Welcome to China Decode. I'm Alice Han, and I'm James Kynge. In today's episode of China Decode, we are discussing Trump's claims that China interfered in US elections, and then we'll chat with Selina Xu on the latest on the AI race. That's all coming up. But first, let's do a quick check-in with how the Chinese markets are starting off the week. On Monday, markets were mixed. The Shanghai Composite rose 0.85% while the tech-heavy Shenzhen Component fell 0.71%. The CSI 300 was up 1.53%. Chinese banks performed well, with ICBC up 2.25% and the Agricultural Bank of China up 3.44%. The People's Bank of China kept rates unchanged, which have been at record lows for 14 consecutive months.
All right, let's get right into it. President Donald Trump's new claims that China may have interfered in the 2020 US elections are causing backlash within China. China's foreign ministry called the claims, quote-unquote, entirely fabricated and aimed at vilifying China. It threatens to upset any advancements the world's powers have made with each other this year. The news also comes as Pew polling finds that China is now viewed more favorably around the world than the US is, and that more people have faith in Xi Jinping than Donald Trump.
James, before I get into the startling polling data, which is its own kind of headline story, let's do a bit of an update on the Beijing-Washington relationship. Things look to be pretty smooth sailing from Trump's visit to Beijing in May, but I think we're starting to see some hiccups along the way, largely with this now allegation from Washington that China has been involved in election meddling, mainly political interference in the 2020 election. And Trump is saying that dozens of significant CIA and NSA records show that China was targeting voters during the election. And although this isn't seen as vote tampering, it's seen as vote influencing.
Now, the Chinese foreign ministry has come out and said that this is basically a fabrication and that China has not been involved in any kind of election interference. But I think the big question I'm still puzzling over is why is Trump picking up on this issue or relitigating an issue, you know, six years ago. Obviously, this is a sore topic for him because he lost that 2020 election, but I don't understand why he's bringing up this topic now, two months before Xi is supposed to go to the US.
Well, that's a really good question, Alice. I mean, to me, this is more of a US story that concerns China than a China story, per se. But I think, as you've already alluded to, the key point here for China is, will this allegation by Trump sink the superpower truce that has ensued after the summit between Trump and Chinese leader Xi Jinping in May this year? At that time, Xi and Trump agreed to build a, quote, constructive China-US relationship of strategic stability, and that was really a key agreement because that meant that the two sides will have this as their guiding framework for the next three years and beyond, and move away from pretty much what was all-out suspicion and rivalry that characterized the relationship from probably about 2019 onwards.
So that was a real moment. At least I regarded it as a real moment in May, and I think a lot of other people did too. So now Trump is coming up with this apparently very serious allegation of election meddling, and so it does raise the question: is this going to bring a premature end to the superpower truce that we saw agreed to in May? And my sense of this is, tentatively, of course, because you never really know, but my sense of this is that Trump's statement is probably more about domestic politics in the US than it is about trying to torpedo the slightly better relationship that China now has with the US.
And I reckon that I can't really give any overwhelming supportive evidence to back that up. But I note that Xi Jinping is still invited to visit the US on September 24th this year, and Trump is still apparently considering attending the APEC summit in Shenzhen in November. So those two facts tend to me to suggest that, you know, the relationship is not headed for the deep freeze. And the other thing is that the White House has not yet given any words on why or what implications this allegation of election meddling has for the US-China relationship.
My guess is that if the White House really had been intending to torpedo the relationship with China, it would have come right out and said this shows XYZ and should have the following consequences for the relationship. But the fact that they were pretty much mum about the relationship itself suggests to me that Trump is focused more on domestic politics in this regard rather than China per se. I don't know, Alice. What do you think? It isn't that clear, I have to admit.
Yeah, but I think you're right. I think that Trump is ultimately blaming the deep state, what he calls the deep state, the intelligence community, for failing to inform him. It seems that the Chinese seem to have hacked 200 million US voter records. And it's, I think, part of a calculated move, maybe I'm reading too much into it, ahead of the midterms, saying, you know, hey, there are these bad actors out there that are also tampering with information going to voters, largely through social media, I would say, and this is what the White House is also saying. And it's designed to, again, show that, you know, he feels that domestically things aren't great, and I want to add to this domestic uncertainty.
