China’s Race to Dominate: Listen to Global Tech Wars

0:00:12 Hey, it’s Jacob.
0:00:15 Today, we’re dropping an excerpt from a new audiobook.
0:00:20 The audiobook is called Global Tech Wars, China’s Race to Dominate.
0:00:28 It’s by James King, a journalist at the Financial Times, and it’s about China’s push to the
0:00:33 technological frontier. And we see China’s technological rise today, of course, in everything
0:00:40 from AI to electric cars. And this story of China’s technological rise, it goes beyond
0:00:46 just technology. It goes beyond just business. It is a global geopolitical story that is going
0:00:50 to change so much about how the world works. If you like the excerpt and want to hear more,
0:00:58 you can get the full book at Pushkin.fm, at Audible, at Spotify, or wherever you get
0:01:22 in the heart of Shenzhen, a city in southern China, is the district of Huaqiangbei, and it’s home to the
0:01:32 biggest electronics market in the world. It’s a vast warren of stalls selling every kind of electronic
0:01:34 component under the sun.
0:01:44 So we’re standing in the middle of one of the Huaqiangbei electronics markets, and the scene is really
0:01:50 quite impressive. It’s basically one stall after another. There’s hundreds of stalls here. I mean,
0:01:56 there’s just piles of electronic components on top of each other in a very higgledy-piggledy way.
0:02:01 It looks like a rather eccentric hardware shop where you know that you’re selling everything,
0:02:03 but you’re not quite sure where anything is.
0:02:14 So we have signal generators, we have multimeters, lots of different kinds of multimeters. Obviously,
0:02:17 any microcontroller you could possibly want.
0:02:26 In the market, I met Noah Zerkin. He’s a tech inventor from the US, and he’s chosen to innovate
0:02:37 new products, not back home in America, but here in Shenzhen. For him, the electronics market is an
0:02:40 Aladdin’s cave of potential treasures.
0:02:45 USB connectors of every sort, including some rather exotic ones.
0:02:51 And these ones over here with lots of, like, brass-looking nodules coming out of them?
0:02:58 Or something that I’ve actually been looking for for close to a year. A suitable one. Yes.
0:03:06 So what kind of products could you build with the components that we can find in these markets here?
0:03:18 Everything from consumer electronics devices to robots, drones, military systems,
0:03:26 systems to maybe even space systems, right? You can build anything using the components here.
0:03:33 Yes. I mean, it’s such a tough question because you can literally build anything.
0:03:40 For decades, this part of China was known as the electronics workshop of the world.
0:03:49 But these days, Shenzhen doesn’t just make other people’s technology. It’s building its own Chinese tech.
0:03:58 And in the process, China is emerging as a tech innovator on a course to overtake the US
0:04:02 as the most important technology power in the world.
0:04:16 Our excerpt of Global Tech Wars will continue in just a minute.
0:04:32 We’re here in Shenzhen. We’re standing by a busy road intersection surrounded by a forest of
0:04:38 enormous skyscrapers, glass and metal buildings reaching all the way down this long avenue.
0:04:48 Cars, taxis, even motorbikes riding on the pavements around us, pretty much in the center of this vast metropolis.
0:04:56 Shenzhen is known as the Silicon Valley of China, and it’s changed dramatically in the last few decades.
0:05:01 About 20 years ago, Shenzhen and the cities around it in the Pearl River Delta made a name for
0:05:09 themselves by mostly manufacturing other countries’ technologies and maybe copying it as well.
0:05:15 But now we’re on the brink of a really totally different new era.
0:05:21 These days, Chinese companies are making their own brands, innovating their own technology,
0:05:26 and selling that to Europe, America, and all over the rest of the world.
0:05:33 Shenzhen is home to some of the biggest names in Chinese technology.
0:05:40 The internet giant Tencent is based here, as is Huawei, the tech behemoth that’s found itself
0:05:45 at the center of US-China tensions over technology in recent years.
