened.
0:24:29 The renminbi depreciated.
0:24:34 So, you know, maybe you’re right, but I’m going to stick my neck out this time.
0:24:36 I think it might happen this time.
0:24:51 And I also note that President Emmanuel Macron of France, who was in China just recently, was talking about the threat of potential protectionism in Europe and, you know, things like that.
0:25:04 So maybe it’s on China’s radar that unless it allows the renminbi to appreciate, it could be storing up quite a bit more pressure from some of its most important export markets.
0:25:05 Yeah, definitely.
0:25:10 Okay, let’s take one last quick break, and we’ll be back with Patrick McGee, so stay with us.
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0:25:58 Well, welcome back.
0:26:01 We’re joined now by journalist Patrick McGee.
0:26:09 He is the author of the fascinating book, Apple in China, The Capture of the World’s Greatest Company, which was published earlier this year to widespread acclaim.
0:26:12 Patrick, thanks so much for joining us.
0:26:15 It seems quite fitting that you are our first guest.
0:26:18 I believe there is an FT connection with James as well.
0:26:22 But you are the honorary first guest, so welcome to China Decode.
0:26:24 Amazing. Huge honor. Thank you, Alice. Thank you, James.
0:26:29 Well, let’s go straight into your book, which I am midway reading, and I am absolutely loving it.
0:26:34 Your book takes the reader through the recent history of Apple’s incredible investment in China.
0:26:45 What’s striking to me is that Apple, as a company earning $400 billion in revenues, is unlike most U.S. tech companies, it is very hardware dependent and very China dependent.
0:26:52 And in fact, in the course of its evolution and relationship with China, it’s actually doubled down on its China dependency.
0:27:00 And the iPhone is still its most important product with huge vulnerabilities because of its relationship and ties to China.
0:27:08 Why, to your mind, has China doubled down on this strategy that’s made it even more reliant on China in the last few years and not less?
0:27:23 Well, the subtitle of the book is The Capture of the World’s Greatest Company, and it’s because there just is no other place on the planet where Apple can build products in the quality it needs, but especially at the quantity it needs and, of course, at the cost that it requires.
0:27:28 They’ve been making, you know, investments in China across hundreds of factories for 25 years.
0:27:32 There’s just no other place where those investments would have the same return on investment.
0:27:37 And there’s no other place just capable of achieving what Apple has demanded.
0:27:42 And so the history really is a narrative of how Apple and China sort of came to be partners, right?
0:27:44 There’s sort of a marriage here of skill and scale.
0:27:50 And I think there’s a bit of hubris within Apple that thinks, look at what we did the last 25 years.
0:27:52 Now we can do that in India.
0:28:01 And for a bunch of reasons that, like, I wish were incorrect because I would love to see things take off in India, I just don’t think that copy and paste strategy is really going to work.
0:28:10 I think their fate is really tied to China for a host of reasons and, you know, ideas that they’re going to move production and diversified production to the United States, for instance, I think are fanciful.
0:28:13 And we’re going to have a whole host of bad policies if we think that’s a realistic option.
0:28:18 And just a quick follow up, why is it that it’s so hard to get off this China dependency?
0:28:22 What is it that’s so, so generous and unique about the China case that makes it so captive?
0:28:28 Apple’s products are just really complicated and they’re doing so at huge scale.
0:28:34 So if you remember the first iPhone in 2007, they only made about 5 million of them and it was only a U.S. product, right?
0:28:37 It didn’t even work outside of AT&T networks in the United States.
0:28:42 By 2015, they were building 230 million of them a year, right?
0:28:44 There are a thousand components within each iPhone.
0:28:50 If you’re building up to a million a day in peak season, you’re operating with a billion components per day.
0:28:55 I mean, America just doesn’t have factories to really make any of those components, let alone all of them.
0:29:11 And China introduces in the early 2000s sort of something called next door manufacturing, where, you know, in the previous years, Apple would be building in Taiwan, but relying on a network that would be in Singapore, Thailand, you know, Malaysia, China would be part of it and Japan and Korea.
0:29:15 And, you know, when you were prototyping something, you were literally crossing bodies of water, right?
0:29:20 To sort of do the assembly and then make things work and then crossing all the way back to California to show it to Steve Jobs, right?
0:29:22 This is sort of in the early chapters.
0:29:29 China made that instead of crossing bodies of water and going through customs and all this sort of stuff, it made it a walk down the street, right?
0:29:39 The way that they introduced world-leading ports, eight-lane highways, high-speed rail, the efficiencies in China just aren’t seen on a similar scale anywhere else on the planet.
0:29:48 I mean, I’ve talked to people really senior at Apple in the 2000s who would say, even if we knew Xi Jinping was coming when the iPhone was birthed, where else would you have us go?
0:29:56 There was just no place where you had this sort of, what Kyle Chan has called, absorption capacity to understand and deploy Apple’s lessons.
0:30:04 So, I mean, there’s probably other reasons, but I hope that’s a decent overview as to just why China is so dominant and why Apple has no other choice.
0:30:07 Absolutely, and terrific to have you on, Patrick.
0:30:11 I’m just interested a little bit in the political context of this.
0:30:16 I mean, you started off by showing us how Apple has been captured by China.
0:30:25 Does China’s hold over Apple give China any kind of political influence in Washington or other forms of influence?
0:30:27 What do you think about that?
0:30:28 Well, yes.