The fact that the latest polling data, I know we shouldn't read too much into it, from Pew is pretty astonishing, and it shows just the both domestic and global decline in faith and regard for Donald Trump, but also for the US compared to China. So now, just the latest Pew polling shows that 46% of people worldwide have a more favorable view of China versus the US. But even when you break down into countries, and your country is one of them, James, the UK, just the countries that have more confidence in Xi than Trump or have more confidence in China versus the US, there's a much larger pool of 36 countries that say that they have more favorable views of China.
I remember, you know, back in 2023, and hot off the heels of the COVID outbreak and China being blamed for it, that people were saying, you know, China's never going to come back from this. Everyone's hating on China. The world is anti-China. But fast forward three, four years, what a world, you know, what a difference those years have made. And it seems like through a mix of the US's own goals, but also, you know, China's pretty good soft power campaign, we're at a stage now where China has more favorable views versus the US.
Yeah, absolutely. I mean, I found this really quite shocking. And to your point, Alice, look at the difference between now and 2023. In 2023, the Pew data showed that 58% of people in countries, this is across 20 countries, had a more favorable opinion of the US versus 32% having a more favorable opinion of China. And then going down the list of nations now that have a more favorable view of China: Germany, the UK, France.
But let's just pause for a minute to think about the relative relationship between those several European countries and the US relative to China. I mean, it's well known that the US is the UK's longest-standing ally and friend. The amount of trade, people-to-people relations, investment relations, financial relations, political relations, not to mention the fact that the UK depends on NATO, which is led by the US entirely, for its national defense. And yet, people in the UK still, according to this poll, have a more favorable opinion of China than they do towards the US.
And you could say the same thing about Germany, but with Germany, there's an added ingredient here, which is that Chinese competition is wiping out a great big chunk of German industry right now. And yet, Germany on average, or German people on average, have a more favorable opinion of China than they do the US. And I could go on. So the real question to me is, you know, what is the key variable here? And I have to be blunt. I think it's Trump.
I think that China is presenting a more positive picture to the world. But I think living here in Europe and traveling around Europe, I think people across this continent are deeply unsettled by many of the statements coming out of the White House, and they just don't know in what direction Trump is taking the United States with regard to its relationship with Europe. So I think the big swing factor is Trump, and then China's relative stability is playing to China's advantage, probably.
But it's pretty shocking. You look to the US's closest neighbors, Canada and Mexico. So Mexico, there's a 19 percentage point swing in favor of China, where 59% of people have a more favorable opinion of China versus the US. In Canada, there's an 11 percentage point swing in favor of China. I mean, it seemed like only yesterday where we had scandals involving the two Michaels and Canada, you know, putting on sanctions on China, etc., etc. It's astounding to me that the two closest neighbors and most of Latin America have a more favorable view of China versus the US.
And it speaks to potentially a failure in the Western Hemispheric approach that was codified, remember, in the November defense report by Washington. How much of this is Trump and the administration's undoing versus the Chinese playing a pretty cool hand?
Yeah. I mean, the other thing I think to say about this is that public opinion is fickle. It does really depend on the headlines of the day. But I think what you're referring to there, Alice, is a much longer-term structural issue here. You know, as we've discussed many times on China Decode, China is becoming the world's leading technological power. In this episode, we're talking a lot about China and AI and the success that China's experienced in that regard. And throughout much of the developing world, China has been bankrolling much of their infrastructural investment and construction. And so China is beginning to get a reputation as the country that can get things done. I think that's really quite important. So even though I do recognize the fickle nature of public opinion and polls like this, I also think that there are bigger structural changes underway.
Okay, we'll be back with more after a quick break. Stay with us.
Support for the show comes from LinkedIn. If you're a small business owner, you don't need me to tell you how much hiring great people matters. But the time and resources you have to spend to get it right are precious commodities. Sourcing, connecting with, and screening candidates can quickly eat into time better spent on your customers. That's where LinkedIn Hiring Pro comes in. It's designed to be your hiring partner, helping you source the right candidates faster. That way, you can hire with confidence without making it feel like a full-time job. LinkedIn Hiring Pro simplifies the entire process, all the way from writing your job post to shortlisting candidates and running AI-powered initial interviews. Plus, it does it all through a conversational interface where you can just describe what you're looking for in plain language. LinkedIn says nearly 60% of hirers find someone to interview within a week. With Hiring Pro, you spend less time searching and more time connecting with the right talent. So, instead of sifting through piles of resumes, you get a tight, high-quality shortlist that actually moves things forward. Join the 2.7 million small businesses using LinkedIn to hire. Get started by posting your job for free at linkedin.com/pro. Terms and conditions apply.