0:05:53 There are newer trailblazers too. DJI, which essentially invented the consumer drone market,
0:06:01 is a Shenzhen company, as is BYD, the Chinese carmaker that is fast becoming a dominant force
0:06:09 in electric vehicles. It all points in one direction, something a think tank recently highlighted,
0:06:17 that China is overtaking the US in its capacity to innovate. And it’s now ahead of the US in everything
0:06:25 from advanced batteries to hypersonic aircraft, quantum communications, and supercomputers.
0:06:32 To understand how that has happened, you need to look at China’s long history of manufacturing consumer
0:06:43 technology. Okay, in this bin here, these are sort of ancient prototype parts, but let’s take this down.
0:06:53 And this needs to go on the floor. In his workshop, a short walk away from Shenzhen’s electronics markets,
0:07:00 the American inventor, Noah Zirkin, shows me what he’s building, an augmented reality headset.
0:07:08 Okay, so there are, you see there are these three circuit boards up here, and that’s just for making
0:07:15 the displays work. And there are these two sensors, each of which have two little cameras on them,
0:07:24 little fisheye cameras to track your hands. Then there are these two big curved mirrors that rest in
0:07:34 front of your eyes. And the electronics on this headset are basically all made from stuff that you can find
0:07:36 in the market downstairs.
0:07:44 Tech inventors like Noah have chosen to base themselves in Shenzhen rather than the United States,
0:07:52 because being in Shenzhen means having instant access to a vast supply chain of components and
0:08:00 factories. It means they can work quickly, develop prototype products, test them, and manufacture them,
0:08:10 all at a rapid rate. Being able to source those components, I was able to order things mostly from
0:08:16 places that have stalls representing them in the Huachang Bay markets, right, that are right here,
0:08:24 and have them arrive at my doorstep, if not that day, the next day. Same with the PCBs,
0:08:34 the circuit boards. Nowhere else can you get 24-hour turnaround. If I make a mistake on one of my prototypes,
0:08:42 I can identify it, change it anywhere else. This is a big deal. So I can do a prototype iteration
0:08:48 in 24 to 48 hours. That is not true anywhere else in the world.
0:08:59 The ability to prototype and manufacture tech products rapidly is giving rise to some really exciting
0:09:02 companies in Shenzhen.
0:09:04 Very small factory.
0:09:06 As a matter of fact, this is not a factory.
0:09:07 Oh, right.
0:09:13 It looks like an exhibition center, but it’s not. This is our R&D testing field.
0:09:17 So where you can see along the windows, there are over 250 chairs.
0:09:31 A few miles north of Huachang Bay are the offices of the robotic startup UI Bot. They design and build
0:09:38 industrial robots. In their bright and spacious new research and development center,
0:09:45 dozens of robots move around the vast open floor, guided by lasers and algorithms.
0:09:55 The company is growing rapidly. Just a few years ago,
0:10:01 it was a neighbor of Noah Zirkin’s in a small workshop above the electronics market.
0:10:09 Guan Jian from UI Bot says access to supply chains and manufacturing expertise
0:10:15 means startups here can operate at what he calls Shenzhen speed.
0:10:23 For the most typical example, during the pandemic, we build an anti-pandemic robot with UVC
0:10:32 lights and a zero-millimeter camera on top within 14 days. I’m not talking about 14 days to get the
0:10:38 conception of a robot. I mean 14 days for the first prototype. From an idea to a prototype,
0:10:41 two weeks. That’s supply chain. How were you able to do that?
0:10:45 We can get every single component downstairs in Huachang North.
0:10:53 This means UI Bot is rapidly catching up with more established U.S. and European competitors.
0:10:58 Before the pandemic, there were several strong competitors globally.
0:11:06 Like we look up to them and we try to study from them. After the pandemic, when we joined a conference
0:11:12 in Germany, we strangely realized that the European players, they still
0:11:19 trying to sell the same thing with the one before pandemic, three years earlier. And when we look at
0:11:25 ourselves, everything’s totally different. So your R&D effort was moving at Shenzhen speed?