0:30:32 I mean, obviously, China’s hold over Apple is just one of many factors.
0:30:35 So maybe it’s difficult to pinpoint that expressly.
0:30:43 But I just think when Donald Trump went after China in Trump 2.0, right, in just the recent months, Beijing didn’t have to do a lot, right?
0:30:46 Sort of lifted its sleeves just to show the muscle.
0:30:53 I mean, the policy of, you know, licensing rare earth minerals for any sort of product wasn’t even something that took effect.
0:30:59 But the mere threat of that essentially was considered a break-the-glass moment, and Washington complained about it.
0:31:00 But essentially, Trump had to back down.
0:31:10 I mean, I think he’s deploying a strategy that might have worked in 2016 and 17, not realizing just how more prepared for it China is this time around, right?
0:31:12 I mean, you think of policies like the Belt and Road Initiative.
0:31:14 I mean, that is many things.
0:31:21 But one thing it is, it’s an initiative to make sure that there are thriving markets outside of Europe, outside of America, where China can send its exports to.
0:31:28 Made in China 2015, I think, has been a wildly successful plan on the part of China to become dominant across 10 different industries.
0:31:39 And the book makes the case that Apple, however, inadvertently, is the biggest supporter of Made in China 2015, which is a fairly stunning claim, but I think one that’s pretty well backed up in the 400-page narrative.
0:31:48 Well, another thing that struck me as interesting, Patrick, in your book is the fact that, in a way, and I’m inferring it, you can’t have Huawei and Xiaomi in China without Apple in China.
0:31:57 That there were, in some of these contracts, embedded within the relationship between the OEM suppliers and Apple, that they couldn’t be the suppliers too dependent on Apple.
0:31:59 Can you walk us through that a little bit?
0:32:11 Because I find that fascinating when we think about the introduction of these Western companies like Apple and Tesla, that, in a way, they kind of kickstart a domestic ecosystem that wouldn’t have existed without them.
0:32:24 Yeah, I mean, this is sort of like a second-order, third-order impact of what it means to have Apple operations in your country, which is that, like, the biggest contribution I think the book makes to Apple history is that Apple doesn’t outsource in the traditional way, right?
0:32:33 If you and I build a product together, or design a product together, the idea of finding an outsourcer is, you know, someone that’s competent in the wherewithal of how to actually build something.
0:32:36 The assumption is that there is a producer available to do that.
0:32:42 In China’s narrative, or Apple in China’s narrative, they don’t find the competence in China.
0:32:44 They build the competence in China.
0:32:52 Literally just engineering 101 with so many Apple engineers that, you know, among the industries Apple disrupts is the airline industry, right?
0:33:00 United begins flying to places like Hangzhou and Chengdu, places that are as furthest away, like, as is possible in United’s entire network.
0:33:08 And they begin flying there three times a week with the understanding that Apple will buy so many first-class tickets that it doesn’t matter if the rest of the plane is empty, right?
0:33:18 So they are having an enormous contribution building up the competencies, in fact, purchasing the machinery and installing it on the production line of all these factories.
0:33:26 And so, you know, that’s just like sort of the biggest takeaway of the book, that Apple had this massive influence on all of these factories.
0:33:37 So once Apple has built up these competencies, what they experience is that, you know, if you remember the first five, six, seven iPhones, there were pretty major changes to those designs.
0:33:47 And so what would happen, basically, is if they obviated the need for certain components, ipso facto, they were obviating the need for that entire supplier.
0:33:52 And because Apple is such a secretive company, that supplier would find out sort of at the last possible second.
0:34:02 And again, if you remember going from 5 million iPhones in 2007 to 230 million by 2015, imagine you’re on the ground floor of that sort of exponential growth.
0:34:08 And then Apple just cuts you off after you’ve made all sorts of investment and you’ve got all sorts of people and real estate and machinery.
0:34:10 I mean, you would just go bankrupt.
0:34:22 I mean, so this was just happening kind of all the time where if Apple made that sort of turn, it was causing all sorts of sort of political problems because they’d be working with, you know, the likes of Fox 100 would be working with who’s on the politics in the ground there.
0:34:32 And so Apple instituted this rule called the 50% rule, which was that they would tell their supplier, however fast you’re growing with us, you need to grow that fast with somebody else.
0:34:34 So it was a self-interested reason.
0:34:35 It gave Apple flexibility, right?
0:34:38 They felt like they could pivot without sort of causing such damage.
0:34:54 But if I’m lens technology in Shenzhen and Apple’s been telling me and teaching me and co-creating, to be clear, you know, facilities and processes to take corning glass that’s cut by the meter and then cut it, temper it, you know, help etch it with multi-touch technology.
0:34:56 Well, what am I going to do with that, with those ideas?
0:34:59 I’m going to teach the local homegrown suppliers.
0:35:01 I’m going to teach Huawei and Oppo and Vivo and Xiaomi.
0:35:11 So Apple, in a sense, built up its own competitors who were able to rely on the very competencies that Apple had brought to the country.
0:35:15 My sort of quip about this is that in the West, we often think that Apple killed Nokia, right?
0:35:19 Nokia wasn’t able to keep up with multi-touch technology and software, the iOS.
0:35:21 I think it’s much more of a hardware story.
0:35:24 But if it’s a hardware story, Apple was never big enough to kill Nokia.