Support for the show comes from Chime. For a lot of you, picking a bank was probably something you did at a young age and never looked back. But banking has evolved since then, and like most things in life, it's gotten better over time. Enter Chime. Chime is not like a traditional bank. Chime offers the most rewarding fee-free banking with the power of the word no. No overdraft fees, no monthly fees, and no minimum balance fees. You can get 5% cash back with Chime cards on things like gas or groceries, all while building credit through regular everyday spending. You can also grow your money faster with a savings rate that is nine times the national average. And if you're ever in a pinch, SpotMe lets you overdraft up to $200 fee-free. Join the millions who are already banking fee-free with America's number one choice for banking. Head to chime.com/pro. That's chime.com/pro. Sign up now. It only takes a few minutes. Chime is a fintech, not a bank. Banking services and Chime card provided by Chime's bank partners. Qualifying direct deposits required. Terms and limits apply. Go to chime.com/disclosures for details.
Support for the show comes from MongoDB. AI-assisted and agentic coding can help you build faster than ever. But if your data layer is a bottleneck, what's the point? MongoDB actually gets out of your way. MongoDB is a unified, AI-ready data platform that empowers you to build scalable generative AI applications. It eliminates the need for separate specialized vector databases by combining a flexible document model natively with semantic vector search, full-text search, and real-time operational data. Instead of wrestling with rigid schemas or translating data formats, MongoDB's native data model mirrors the language LLMs already speak. Plus, MongoDB gives you the flexibility to ship at the speed of AI. The ACID compliance lets you sleep soundly at night and scales to handle massive Fortune 500 workloads. Developers have a word for that kind of reliability. Actually, four words. It's a great database. Start building at mongodb.com/ai.
Welcome back. We're joined now by an expert in all things AI, Selina Xu, a writer and head of China research for former Google CEO Eric Schmidt. Selina, we're so excited to have you on the show.
Thank you for having me. I'm so excited to be here.
You know, you and I have been talking a little bit, and I know you've been in and out of China, so I really want to get your fresh take on what's happening. Obviously, we've seen the recent announcement from Kimi in terms of their capabilities catching up to some parts of the Anthropic suite. It seems like every other week we hear this, James and I talk about this quite a lot, these new announcements, these DeepSeek 2.0s that are coming out of China. How should we be reading these announcements, and what is the broad takeaway from them when it comes to US versus Chinese capabilities?
Yeah, that's a great question. I actually visited Moonshot and also Z.AI in Beijing end of May. So I think it's really interesting just how fast things are moving. If you look at the pace of releases, right? Like, think about it. DeepSeek V4 came out in April, and then we had the whole Fable Mythos saga, and then Fable came out after the bans were lifted, and then in June we had essentially GLM 5.2 from Z.AI, and then now July, Kimi. So the frontier of intelligence is moving so fast that any lead you have is essentially perishable. It's just you might hold on to it for max a month, and then it's the next model. So I think this is kind of the pace here.
And if you're thinking about the vibes on the ground and how people are talking about it, I felt the biggest takeaway in terms of vibes is that compared to last year, Chinese AI companies now are so much more motivated and they have a very clear goal in mind. I think last year it was a bit of soul-searching after DeepSeek R1, right? People are like, can we replicate that? What is the next paradigm? Do we have to figure out something after the transformer? And now it's like, okay, Anthropic has shown us the way. Coding agents is the way to go. We are going to all do this, and we'll do it better. So I think that's kind of the very gung-ho energy that I sensed in China amongst talking to these AI founders.
And I think once they have this clarity, there are a lot of advantages that China has on their end. So I think one is that they're all planning to stick to open source for as long as it makes sense. I know there was a bit of a debate, you know, the past few weeks about whether China was going to restrict open source, and I think we've seen with the latest releases and with what Chinese President Xi Jinping said at the World AI Conference that they will continue to do open source. So I think one, open source will continue from Chinese AI companies.
And then the second one is, you know, there's been a lot of efficiency techniques that these startups have done, which essentially means that they will try to extract the maximum amount, you know, of training efficiency from every unit of compute. So because of the chip constraints that they have, they've been forced to do this, and as a result, their models are so much more capital efficient and compute efficient compared to, you know, OpenAI and Anthropic. So I think they will continue to do this.
