The Prof G Pod with Scott Galloway - China Decode: Apple's China Chip Play, DeepSeek Seeking Billions, and the Californication of Chinese Food

Episode Date: June 30, 2026

Alice Han and James Kynge dig into why Apple is lobbying the Trump administration for permission to buy memory chips from a Chinese company on the Pentagon's military blacklist. With DRAM prices up nearly 100% in a single quarter — analysts are calling it "RAMageddon" — Apple already raised MacBook and iPad prices by up to 20%, and iPhones could be next. How far will Apple go to secure its supply chain, and what does it mean if Washington says yes? They also break down DeepSeek's landmark $7.4 billion funding round, which is the first time the Chinese AI startup has ever taken outside money. Tencent, CATL, and China's state-backed National AI Investment Fund are among the backers, and the valuation has jumped six-fold in six weeks to nearly $59 billion. DeepSeek built its reputation on doing more with less — so why does it need the money now? And finally: a new sign that China's middle class is changing what it puts on the table. The Economist calls it the "Californication" of Chinese diets: a growing appetite for organic, health-conscious food. Subscribe to China Decode on Substack for weekly analysis, livestreams, and deep dives into the biggest story shaping the global economy: chinadecode.profgmedia.com. Learn more about your ad choices. Visit podcastchoices.com/adchoices

This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify.

Staples Preferred Business Membership, built for busy business owners, because you've got bigger things to think about. With Staples Preferred, get free delivery, no minimums. Staples Preferred unlocks up to 3% back, plus 10% savings on print and exclusive wireless offers. One less thing on your plate. Actually, a lot less. Visit staples.ca.ca.comfired. That was easy. This spring, denim gets a softer, lighter update.

Introducing Old Navy's drapey denim wide leg, a new fit that moves with you. It's everything you want denim to feel like for summer. Easy, breathable, and effortlessly cool. With a fit that creates natural movement and a wide leg that feels modern, not overwhelming. Plus, that signature, wait, for this price, moment. Old Navy's drapey denim wide leg. We have to recognize how enormous a trend this. is the South Korean government, along with Samsung Electronics and S.K. Heenix, have allocated

$520 billion U.S. dollars to keep South Korea in the AI race. Can we see any kind of a pledge like that in Europe? Nothing so far comes close to that. Welcome to China Decode. I'm Alice Han. And I'm James King. In today's episode, of China Decode, we're discussing big money moves in the AI arms race, China's latest strategy to increase its global influence, and the Californication of Chinese diets. That's all coming up, but first, let's do a quick check-in with how the markets are starting the week in China. On Monday, markets finished mostly higher after sentiment improved on easing geopolitical tensions and renewed risk appetite. The Shanghai composite was up 1.16%. The CSI-300 rose one,

1.21%, and the Shenzhen component added 0.19%. Financial stocks led the way with industrial and commercial Bank of China up 0.98% and the Agricultural Bank of China up 0.81%. All right, let's get into it. A lot of news this week in the AI world, starting with Apple, who raised prices on the MacBook and the iPad, in some cases by around 20%. AI is to blame, but not because of new features. It's because of the growing chip shortage as chip makers prioritize orders for companies like Nvidia.

Now, Apple is reportedly lobbying the Trump administration for permission to buy chips from blacklisted Chinese DRAM company, CXMT. Meanwhile, Chinese AI company Deepseek has just announced plans to double its headcount in some departments and is preparing to take outside investment for the first time ever. James, a lot of exciting things happening in the world of AI, not just in the US, clearly in China too. And the first one really is this Apple story. You know, not only will consumers have to confront price rises globally of Apple products, but now Apple is really stretched in terms of capacity for memory as well as chips. And this speaks to a broader supply shortage that we're

seeing. It explains why DRAM prices from the Korean companies have basically doubled in the last few months. And this is, I think, a perfect entry point for some of these Chinese players like CXMT, which is China's big chipmaker in the space, to enter and potentially catered to the apples of the world. But I think the bigger political question is whether or not the Trump administration, you know, is going to ultimately clear CXMT for sales to Apple or to American companies, because right now, as you know, it's technically on a list banned by the Pentagon because it's blacklisted as a company that's aiding the People's Liberation Army of China. Now, this is not a ban that creates legal penalties for an Apple or a company trying to buy