0:35:27 Nokia often had 50% penetration in certain markets.
0:35:29 Apple’s never had more than 20% globally.
0:35:31 So who killed Nokia?
0:35:37 And the answer is the Chinese competitors that Apple had made so good by building up a supply chain that they could all rely on.
0:35:38 Fascinating.
0:35:40 Just looking forward a little bit, Patrick.
0:35:46 I mean, if we try to think forward maybe a decade or five years or something like that,
0:35:57 what hope do you think the rest of the world, I mean, the West, has to loosen China’s capture of Apple and other big tech companies, not just Apple?
0:36:03 I mean, in the case of Apple, there is this attempt to get manufacturing going in India.
0:36:08 I’ve seen various numbers, but there are quite a few iPhones now being made in India.
0:36:11 Do you think that’s a long-term strategy?
0:36:17 Do you think it’s something that could bear fruit over a five, ten-year timescale?
0:36:28 Or are we basically in a world in which China captures Apple, dominates the supply chain for smartphones for the foreseeable future?
0:36:33 It’s such a pessimistic outlook at the end of the book, and it’s unfortunately the one that I still have now.
0:36:41 I’m always hoping that some expert is able to shake me out of my pessimism, and I’ve sort of been asking that, you know, adamantly of all sorts of people that I’ve been meeting over the last six months.
0:36:45 And basically just nobody has been able to do it, and they’re not really even trying.
0:36:55 I mean, the sort of the more you know about the fields, the more you understand about China’s dominance in these sectors and how incapable other places are, not least of which America, but unfortunately India for a host of reasons as well.
0:37:09 So, I mean, look, it’s basically, you know, engineers and executives that are working in India on behalf of Apple or its suppliers like Foxconn and Tata that are the ones that are saying, like, this isn’t working the way that we need it to, right?
0:37:13 If you talk about India speed, you’re not talking about as the equivalent of Shenzhen or China speed.
0:37:15 It’s unfortunately a pejorative term.
0:37:19 India just doesn’t have the same next-door facilities or ecosystems.
0:37:32 They want to have the higher value-added stuff, the sort of things that the Koreans, for instance, are really great at, but they don’t quite get that what makes China so good is having everything, right?
0:37:44 Deeply skilled PhDs at Foxconn coupled with migrant labor, where the job can literally be taught to you in 20 minutes on a Monday, and by Friday, you’re already at the peak of your strength, your abilities to be able to pull that off.
0:37:54 India sort of doesn’t want to play those roles, or rather the ministers driving the change in certain provinces like Tamil Nadu and Karnataka don’t want to play those roles, and yet, if they don’t, they’re never going to compete with China.
0:38:09 So, unfortunately, I’m quite pessimistic about our chances, and I would maybe just point to basic statistics and projections, like, from the United Nations that would say China today has roughly one-third of the value-added in manufacturing, and their projection for 2030 is that China will have 45% of it.
0:38:15 I want to be more optimistic, but when that’s the sort of broader paradigm that we’re working in, where is the optimism coming from?
0:38:16 Absolutely.
0:38:19 If I could just have a quick follow-up.
0:38:23 I mean, what kind of geopolitical power does this give China?
0:38:30 I mean, if China’s making 45% of the world’s manufacturing value added by 2035, was it?
0:38:43 And there’s another reference to a scholar calling China the OPEC of intermediate products, because it makes so many of the components that the world needs to make just about everything.
0:38:47 What sort of geopolitical power does that give China going forward?
0:38:59 I mean, does that mean that China can basically hold everybody to ransom, indulge in a bit of economic coercion when it wants to get its way in the world, either politically or in economic matters?
0:39:00 Yeah.
0:39:01 I mean, aren’t we already seeing that?
0:39:05 I mean, that’s sort of the lesson, I think, over the last six months or so.
0:39:08 So I would sort of say we’re just watching that play out, right?
0:39:13 I mean, even before Trump 2.0, it was Biden that put 100% tariffs on EVs coming from China.
0:39:19 And if Europe sort of doesn’t impose that sort of policy, you’re just going to see more and more electric vehicles taking over.
0:39:30 There’s this line from Noah Smith that I really like, you know, the economist, who talks about how overcapacity is seen as a problem from a Western lens.
0:39:41 But through China’s lens, this is just something where by producing more than they need and then exporting it at cutthroat prices or even losing money in certain respects, I mean, they’re just deindustrializing other nations.
0:39:45 And that’s not good for sort of capitalism in the profit sense.
0:39:50 But if you’re using this as industrial statecraft, if not war, profit is not the goal.
0:39:52 That’s a great way to think about it.
0:39:54 Patrick McGee, thank you so much.
0:39:58 This is a great case study for how hard it is to actually decouple from China.
0:40:00 Patrick McGee is the author of Apple in China.
0:40:02 Patrick, thank you so much for your time.
0:40:03 Thank you.
0:40:03 Appreciate it.
0:40:08 All right, James, it’s predictions time.
0:40:10 What’s your prediction for the week?
0:40:12 Well, I’m going to stick with the renminbi.
0:40:16 And as I say, I’m going to nail my colors to the mast.
0:40:22 I’ll almost certainly be wrong because I think every currency prediction I’ve ever come across has been wrong in some way.
0:40:34 But I’d like to say, because I think it’s so important, that I think next year, 2026, the renminbi will appreciate by 10% against the US dollar.