And then the turning point, I think, with Kimi K3 is that it is a huge model. It's the largest open-source model. It has 2.8 trillion parameters. So this is huge. And they're not really trying to, you know, compare themselves to DeepSeek V4, which is super cheap. Instead, I think they're trying to show that, hey, open source doesn't just have to be cheap and efficient. We can also be at the very cutting edge. So they're trying to, like, toss that away. And I think their president, Zhuang Yuan, had this post on social media, and she's saying, like, open source doesn't have to just go the cheap route. We're trying to do something else. So I think this is kind of a turning point for Chinese open source.
Terrific, Selina. It's so great to have you on. Maybe I could drill a little bit deeper into the structural advantages that China has, because we hear about an inexhaustible supply of intellectual talent. We hear about very low electricity costs, some of the things you've already mentioned with regard to the efficiency of Chinese models. If you throw this race forward, the race for AI between the US and China, do you think that these structural advantages will begin to tell in China's favor?
Yeah, I think that's kind of the big question when people are thinking about the US-China race, like what are the, you know, the chips that each of them have on their side. And I think for sure China has huge structural advantages that you've mentioned. So one, energy. So energy is one of the main constraints on the US side. We've seen all the protests against data centers getting built and, you know, proposals of moratoriums on that. So I think the timeline of trying to build a data center and get it erected and have the right chips inside for it to come online is just way longer in the US compared to China.
In China, the main thing is what they call, which is essentially like east data, west compute. So you have, you know, the major cities on the coast essentially using a lot of AI, and then you have the compute built out in, you know, far-flung areas in the desert, you know, in Inner Mongolia and in Guizhou or other more far-flung places where actually a lot of renewable build-out has taken place. So that's kind of the strategy that China has been going with.
I would say that, you know, beyond energy, I think one of the big things actually that people have taken less into account in this race is what you would call, like, domestic sentiment and societal transition. So I think this is one thing that nobody really anticipated, because if you look at past technological cycles, you know, initially there is a bit of resistance. For instance, during the Industrial Revolution, and you had the Luddite protest of people smashing, you know, the automated looms. But afterwards, when the benefits start showing, you have people adopt it, and it generally lifts, you know, everybody's boats, and, you know, society adopts it, and innovation is good.
I think this time round with AI, it is a lot trickier because the whole pace and, you know, scope of automation will impact much larger swaths of people who will have a lot more political power compared to previous cycles of technological transition. And we see this playing out very acutely right now in the US when you see huge anti-AI sentiment across the country. There was a poll in March when people disliked AI on net more than, you know, ICE and more than, you know, Iran. So I think this is something that's very hated, especially by younger people who tend to usually be more pro-tech.
And then in China, there is that similar worry because so much rests on, you know, social and regime stability, but China really needs AI to drive its engine forward. So I think the common challenge in this race, also beyond, you know, energy, talent, compute, and everything else, it's really which country can handle this transition better and, you know, balance both having a lot of AI growth for their economy and then being able to control it so that, you know, the whole system doesn't really collapse.
Really interesting. On the subject of transitions, I have to alert everyone to your amazing op-ed with Eric Schmidt in The New York Times, in which you talk about your takeaways from your month basically in China over the summer. And what struck me as interesting in that piece is the fact that both the government in China and the entrepreneurs have this kind of slow-burn approach to AI because they are mindful, historically, as you've alluded to, to instances in the past where there has been, say, a Luddite backlash to technological innovation.
So in a way, this explains why the government has been, I think, pretty alerted to the fact that there is a labor issue to too much AI transformation, that the gig economy of 320 million, 44% of the workforce, is at risk. You see that in terms of them slow-rolling autonomous vehicle licenses in China, and also more recently in a piece you may have seen, in terms of AI companions trying to set regulations in terms of making sure that they're not too personalized or anthropomorphized so that people don't have too much of an emotional or romantic connection to these AI bots or agents.
Can you speak to us more about this relationship that governments and entrepreneurs in China have to AI, and how that's quite distinct from what we see in the US? Because it seems to me that at the heart of it, these two countries see AI in very, very different ways.
Yeah, it's definitely a different relationship between the companies and the entrepreneurs with the government, as we all know in China, versus the US. I think in China, the interesting dynamic is, and you've talked about this before, Alice, like the entrepreneurs in the tech industry were basically reined in during COVID under, you know, a sweeping crackdown. And then now, after COVID ended, the government realized, actually, we really need the private industry, and we need tech and AI specifically as this new engine of growth.