six empty chips, but it does carry a lot of reputational risk. So the big question is, A, will there be a change of tune from the Trump administration? And B, will Apple try to risk it in order to get more DRAM? That's a great question, Alice. Just to take one step back, I think what we're in now is Ramageddon. And obviously this is because, as you've described, the frenzy for AI is causing this chip shortage, and the shortage focuses on memory chips, hence the RAM in Ramageddon,

because RAM stands for random access memory. And the reason that AI is causing the shortage is because data centers that are needed to train, the large language models use a lot of these memory chips. And so that's the situation that we're in. I think it'll take a long time to build new capacity here because it takes a long time to build new chip factories. And that's what needs to happen to increase the supply of these memory chips to ease this Ramageddon situation that we've got at the moment. We have to recognize how enormous a trend this is. And I think that was thrown into sharp relief today by the incredible

announcement from South Korea. The South Korean government, along with Samsung Electronics and S.K. Hynix, have allocated $520 billion U.S. dollars to keep South Korea in the AI race. This money is going to be spent in lots of different areas, including building new chip factories, but also building AI data centers, robotics and all of that. So this just shows how huge the trend that we are trying to describe really is. I don't think this is the biggest industrial policy move in history. It's not as big as the Belt and Road Initiative by China, and it's not as big as the American New Deal as a percentage of GDP, that is.

But $520 billion U.S. dollars being spent by a single country and a couple of companies just shows how crucially important the AI race is and also being able to get enough memory chips to power the large language models that train AI really is. So to come to CXMT, is the U.S. going to approve Apple to use chips that are made by CXMT in China or not? It's a really big call for the White House, isn't it? Because all along the U.S. has been saying, we want to deny China a leg up in the tech race. And allowing America's most impressive tech company, or certainly one of them perhaps, after NVIDIA, perhaps, after Nvidia, perhaps, level pegging with Nvidia, allowing one of America's most impressive tech companies to buy Chinese chips made by this CXMT company,

which is a very proficient maker of memory chips and does so at a pretty low price, will be a huge leg up to China, and therefore it will be countering America's broad strategy of trying to keep Chinese tech contained, trying to keep its advance contained. I really wouldn't like to call it, to be honest. It's so hard to call this White House.

They seem to flip-flop on these policies all the time. So all I think we can say is that the pressure is going to be intense, and that pressure will grow, because as I said at the beginning, this is a structural trend. The world is not going to be able to supply masses and masses more, memory chips in short order. It's going to take a long time to build the factories that are going to have to make these memory chips to ease the supply bottleneck. So, you know, the pressure is only going

to intensify. And do you think that with the midterms and potentially a blue wave or a democratic sweep through the House at the very least, that it'll make it even harder for CXMT in the same way that, say, four years ago in 2022, Apple said that it wanted to buy from Chinese Strip Maker YMTC that was, I wouldn't say, legally blocked, but it still was not allowed because it was blacklisted by the U.S. administration, and Apple didn't move further on it. There seemed to be parallels between YMTC back in 2022 and CXMT today. But am I wrong to overindex on the congressional part of things? Because I do think that if you take out Trump, the congressional committees and House representatives tend to have a very anti-China view, and this extends to the

technology race, where you saw obviously the passing of the Legislative Builder Match Act, which has affected ASML. But am I right to be thinking about the midterms is really another key data point in terms of worsening relations between U.S. and China and affecting technology? I think you're absolutely right, Alice. There's no question that in general, Congress is more, as you put it, anti-China or, you know, they're more competitive when it comes to the U.S. China tech race. You know, the mood is definitely that this is a crucial battle that America needs to win and therefore they need to disadvantage China whenever they can.

However, having said that, we need to look at the economic effects of this as well. And you've just mentioned the way in which the Apple, various different, Apple products are rising in price. So the MacBook Air jumped in price from $1,099 U.S. dollars to $1,299 U.S. dollars. The entry-level iPad Air also rose by a similar magnitude. And so what we've got here is clear inflationary pressure moving through not just Apple products, but the whole gamut of electronic products.

when you add that to the inflationary pressures that we're already getting in terms of oil prices from the Middle East and the fact that U.S. inflation is rising and is at fairly high levels, a trend that we see across Europe, by the way, then the question is, if inflation in the U.S. really starts to bite in coming months, then will Congress remain so adamant on its anti-China policy or on its policies to disadvantage China in the tech race? Or will they think, you know what, guys? We need to just let in the cheapest products

as quickly as possible to keep inflation under control. So what we've got, I think, is a dynamic picture. I don't really think we can call it, but I do think that the will of Congress will start being fairly in favor of containment, China, but then inflationary pressures, if they really begin to take off, could undermine that stance. Yeah, it definitely undermines the affordability issue or set of concerns that the Trump administration clearly was worried about, even before Iran hit people's baskets and the gas pump prices.