0:40:48 And this will have enormous impacts all over the world, both in flows of capital into China and potentially, you know, the interest that Chinese people show in buying foreign imports as well.
0:40:50 So that’s my prediction, Alice.
0:40:52 I know it’s a bold one.
0:41:00 I may not be right, but I do think that, you know, what I’m trying to get at is the direction that I think this is going to take.
0:41:01 I do think the renminbi will appreciate.
0:41:04 Well, James, it’s good to put your money where your mouth is.
0:41:09 And so we’ll see at the end of next year whether or not we drink a toast to that trade.
0:41:17 OK, so my prediction is more on the back of French President Emmanuel Macron’s recent trip to China, which felt very Gaullist.
0:41:21 You know, if you’re a student in history and the 60s, you’ll understand why.
0:41:24 The fandom that he received in China was pretty incredible.
0:41:32 But I think it’s paint over a relationship that is deteriorating between Europe and China.
0:41:37 Europe runs a huge deficit with China to the tune of $350 billion in 2024.
0:41:41 I could see the Chinese offer olive branches, so to speak.
0:41:42 There were Airbus officials there.
0:41:46 Now, in the past, they’ve had Airbus officials in previous trade meetings.
0:41:52 But I think that the Chinese could potentially offer the olive branch of buying more Airbus planes.
0:41:59 I could see them dropping certain investigations into, say, European pork, again, to help the relationship.
0:42:02 They’ve certainly started to do this French cognac.
0:42:06 But on the flip side, I sense in Europe, and I want to get your quick take on this too,
0:42:13 my prediction in the European context is that we’re going to see a lot more in the form of trade investigations,
0:42:21 tariffs and non-tariff barriers against Chinese goods, and a more concerted effort to de-risk from China.
0:42:25 And I think the critical minerals part is a big part of this as well.
0:42:29 So I think we’re going to have a two-pronged nature to this relationship.
0:42:31 On the one hand, China trying to make nice.
0:42:36 On the other hand, the Europeans on a totally different planet where they’re very, very concerned about the dependency on China.
0:42:45 Yeah, I mean, I think that Europe is certainly getting very hot under the collar about the size of its deficit with China,
0:42:47 its trade deficit in particular.
0:42:50 But I think tariffs will be difficult for Europe.
0:42:56 What will be easier and what I expect to see much more of is non-tariff barriers.
0:43:03 And I think 2026, you know, which chimes with your prediction, may well be the year of non-tariff barriers in Europe,
0:43:10 aimed at keeping these super hyper-competitive Chinese exports out to some degree.
0:43:12 Definitely watch this space.
0:43:15 And I know you’re heading to Europe, so we’ll definitely touch base next week.
0:43:17 All right, that’s all for this episode.
0:43:20 Thank you so much for listening to China Decode.
0:43:22 This is a production of Prof G Media.
0:43:24 Our producer is David Toledo.
0:43:27 Our associate producer is Eric Janikas.
0:43:30 Our video editor is Ness Smith-Savadoff.
0:43:33 Our research associate is Dan Shalane.
0:43:35 Our technical director is Drew Burrows.
0:43:37 Our engineer is William Flynn.
0:43:40 And our executive producer is Catherine Dillon.
0:43:44 Make sure to follow us wherever you get your podcasts so you don’t miss an episode.
0:43:46 Talk to you again next week.
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Podcast này tập trung vào ba chủ đề liên kết chặt chẽ: động lực kinh tế và chính trị của cuộc chiến thương mại Mỹ-Trung, những vấn đề hệ thống đằng sau giá dược phẩm cao ở Mỹ, và những rủi ro khi đưa các tài sản biến động mạnh như cổ phiếu tiền mã hóa vào các chỉ số chính. Cuộc thảo luận có cuộc phỏng vấn với Alice Hahn, một nhà kinh tế học về Trung Quốc, người cung cấp góc nhìn từ thực địa tại Bắc Kinh. Cô mô tả sự tự tin đáng ngạc nhiên của các nhà hoạch định chính sách Trung Quốc sau các thông báo áp thuế ban đầu và phác thảo một lộ trình tiềm năng để giảm leo thang, gợi ý rằng cả hai bên có thể tìm được một thỏa thuận “tái cân bằng” cùng có lợi. Tuy nhiên, các host bày tỏ sự hoài nghi sâu sắc về khả năng lãnh đạo chính trị Mỹ thực thi một thỏa thuận như vậy một cách thông thạo.
Một phần lớn cuộc trò chuyện chỉ trích ngành công nghiệp dược phẩm Mỹ, mô tả nó như một ví dụ điển hình của “sự chi phối quy định”. Các host lập luận rằng ngành này đã “vũ khí hóa” ảnh hưởng của mình lên các quan chức dân cử để duy trì giá thuốc nhân tạo cao ở Mỹ, thường cao gấp 4 đến 8 lần so với các quốc gia phát triển khác. Họ phân tích một sự kiện chính trị gần đây khi các đề xuất kiểm soát giá thuốc ban đầu làm thị trường hoảng sợ, nhưng khi lệnh hành pháp thực tế tỏ ra vô hiệu lực, giá cổ phiếu đã phục hồi—làm nổi bật nhận thức của thị trường rằng hệ thống chính trị không có khả năng thực hiện cải cách thực chất.