0:11:38 For newer startups like UI Bot, there are plenty of examples around Shenzhen of the potential
0:11:44 global success that Chinese companies can aspire to.
0:11:50 We’ve come to a different part of Shenzhen. We’re now in one of the big tech centers of this city.
0:11:57 We’re surrounded by huge buildings, mostly occupied by some of the biggest tech companies in China and in
0:12:04 the world. There’s a sound of construction in the background. Three more huge blocks are going up,
0:12:10 soon to be occupied by other Chinese tech companies. And we’re standing in front of the brand new
0:12:20 headquarters of one of the companies that’s really put Shenzhen on the map in the last few years, and that’s DJI.
0:12:28 If you want an example of a Chinese company totally dominating a sector, Shenzhen’s drone maker DJI is a
0:12:36 good example. Over the last decade it effectively invented the consumer drone market. It now sells eight
0:12:43 out of ten drones around the world. When it’s coming towards us, it really looks like an insect. I’d say
0:12:50 a dragonfly or something like that. It’s now gone, I don’t know, that must be 20, 30 meters into the sky.
0:12:58 It’s just hovering over the forecourt of this building. Now it’s going even higher. Oh my, it’s now outside.
0:13:10 Success for DJI means a massive new headquarters. Two towers that appear to hover in the sky,
0:13:15 called Sky City. Everywhere we go in Shenzhen, these enormous buildings.
0:13:20 Yeah. So if you come here six years ago, now it’s seven years ago, there’s no this building.
0:13:26 Yeah. But right now, because we got this piece of land in 2016. And in 2022, we moved into this
0:13:31 building. So after six years, we have this beautiful twin building and campus here. And
0:13:36 right now we live here more than one and a half years already. Christina Zhang showed us around the
0:13:42 buildings and told us about the secret drone testing area housed inside one of the towers.
0:13:49 Before, when we have the office that we rent, it’s so difficult to find a place to fly because people are
0:13:55 going to walk around. We need to avoid the people. And also, some of the people, they try to know or
0:14:02 try to find out what is DJI’s next product. So they try to steal and see the product that we’re testing fly.
0:14:09 So we have the flying site inside this building. You may see off this toolbox, there are four floor high
0:14:15 area. Oh, four floor high area. That’s the flight inside. Wow. Yeah. That’s very interesting. So they
0:14:22 can fly it in there in peace. They know nobody is watching. You can maintain your intellectual property.
0:14:28 nobody can see. Yeah. And also, even without the good condition, like if it’s raining,
0:14:33 windy, you can still test inside. Yeah. Yeah. Have you got any really cool prototypes you’re
0:14:36 working on at the moment? We have so many, but I cannot share now.
0:14:53 A company like DJI represents something that 10 or 20 years ago, to observers in the West at least,
0:14:59 would have been difficult to imagine. A Chinese company way out in front of the competition,
0:15:06 setting the pace in the creation of leading tech products. But China’s tech ambitions are not
0:15:15 limited to robots or drones. China wants to lead the world in all kinds of cutting edge technology.
0:15:20 technologies. We’ll be back in just a minute.
0:15:37 The drone maker DJI is one example of a Chinese tech company that’s leading its field in the development
0:15:45 of technology. Huawei is another. And China might be leading in a multitude of other areas.
0:15:53 last year, the Australian Strategic Policy Institute, a think tank, made waves when it concluded that
0:16:03 China now leads the world in 37 out of 44 critical areas of technology. Another think tank,
0:16:11 the Information Technology and Innovation Foundation, based in Washington, warned that China is evolving from
0:16:20 from an imitator to an innovator. It’s easy to forget now just how far behind China was in technology and
0:16:26 how dismissive most of us in the West were about China’s tech capabilities all the way up till pretty
0:16:32 China’s tech companies. Matt Sheehan is a fellow in the Asia program of the Carnegie Endowment for
0:16:41 international peace in the U.S. Where would you say China is right now? Is China catching up to the
0:16:47 U.S. level in many technologies? Is it a peer competitor already? Is it on a trajectory to overtake?