I want to take this back to Apple itself and how it fares in this rule, I would say, pecking order for chips. This is a competition for chips in a time where capacity that you've referenced, James, is already constrained. And I almost feel that the right way to think about it is that the hyperscalers that are creating the frontier models, your clothes and your chat GPs will get first preference. You know, we've got north of $700 billion of CAPEX going into data center rollout throughout America. It seems to be basically, I would say, a frenzy to get as much, as many chips as possible. And because they can pay for it,

the real, I think, preferences for the, you know, SK-Hinexes and Samsung's of the world to be selling to these hyperscalers as opposed to Apple. And meanwhile, prices rise across the board. I think the markets have reflected this somehow in the sense that Apple stock has already fallen more than 6% on the news of the price hikes last week.

And that's a single, that's a steeper single-day drop since Liberation Day tariffs last April that Trump launched. I almost feel as though the market is expecting that Apple is going to have to eat the cost and the final bearer of the cost will have to be everyday consumers

in China, in America, globally because we're going to have to deal with more expensive electronic goods because of the shortage of chips. Yeah, completely. I mean, I think we're in this for a good long time, actually. the DRAM prices surged nearly 100% in the first quarter of this year.

There's another 60% jump expected this quarter. This is not going to go away. We are in a structural shortage of DRAM and RAM chips. So Ramageddon, I think, is going to last for quite some time. We're just at the beginning of the trend. We don't know all of the permutations, but I would say an inflationary spike, you know, which broadens through various tech products is highly likely. And, you know, we've already seen the inflation that's coming from oil prices.

So we could be in for a rough few months ahead. Yeah, very, very interesting. So quickly on DeepSeek, you know, it's been in the news again. And in general, China has been in the news. This is the new X-AI model that says that it is as good as mythos. This is the new model that's come out of China in the cyber super. space. Deepseekers just said that it wants to double its workforce and that it's now open to external investors. It's close apparently to finalizing a $7.4 billion funding round,

largely driven by Tencent, CATL, the battery maker, as well as China's state-backed National AI Investment Fund, which is a consortium of both private and public companies in the technology space. So, you know, it's clear to me that Deep Seek is still a darling, even although we've seen in the last year or so that sometimes bite dance comes ahead, sometimes Zippoor comes ahead. You know, it's still, I think, very unclear who is going to be the leader in the AI model race, but it seems clear that Deep Seek isn't off the list. There's a lot of what I'm hearing from my China friends is that there's a lot of enthusiasm about getting involved in this round and still a lot a positivity about Deepseek. But I thought this was interesting because of two things.

One is that, you know, these models in China are super competitive and I've been hearing that their use cases and adoption are rising outside of China quite exponentially. And the number two issue that I want to raise is the fact that these funding rounds, and this is just $7.4 billion, are tiny compared to the amounts that are being raised by, you know, anthropics. and Open AIs in America. Again, I want to bring this home because you see this both in the valuation of Chinese tech companies publicly listed, but you also see this in the size of the funding grounds is that they tend to be much smaller. I mean, I would say maybe even less than half of what you see in Silicon Valley,

which I think is interesting. And I haven't yet figured out why the ticket sizes are much smaller. Suffice to say that my friends who are knowledgeable in the investment space, just say that this is normal given the profitability, the scale and the capital market depths in mainland China compared to Silicon Valley. I think those are really interesting points. I just think that this deep seek move is a yet again evidence of how vibrant the whole large language model AI sector is in China.