Chủ đề chính cuối cùng xem xét quyết định đưa Coinbase vào chỉ số S&P 500. Các host coi đây là một sự hợp pháp hóa nguy hiểm cho một thị trường được xây dựng trên việc giao dịch các tài sản crypto đầu cơ cao với giá trị cơ bản thấp. Họ vẽ nên một sự tương đồng trực tiếp với cuộc khủng hoảng tài chính 2008, lập luận rằng khi các tổ chức tài chính chính thống chấp nhận và xây dựng cơ sở hạ tầng xung quanh “các tài sản vô giá trị”, nó sẽ tạo ra rủi ro hệ thống. Việc đưa vào này buộc các nhà đầu tư thông thường, thông qua các quỹ chỉ số và tài khoản hưu trí của họ, phải sở hữu một phần của hệ sinh thái đầu cơ này, điều mà họ coi là một sự thất bại trong nghĩa vụ ủy thác của hội đồng chỉ số.
Những Thấu Hiểu Đáng Ngạc Nhiên
- Sự Tự Tin Của Trung Quốc Sau Thuế Quan: Trái ngược với sự thất vọng được dự đoán, Alice Hahn báo cáo rằng tâm lý ở Bắc Kinh sau các thông báo áp thuế lớn của Mỹ lại tích cực và phấn chấn một cách bất ngờ, với sự tự tin rằng Trung Quốc có năng lực tài khóa để vượt qua cú sốc và niềm tin rằng họ nắm “thế thượng phong trong leo thang”.
- Lệnh Hành Pháp “Vô Dụng”: Phản ứng của thị trường trước các đề xuất kiểm soát giá thuốc tiết lộ một sự thực đầy hoài nghi: khi một tuyên bố tổng thống nghe có vẻ cứng rắn được theo sau bởi một lệnh hành pháp vô hiệu lực chỉ “yêu cầu” các công ty giảm giá, cổ phiếu dược phẩm nhanh chóng phục hồi, cho thấy Phố Wall đã diễn giải chính xác rằng nó không phải là mối đe dọa thực sự.
- S&P 500 với Vai Trò “Hợp Pháp Hóa Ponzi”: Phân tích cho thấy việc hội đồng S&P 500 đưa Coinbase vào không chỉ phản ánh quy mô của nó, mà còn chủ động hợp pháp hóa toàn bộ lớp tài sản crypto cơ bản cho dòng chính thống, có khả năng thổi phồng bong bóng và phơi bày tiền tiết kiệm hưu trí trước các tài sản mà các host so sánh với “búp bê Beanie Babies”.
- “Người Thắng” Ngoài Mỹ & Trung Trong Chiến Tranh Thương Mại: Cuộc thảo luận xác định những bên thứ ba hưởng lợi bất ngờ từ căng thẳng thương mại, bao gồm các nhà sản xuất nông nghiệp Mỹ Latinh (như Brazil), các trung tâm sản xuất Đông Nam Á (như Việt Nam và Malaysia), và các quốc gia châu Âu có thể ký các thỏa thuận riêng với Trung Quốc về xe điện và công nghệ.
Điểm Rút Ra Thực Tiễn
- Xem Xét Kỹ “Hành Động” Chính Trị Về Giá Thuốc: Hãy hoài nghi sâu sắc với các thông báo chính trị tuyên bố giải quyết giá thuốc cao. Hãy tìm kiếm các cơ chế lập pháp hoặc quy định cụ thể có quyền lực thực thi, không chỉ là các tuyên bố hoặc yêu cầu tự nguyện.
- Hiểu Rõ Mức Độ Phơi Nhiễm Của Quỹ Chỉ Số Của Bạn: Nếu bạn đầu tư vào các quỹ chỉ số S&P 500, hãy nhận thức rằng bạn đang đầu tư thụ động vào các công ty như Coinbase. Hãy đánh giá xem bạn có thoải mái với những rủi ro vốn có của các lớp tài sản đầu cơ mà các công ty này tạo điều kiện hay không.
- Cân Nhắc Sự Tái Cân Bằng Địa Chính Trị Trong Đầu Tư: Chiến tranh thương mại đang đẩy nhanh sự dịch chuyển trong chuỗi cung ứng và quan hệ đối tác toàn cầu. Hãy tìm kiếm cơ hội đầu tư ở các khu vực và lĩnh vực hưởng lợi từ sự đa dạng hóa này, chẳng hạn như nông nghiệp ở Mỹ Latinh hoặc sản xuất ở Đông Nam Á.
- Tách Biệt Tâm Lý Khỏi Bản Chất Trên Thị Trường: Tập podcast này nêu bật cách các di chuyển thị trường (như sự phục hồi cổ phiếu dược phẩm) có thể là những đọc hiểu chính xác về sự không hành động chính trị. Hãy học cách diễn giải sự biến động thị trường xung quanh tin tức chính trị như một thước đo hiệu quả chính sách được nhận thức, không chỉ là tiếng ồn.
- Đánh Giá Các “Nhà Vô Địch Quốc Gia” Như BYD: Khi phân tích sự trỗi dậy của các công ty như nhà sản xuất xe điện Trung Quốc BYD, hãy nhìn xa hơn sản phẩm đến các chuỗi cung ứng dọc được tích hợp sâu và R&D đa ngành của họ. Mô hình tổ chức công nghiệp này là một lợi thế cạnh tranh then chốt.