0:16:53 I think the term peer competitor captures it. I mean, there are some areas where the U.S. is
0:16:59 clearly ahead in the frontiers of AI, in large language models, in generative AI. That’s an area
0:17:03 where the U.S. can pretty comfortably say we are ahead. But if you look across other areas,
0:17:09 if you look at renewable energy technologies, clean technologies, battery powered vehicles,
0:17:15 electric vehicles, China is far and away the global leader in these. It has the supply chains,
0:17:24 it has the deep manufacturing expertise, and it’s really on a trajectory currently to dominate those
0:17:31 industries globally. Look at an area like quantum. It’s still a wide open field. We don’t know which
0:17:38 sort of path is going to be the most promising, but China is showing results that are just as impressive
0:17:44 or roughly on par with the U.S. across a few of those different approaches. If you look at, you know,
0:17:50 the success of platform technology companies, obviously the U.S. has some of the global leaders in
0:17:57 Google, Facebook, Amazon. But, you know, the most popular app in the world right now is a Chinese app.
0:18:04 It’s TikTok. In recent years, China has overtaken the U.S. to become the biggest filer of patents
0:18:12 in the world. But Xi’an says innovation is not just about coming up with new ideas. It’s about turning
0:18:20 them into solutions and products at a scale that can reach a mass market. This is really an area where
0:18:26 China’s manufacturing prowess is going to come into play. You know, the idea of China being the factory
0:18:32 of the world just because it has cheap labor is way out of date. China’s advantage is not the cost of its
0:18:39 labor. It’s the fact that it’s built up the most sophisticated, intricate manufacturing ecosystem in
0:18:47 the world, that they have trained engineers who have spent 30, 40 years progressively building and
0:18:51 refining more and more precise manufacturing technologies, and especially learning how to
0:18:57 take a good idea and scale it up to the level of, you know, hundreds of thousands or millions of products.
0:19:03 The Chinese government has technological progress at the center of its national ambitions.
0:19:12 Matt Xi’an says it’s not clear that China will inevitably overtake the U.S. But he says China’s
0:19:18 progress so far suggests that the U.S. cannot assume that it will always be in the lead.
0:19:24 Matt Gi’an: Broadly, but I think especially if you zoom in on the United States and on Silicon Valley,
0:19:32 we have this narrative that technological innovation, freedom of speech and democracy are all intimately
0:19:38 intertwined, that you cannot have innovation unless you have free speech, free internet, political freedoms.
0:19:46 And I think that was a nice story. It fit broadly with our perception of the way that creativity works and
0:19:52 the way that business and markets work. I think what China has done over the last 10, 15 years,
0:20:00 it’s essentially pulled apart that narrative that innovation depends on certain types of freedoms.
0:20:06 You can have, you know, world leading apps come out of a country that doesn’t have a free internet.
0:20:12 You can have some of the biggest and most successful technology companies in a country that has quite
0:20:19 controlled markets and a very heavy-handed government. And I think it turned a lot of ideas that we had in
0:20:21 the West on their head.
0:20:30 Matt Gi’an: It’s a profound conclusion. It used to be an article of faith that you need a democracy to spur
0:20:38 tech innovation. But China is turning that argument upside down. In an authoritarian state,
0:20:45 you can still innovate tech products and sell them to the rest of the world via gloves-off,
0:20:47 bare-knuckle capitalism.
0:20:56 Matt Gi’an: So in your daily life, how many times do you feel surprised by new products
0:20:59 being made and new innovations?
0:21:03 Matt Gi’an: Almost every day. Almost every day.