And we see several companies, Chinese companies, battling for primacy. There's the Alibaba Kuen, there's Drew Poo. that you've already mentioned, and there are several others. We don't know which one is going to come out on top. We don't know how many leaders the market can take, you know, that's another thing. Are we looking at a mature market where there are one or two big providers at some point in the future, or are we looking at a cluster of different LLMs that do different things? My sense of it is we may well be looking at a small number, and so, you know, time is obviously. the essence. Maybe that's the reason, one of the reasons why Deep Seek is keen to raise money and to

kick on. But anyway, I just think the battle between US and China on AI is as vibrant and competitive as ever. And now we've seen, as I mentioned at the outset, South Korea, the South Korean government and two big South Korean companies ready to put up 520 billion US dollars to up their challenge in the race to, you know, this is going to get bloody. The margins are going to vanish or turn negative, in my view. It's going to be highly competitive, highly bruising, I would say. Okay, very interesting. Okay, we'll be back with more after a quick break.

Stay with us. Support for the show comes from Superhuman. Be honest, how many tabs do you have open right now? My computer and tabs are. chocolate mess. Anyways, it seems like a given that working life today requires being overwhelmed and stratified. But if you have the right tools, it doesn't have to be like that. Enter superhuman. Superhuman is the platform behind Grammarly and Coda. Their suite of AI enhanced tools are designed to enhance communication for individuals and teams. Take Superhuman Go. It's an AI chat

that's always there when you need it, already aware of what you're doing, and doesn't ask you to start from zero. Go works inside the tools and sites you already use, your browser, inbox, docs, project tools, and helps you cut through the busy work and clarify your communication at every level. You can use Go's AI chat to draft email and messages, summarize long threads and documents, and search across your apps, all without leaving the page you're on. Bottom line, superhuman is AI that works with you, not on top of you. Check it out, find out more at superhuman.com. Support for the show comes from Odo. Running a business is hard enough, and you don't need to make it harder with a dozen different apps that don't speak to each other. One for sales,

another for inventory, a separate one for accounting. Before you know it, you find yourself drowning in software and processes instead of focusing on what matters, growing your business. That's where Odoo comes in. It's the only business software you'll ever need. Odo is an all-in-one fully integrated platform that handles everything. That means CRM accounting, inventory, e-commerce, HR, and more. No more app overload. No more juggling logins. Just one seamless system that makes work easier. And the best part is O-DU replaces multiple expensive platforms for a fraction of the cost. It's built to grow with your business, whether you're just starting out or you're already scaling up. Plus, it's easy to use, customizable, and designed to streamline

every process. It's time to put the clutter aside and focus on what really matters, running your business. Thousands of businesses have made the switch, so why not you? Try O-D-for-free at O-D-O-O-O-O-D-com. Support for the show comes from LinkedIn ads. There's no worst feelings. than making a major investment in something, only to realize it didn't exactly live up to the hype, such as buying a nice piece of tech that ends up in storage collecting dust, or taking a business workshop where your main takeaway was little more than a few motivational words. If you work in marketing, this can happen with ads. You optimize for the numbers that look great, impressions, reach, and reactions.

But when they don't show revenue, well, that can turn into an unfund conversation with the CFO. LinkedIn has a word for that, bullspend. Reach the right buyers when LinkedIn ads and invest in what looks. good to your CFO. According to the 2026 Dream Data Benchmark Report, LinkedIn ads generated the highest ROAS of all major ad networks. It's 121%.

You can target by company, industry, job title, and more. It's time to cut the bull spend. Advertise on LinkedIn, the network that works for you. Spend $250 in your first campaign on LinkedIn ads and get a $250 credit for the next one. Just go to LinkedIn.com slash Scott. That's LinkedIn.com slash Scott.

Terms and conditions apply. Welcome back. Chinese Commerce Minister Wang Wunthal is in Brussels early this week for a meeting with EU Trade Commissioner Mara Sevkovich, which comes as fears of an EU-China-trade war continue to bubble up and European leaders express more concern for China's trade surplus. The effort to maintain good relations with the EU comes in a year where Chinese President Xi Jinping has already hosted more than a dozen world leaders and made particular inroads with so-called middle-power countries, especially as an alternative to an increasingly volatile U.S. So James, we still haven't, at the point of this recording,

figured out what is being negotiated or announced between the Chinese and European counterparts in Brussels this week. Two main points that I would flag that I think are worth considering. Number one is the fact that the EU is in a really dire position. China's goods trade surplus with the EU hit 300,000. $60 billion in 2025, a 15% increase on 2024. And it's very likely, in fact, I think it's inevitable that it's going to expand in 2026 based on the first half of 2026 already. And so we're up for probably a record trade surplus in 26, even though last year was already a record at $1.19 trillion