本集播客節目圍結於三大相互關聯的主題：中美貿易戰背後的經濟與政治動態、美國藥價高企的體制性根源，以及將加密貨幣股票等高波動性資產納入主要指數所帶來的風險。節目專訪了中國經濟學家艾麗斯·韓，她從北京現場提供了第一手觀察。她描述中國政策制定者在關稅措施公布後展現出驚人的信心，並勾勒出一條潛在的降級路徑，建議雙方或可尋求互利共贏的「再平衡」協議。然而，主持人對美國政治領導層能否有效執行此類協議表達了深度質疑。
節目中大量篇幅批判美國製藥產業，指其為「監管俘獲」的典型案例。主持人認為該產業將對民選官員的影響力「武器化」，以此維持美國藥價的畸高水準——往往比其他發達國家高出四至八倍。他們剖析近期一項政治事件：擬議的藥價管控措施最初引發市場恐慌，但當實際頒布的行政命令被證明缺乏約束力後，股價迅速反彈。這凸顯市場認定政治體系無力推行實質改革。
最後一個重要議題探討將Coinbase納入標普500指數的決策。主持人視此舉為危險的背書行為，等於正規化一個建立在交易高度投機、缺乏基本面價值的加密資產之上的市場。他們直接類比2008年金融危機，指出當主流金融機構擁抱「虛幻資產」並為其構建基礎設施時，將催生系統性風險。此舉迫使普通投資者透過指數基金與退休帳戶被動持有這類投機生態系統的份額，主持人認為這是指數委員會未盡信託責任的失職表現。
節目中大量篇幅批判美國製藥產業，指其為「監管俘獲」的典型案例。主持人認為該產業將對民選官員的影響力「武器化」，以此維持美國藥價的畸高水準——往往比其他發達國家高出四至八倍。他們剖析近期一項政治事件：擬議的藥價管控措施最初引發市場恐慌，但當實際頒布的行政命令被證明缺乏約束力後，股價迅速反彈。這凸顯市場認定政治體系無力推行實質改革。
最後一個重要議題探討將Coinbase納入標普500指數的決策。主持人視此舉為危險的背書行為，等於正規化一個建立在交易高度投機、缺乏基本面價值的加密資產之上的市場。他們直接類比2008年金融危機，指出當主流金融機構擁抱「虛幻資產」並為其構建基礎設施時，將催生系統性風險。此舉迫使普通投資者透過指數基金與退休帳戶被動持有這類投機生態系統的份額，主持人認為這是指數委員會未盡信託責任的失職表現。
意外洞見
- 關稅後的中國信心: 艾麗斯·韓指出，在北京觀察到與預期沮喪相反的情緒：美方大規模關稅公告後，中國政策圈意外呈現樂觀昂揚的態度，確信中國具備應對衝擊的財政能力，且自認擁有「升級控制優勢」。
- 「空頭支票」行政命令: 藥價管控提案引發的市場反應揭示諷刺現實：當措辭強硬的總統聲明後續接續的是僅「建議」企業降價的無約束力行政命令時，製藥股迅速反彈，顯示華爾街準確解讀其無實質威脅。
- 標普500成「龐氏」背書者: 分析指出標普委員會納入Coinbase不僅反映其規模，更主動為主流市場正規化整個加密資產類別，可能助長泡沫膨脹，使退休儲蓄暴露於被主持人喻為「豆豆娃」的資產風險中。
- 貿易戰「贏家」超出中美範疇: 討論揭示貿易緊張局勢中的意外第三方受益者，包括拉丁美洲農產品生產國（如巴西）、東南亞製造中心（如越南、馬來西亞），以及可能在電動車和科技領域與中國達成單獨協議的歐洲國家。
實用建議
- 審視藥價管控的政客「行動」: 對宣稱解決高藥價的政治聲明保持高度懷疑。關注具執法力的具體立法或監管機制，而非僅是宣言或自願性要求。
- 理解指數基金風險敞口: 若投資標普500指數基金，需認知你現在被動投資於如Coinbase等公司。評估是否願意承受這類公司所推動的投機性資產類別的內在風險。
- 考量投資中的地緣政治再平衡: 貿易戰正加速全球供應鏈與合作關係的重組。關注從此多元化趨勢中受益的區域與產業投資機會，如拉丁美洲農業或東南亞製造業。
- 區分市場情緒與政策實質: 本集說明市場波動（如製藥股反彈）可能精準反映政治「不作為」。學習解讀政治新聞引發的市場波動，將其視為政策效力的感知指標，而非單純雜訊。
- 審視「國家冠軍」企業如比亞迪: 分析中國電動車製造商比亞迪等公司的崛起時，應超越產品層面，關注其高度垂直整合的供應鏈與跨領域研發模式。這種產業組織形式正是關鍵競爭優勢。
Este episodio del podcast se centra principalmente en tres temas interconectados: la dinámica económica y política de la guerra comercial entre Estados Unidos y China, los problemas sistémicos detrás de los altos precios de los medicamentos en Estados Unidos y los riesgos que plantea la inclusión de activos volátiles como las acciones de criptomonedas en los principales índices bursátiles. La discusión incluye una entrevista con Alice Hahn, economista especializada en China, quien ofrece una perspectiva desde el terreno en Beijing. Ella describe una confianza sorprendente entre los responsables políticos chinos tras los anuncios iniciales de aranceles y esboza un posible camino para la desescalada, sugiriendo que ambas partes podrían encontrar un acuerdo mutuamente beneficioso de “reequilibrio”. Sin embargo, los presentadores expresan un profundo escepticismo sobre la capacidad del liderazgo político estadounidense para ejecutar tal acuerdo de manera competente.