0:21:10 Matt Gi’an: Chi Zhou is a venture capitalist based in Shenzhen. He spent years working at Huawei and in
0:21:17 Japanese tech companies before returning to China to capitalize on what he saw as a boom in Chinese
0:21:18 innovation.
0:21:25 Matt Gi’an: I forced myself to meet at least one company one day, at least one company one day,
0:21:34 and read five to ten business plans one day, five to ten business every day, every day, almost.
0:21:39 Matt Gi’an: Almost. So I can see a lot of innovative products.
0:21:45 Matt Gi’an: Chi Zhou agrees that China’s expertise in manufacturing has helped tech companies develop,
0:21:50 Matt Gi’an: But he says there’s another factor spurring Chinese firms on:
0:21:57 Matt Gi’an: The intense competition between Chinese companies for Chinese tech consumers.
0:22:03 Matt Gi’an: Chinese guys like to use new things like application, one app,
0:22:08 Matt Gi’an: And they will give up one app very quickly too.
0:22:18 Matt Gi’an: So if you can’t let them know the valuations of your app, they will give up very quickly.
0:22:24 Matt Gi’an: This is one point. And another point is competition, competition.
0:22:28 Matt Gi’an: This is a different culture, I think.
0:22:33 Matt Gi’an: In Western countries, I do my business, you do yours.
0:22:39 Matt Gi’an: But in China, I don’t think so. I do my business and I do your business too.
0:22:48 Matt Gi’an: Zhou says Chinese companies think of it in terms of survival. Innovate or die?
0:22:52 Matt Gi’an: Survive. Survive is a very important keyword in China.
0:23:00 Matt Gi’an: China’s transformation into a global tech superpower to rival the US is an incredible story.
0:23:13 Matt Gi’an: But the question now is whether China is going to maintain that momentum and power past the US and other countries to become the tech power in the world.
0:23:19 Matt Gi’an: The global success of Shenzhen’s companies suggest it might, but it’s not a given.
0:23:25 Matt Gi’an: I would say the most advanced technology is not in China, even now.
0:23:37 Matt Gi’an: In some key industries, we need some time. We need time to develop, like semiconductors, like AIs.
0:23:43 Matt Gi’an: So China is not the most advanced in terms of technology, but it’s catching up fast.
0:23:52 Matt Gi’an: Do you think that China one day soon in the next few years could become the most advanced country for technology?
0:23:57 Matt Gi’an: We developed very rapidly before today.
0:24:02 Matt Gi’an: After that, I cannot predict. We are still working hard on catching up.
0:24:06 Matt Gi’an: But when we overtake the US, we don’t know.
0:24:14 Matt Gi’an: And I think from the point of government, we don’t think one day we have to.
0:24:17 Matt Gi’an: We have to overtake America. I don’t think so.
0:24:23 Matt Gi’an: But as a boss of a company, we have to overtake the other guys.
0:24:27 Matt Gi’an: I am a businessman.
0:24:34 Matt Gi’an: When I invest in a company, I hope they will be the first one in the world one day.
0:24:43 Matt Gi’an: A changing of the guard when it comes to technology happens very rarely.
0:24:51 Matt Gi’an: For the first time, we’re seeing global tech come out of an authoritarian state,
0:24:54 Matt Gi’an: without free internet, without freedom of expression,
0:24:58 Matt Gi’an: and where surveillance cameras monitor your every move.
0:25:04 Matt Gi’an: If China wins the tech race, the impact on the rest of the world will be huge.
0:25:08 Matt Gi’an: And we’re already starting to see it.
0:25:20 Matt Gi’an: That was an excerpt from the new audiobook, Global Tech Wars: China’s Race to Dominate.
0:25:23 Matt Gi’an: The full audiobook is available at Pushkin.fm,
0:25:28 Matt Gi’an: at Audible, at Spotify, and everywhere else you can get audiobooks.
0:25:33 Matt Gi’an: One last note: What’s Your Problem will be off for the next few weeks,
0:25:36 Matt Gi’an: and then we’ll be back with more episodes.