So there is this, you know, almost reluctant but pragmatic concession, like, we need you, and this is mutual. But so I think having that weigh on the minds of the entrepreneurs, it really, I think, shapes how they see their relationship with the government. It's not just like, let us run complete deregulation, we got it. It's more of like, okay, we want to negotiate some amount of room for growth, and we will have this constant feedback with the government, but at the same time, we know if there is any hint of instability or things getting out of control in a place like China, this will be quite, I think, it will be a direct trigger for the government to step in and to basically re-regulate and crack down on the industry again, something that I think nobody in the tech industry wants in China. So I think that's very alive in their heads.
And the interesting thing about AI companions is that this is like a global issue. We see a lot of debates about this in the US as well with, you know, very high-profile cases of teenagers committing suicide. In China, I think the worry is that, but also romantic relationships being formed between especially young women and AI companions, and the refusal to then get married, have babies, and that impacts China's fertility rate. So I think it is a very complicated issue at the heart of, you know, China's whole debate on what do we do with AI.
And I think the best thing to take away from this example of how the guidelines and then subsequent regulation got formed was they released draft guidelines on restricting AI companions at the end of December last year, and then they opened it to feedback from society and industry. And actually, the current regulation that we've seen take effect as of last is very much watered down and a lot more narrow than the December guidelines, which had pretty strict restrictions on, for example, you have mandatory human takeover in case of any triggering words. The platform has to step in and bring in a human. That's like a pretty, you know, high burden for a tech company to have, like, 24/7 staff being, you know, constantly monitoring.
So that probably got industry pushback, and then now it's not mandatory, but you have to give, like, an emergency contact or, like, a guardian, and it's only mandatory for specific groups of people. And then the other thing that got watered down mainly was training data. So the initial draft guideline said that all training data from these kinds of anthropomorphized interactions needed user consent before a company can train on it. But in the new current regulation that's taken effect, this essentially only pertains to, you know, specific personally sensitive information, and other things are good for, like, it's good for a company to train on.
So I think that's an example of how the government and the industry are basically negotiating with each other on what kinds of regulations will make sense to protect some of the government's priorities while allowing industry to continue to drive AI development forward.
Support for the show comes from Odoo. If your business runs on five different apps, 12 browser tabs, and one spreadsheet that everyone's afraid to touch, it's probably time for Odoo. Odoo is an all-in-one business management software that connects every part of your business into one powerful, easy-to-use platform. So instead of wasting time switching between disconnected systems, your entire business works together in real time. Your team moves faster, your data stays accurate, and you can actually focus on growing your business. Let one unified system run your entire business. From the first opportunity to the final payment, everything works together in one place. Whether you're a small business or managing a large operation, Odoo gives you one flexible platform built to grow with you. Try it today for free at odoo.com/pro. That's odoo.com/pro.
Support for the show comes from Pendulum Metabolic Daily. There's a gut bacterium that PhD researchers from Harvard, Berkeley, and Stanford have spent years studying. They were specifically trying to figure out what it does for the metabolism. It's called Akkermansia, and it's the key ingredient in Pendulum Metabolic Daily. Akkermansia is the gut bacterium that helps signal your body to produce more of its natural GLP-1. And you already may be familiar with GLP-1, which is the hormone that helps regulate appetite and feeling full. Pendulum Metabolic Daily is backed by rigorous clinical research. It's a probiotic designed to help you feel fuller longer, experience fewer cravings, and make it easier to stay on track with your health goals. It's just one capsule a day taken with food. Some people report noticing fewer cravings and more energy in as little as a week, though individual results can vary. Right now, our listeners can get an exclusive 20% off their first order at pendulumlife.com/pro. That's pendulumlife.com/pro for an extra 20% off your first order. Again, go to pendulumlife.com/pro and get 20% off today.
Support for the show comes from SoFi. Whether you're buying your first home or just looking for ways to make your current mortgage work better for you, the process can feel overwhelming. The good news, you have more options than you might think, and the right home loan can really make a difference helping you reach your financial goals. That's where SoFi can help. Whether you're buying, refinancing, or planning your next move, SoFi offers a tech-forward, human-backed mortgage experience designed to make the process simpler. You can apply online in minutes while still having access to a dedicated mortgage loan officer to answer your questions and guide you through every step of the way. So, no matter where you are in your home ownership journey, SoFi has solutions designed to help you move forward with confidence. Head to sofi.com/pro to explore your options today. That's sofi.com/pro. Mortgages originated by SoFi Bank, N.A., member FDIC, NMLS 696891. Terms and conditions apply. Equal housing lender. Verified pre-approval letter. Terms apply. See conditional pre-approval letter for details. Not a final loan approval and not a commitment to lend.