Una parte importante de la conversación critica a la industria farmacéutica estadounidense, describiéndola como un ejemplo primordial de “captura regulatoria”. Los presentadores argumentan que la industria ha “convertido en arma” su influencia sobre los funcionarios electos para mantener los precios de los medicamentos artificialmente altos en Estados Unidos, que suelen ser de cuatro a ocho veces superiores a los de otras naciones desarrolladas. Analizan un evento político reciente en el que las propuestas de control de precios de medicamentos inicialmente asustaron al mercado, pero cuando la orden ejecutiva real resultó ineficaz, los precios de las acciones se recuperaron, lo que pone de relieve la percepción del mercado de que el sistema político es incapaz de promulgar una reforma real.
El último tema principal examina la decisión de incluir a Coinbase en el índice S&P 500. Los presentadores ven esto como una peligrosa legitimación de un mercado construido sobre el comercio de activos criptográficos altamente especulativos y con poco valor fundamental. Establecen una analogía directa con la crisis financiera de 2008, argumentando que cuando las instituciones financieras tradicionales adoptan y construyen infraestructura en torno a “activos sin sentido”, se crea un riesgo sistémico. Esta inclusión obliga a los inversores comunes, a través de sus fondos indexados y cuentas de jubilación, a poseer una parte de este ecosistema especulativo, lo que ellos ven como una falla en el deber fiduciario por parte del comité del índice.
Perspectivas Sorprendentes
- Confianza China Tras los Aranceles: Contrariamente a la consternación esperada, Alice Hahn informó que el sentimiento en Beijing tras los masivos anuncios de aranceles estadounidenses fue inesperadamente positivo y eufórico, con la confianza de que China tenía la capacidad fiscal para resistir el impacto y la creencia de que poseían un “dominio de la escalada”.
- La Orden Ejecutiva “Sin Sustancia”: La reacción del mercado a las propuestas de control de precios de medicamentos reveló una verdad cínica: cuando una proclamación presidencial que sonaba firme fue seguida por una orden ejecutiva ineficaz que solo “pedía” a las empresas que bajaran los precios, las acciones farmacéuticas se recuperaron rápidamente, mostrando que Wall Street lo interpretó correctamente como una amenaza no real.
- El S&P 500 como Legitimador de un “Esquema Ponzi”: El análisis sugiere que la inclusión de Coinbase por parte del comité del S&P 500 no solo refleja su tamaño, sino que activamente legitima toda la clase subyacente de activos criptográficos para el mercado general, inflando potencialmente una burbuja y exponiendo los ahorros para la jubilación a activos que los presentadores comparan con “Beanie Babies”.
- “Ganadores” de la Guerra Comercial Más Allá de EE.UU. y China: La discusión identifica beneficiarios inesperados de terceros países en las tensiones comerciales, incluyendo a productores agrícolas latinoamericanos (como Brasil), centros manufactureros del sudeste asiático (como Vietnam y Malasia) y naciones europeas que podrían cerrar acuerdos separados con China sobre vehículos eléctricos y tecnología.
Conclusiones Prácticas
- Escudriñar la “Acción” Política sobre Precios de Medicamentos: Sea profundamente escéptico ante los anuncios políticos que afirman abordar los altos precios de los medicamentos. Busque mecanismos legislativos o regulatorios específicos con poder de aplicación, no solo proclamaciones o solicitudes voluntarias.
- Comprenda Su Exposición en Fondos Indexados: Si invierte en fondos indexados del S&P 500, reconozca que ahora está invirtiendo pasivamente en empresas como Coinbase. Evalúe si se siente cómodo con los riesgos inherentes de las clases de activos especulativos que estas empresas facilitan.
- Considere el Reequilibrio Geopolítico en las Inversiones: La guerra comercial está acelerando un cambio en las cadenas de suministro y alianzas globales. Busque oportunidades de inversión en regiones y sectores que se beneficien de esta diversificación, como la agricultura en América Latina o la manufactura en el sudeste asiático.
- Desacople el Sentimiento de la Sustancia en los Mercados: El episodio destaca cómo los movimientos del mercado (como la recuperación de las acciones farmacéuticas) pueden ser lecturas precisas de la inacción política. Aprenda a interpretar la volatilidad del mercado ante noticias políticas como un indicador de la efectividad percibida de las políticas, no solo como ruido.
- Evalúe a los “Campeones Nacionales” Como BYD: Al analizar el ascenso de empresas como el fabricante chino de vehículos eléctricos BYD, mire más allá del producto hacia sus cadenas de suministro verticales profundamente integradas y la I+D intersectorial. Este modelo de organización industrial es una ventaja competitiva clave.
Este episódio de podcast concentra-se principalmente em três temas interligados: as dinâmicas económicas e políticas da guerra comercial EUA-China, as questões sistémicas por trás dos elevados preços dos medicamentos nos Estados Unidos, e os riscos decorrentes da inclusão de ativos voláteis, como as ações de criptomoedas, nos principais índices. A discussão inclui uma entrevista com Alice Hahn, economista especializada na China, que oferece uma perspectiva local a partir de Pequim. Ela descreve uma confiança surpreendente entre os decisores políticos chineses após os anúncios iniciais de tarifas e esboça um caminho potencial para a desescalada, sugerindo que ambas as partes poderiam encontrar um acordo mutuamente benéfico de “rebalanceamento”. No entanto, os apresentadores expressam um profundo ceticismo quanto à capacidade da liderança política norte-americana para executar tal acordo com competência.
Uma parte significativa da conversa critica a indústria farmacêutica dos EUA, descrevendo-a como um exemplo clássico de “captura regulatória”. Os apresentadores argumentam que a indústria “armou” a sua influência sobre os eleitos para manter artificialmente altos os preços dos medicamentos nos EUA, que são frequentemente quatro a oito vezes superiores aos de outras nações desenvolvidas. Eles analisam um evento político recente em que as propostas de controlo de preços de medicamentos inicialmente assustaram o mercado, mas quando a ordem executiva real se revelou inócua, os preços das ações recuperaram, destacando a perceção do mercado de que o sistema político é incapaz de promulgar uma reforma real.
O último grande tópico examina a decisão de incluir a Coinbase no índice S&P 500. Os apresentadores veem isto como uma perigosa legitimação de um mercado construído sobre a negociação de ativos criptográficos altamente especulativos e com pouco valor fundamental. Eles estabelecem uma analogia direta com a crise financeira de 2008, argumentando que quando as instituições financeiras tradicionais abraçam e constroem infraestruturas em torno de “ativos sem valor”, isso cria um risco sistémico. Esta inclusão obriga os investidores comuns, através dos seus fundos de índice e contas de reforma, a possuir uma parte deste ecossistema especulativo, o que eles veem como uma falha do dever fiduciário por parte do comitê do índice.
Perspetivas Surpreendentes
- Confiança Chinesa Pós-Tarifas: Ao contrário do desânimo esperado, Alice Hahn relatou que o sentimento em Pequim após os massivos anúncios de tarifas dos EUA foi inesperadamente positivo e eufórico, com confiança de que a China tinha capacidade fiscal para suportar o choque e uma crença de que detinham a “superioridade na escalada”.
- A Ordem Executiva “Sem Consequências”: A reação do mercado às propostas de controlo de preços de medicamentos revelou uma verdade cínica: quando uma proclamação presidencial de tom duro foi seguida por uma ordem executiva inócua que apenas “pedia” às empresas para baixarem os preços, as ações farmacêuticas recuperaram rapidamente, mostrando que Wall Street a interpretou corretamente como nenhuma ameaça real.
- S&P 500 como Legitimador de “Esquema Ponzi”: A análise sugere que a inclusão da Coinbase pelo comitê do S&P 500 não reflete apenas o seu tamanho, mas legitima ativamente toda a classe de ativos criptográficos subjacente para o público em geral, potencialmente inflacionando uma bolha e expondo poupanças para a reforma a ativos que os apresentadores comparam a “Beanie Babies”.
- “Vencedores” da Guerra Comercial Além dos EUA e China: A discussão identifica beneficiários inesperados de terceiros da tensão comercial, incluindo produtores agrícolas da América Latina (como o Brasil), centros de manufactura do Sudeste Asiático (como Vietname e Malásia) e nações europeias que poderiam fechar acordos separados com a China sobre VEs e tecnologia.
Conclusões Práticas
- Scrutinar a “Ação” Política sobre Preços de Medicamentos: Seja profundamente cético em relação aos anúncios políticos que afirmam combater os altos preços dos medicamentos. Procure mecanismos legislativos ou regulatórios específicos com poder de aplicação, e não apenas proclamações ou pedidos voluntários.
- Compreender a Sua Exposição em Fundos de Índice: Se investe em fundos de índice S&P 500, reconheça que está agora a investir passivamente em empresas como a Coinbase. Avalie se se sente confortável com os riscos inerentes das classes de ativos especulativas que estas empresas facilitam.
- Considerar o Rebalanceamento Geopolítico nos Investimentos: A guerra comercial está a acelerar uma mudança nas cadeias de abastecimento e parcerias globais. Procure oportunidades de investimento em regiões e sectores que beneficiem desta diversificação, como a agricultura na América Latina ou a manufactura no Sudeste Asiático.
- Separar Sentido da Substância nos Mercados: O episódio destaca como os movimentos do mercado (como a recuperação das ações farmacêuticas) podem ser leituras precisas da *inacção* política. Aprenda a interpretar a volatilidade do mercado em torno de notícias políticas como um indicador da perceção da eficácia das políticas, e não apenas como ruído.
- Avaliar “Campeões Nacionais” Como a BYD: Ao analisar a ascensão de empresas como a fabricante chinesa de VEs BYD, veja além do produto para as suas cadeias de abastecimento verticalmente integradas e profundas e para o I&D intersectorial. Este modelo de organização industrial é uma vantagem competitiva chave.
In this episode of China Decode, hosts Alice Han and James Kynge unpack China’s high-stakes push for tech independence, from Moore Threads’ explosive IPO to Beijing’s drive to build a homegrown alternative to Nvidia. They also explore why the renminbi (CNY) remains deeply undervalued despite calls for a stronger yuan. Later, they sit down with Patrick McGee, author of Apple in China: The Capture of the World’s Greatest Company, to discuss Apple’s deep reliance on China and the broader political and commercial leverage Beijing now wields over Western companies.
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