in terms of China's full trade surplus with the EU. So there's that hanging, like a sort of damoclus over the relationship. And the second point that I would raise is that there has been some wiggle room in the sense that Europe has entertained conversations with Chinese counterparts as a way to balance against what it sees as a non-committal, volatile Washington administration

and especially because there was no love lost over the Iran issue and the ensuing energy crisis that are produced particularly for the Brits. and the Europeans. And the reason I raised this issue is that I was pleasantly surprised that they had agreed finally in January to price flaws, so export price floors for Chinese EVs going into Europe. And that would be a way to obviate the tariffs, you know, close to 40% that have been put on Chinese EVs by Brussels. But now it seems that there's a threat to something that hasn't yet been targeted, which is the hybrid market. So PHEVs hybrid plug-in cars with Brussels potentially intentional.

entertaining tariffs on hybrid vehicles because of just the influx, you know, the surge in Chinese hybrid exports to Europe. So it seems like on the one hand, Europe is screwed economically because of an ever-imbalanced relationship. At the same time, it wants to, you know, continue to talk to China, to use China to balance against America, to try to fight in a way, maybe this is uncharitable for relevance by engaging with the Chinese. No, I'm afraid it isn't too uncharitable. Alice, I think you put your finger on it. My sense of this is potentially even more stark.

You know, the trade numbers that you mentioned, shocking as they are, the fact that this year the trade deficit that the Eurozone has with China will reach almost 400 billion euro. Although those numbers are shocking, they don't even describe. the importance of what's going on here. What is happening here is that this inflow of Chinese imports, most of them high-tech these days, and priced at levels that European companies simply can't compete with,

is wiping out Europe's industrial base. And I say that very bluntly, I believe it's true. I believe that within five or maybe 10 years, Europe's industrial base will have been wiped out by Chinese competition, unless there is a significant move either in terms of self-restraint by the Chinese that you've already alluded to or in terms of major trade barriers erected by Europe. My current sense is that Europe at the moment simply lacks the unity for a genuine trade. barriers with China. And that's because, you know, you can have these European representatives who

go to China, such as we have right now, but they have their hands tied behind their backs, because several member countries of the EU, often Spain, which is benefiting from an inflow of Chinese investment, or countries like Hungary, which have longstanding, warm relations with China, are not prepared to back very strong European trade barriers against China. And Germany, which is, of course, the most powerful country in the Eurozone, flows one way and then the other. We're never very clear which way the wind is blowing in Berlin. And so I think that this visit will be the same as all the other visits. The Europeans will talk up a storm but deliver very little in concrete,

terms in terms of genuine barriers or genuine protective measures to protect European industry against what I believe is the extinction or close to the extinction of Europe's industrial base. And the reason I say that, I mean, this is the topic that I spend most of my time researching. The reason I say that is because I see sector by sector how cheap and how good the Chinese products are in terms of their technology content. And then I compare that to what the Europeans are able to do, and the gap is huge. I don't want to undersell the Europeans too much.

There is news today that the European Commission will put a small new tariff on small parcels that come into Europe. It's going to put three euros onto packages that come from China if they have a value of over 150 euro. So this is aimed to reverse or to stop what is being called by the European Commission the desertification of Europe's high streets. Basically, a whole load of shops in Europe's high streets are going to the wall or going out of business because people can just order online super cheap,

that come from China. And so this additional charge of three euros is intended to stop that. The number of low value parcels coming into Europe has more than quadrupled. In 2022, it was valued at 1.3 billion euro. And this, sorry, last year, it was valued at 5.9 billion, so virtually 6 billion euros. So you can see there's been a huge increase in this type of a small package. It's funny that you raise this, James, that the Europeans have finally gotten onto the de minimis requirements of the Trump administration, if you recall, put into place last year. And there's just a Niki piece that came out showing how Chinese merchants on Temu and Sheen, you know, these are the ones doing these low-cost goods, have actually found loopholes

through logistic networks and through false import declarations in order to even avoid the de minimis requirements in the US, which are I think around $800 US, anything above $800 needs to be subject to tariffs. So I look at that bit of regulation that you just cited James, and I go, well, not only is that too little too late, but will, as we know, is often the case with Chinese merchants, will they find loopholes because they're pretty canny and smart?

And I think I probably take that scenario, which is that they will find loopholes to avoid even these requirements. But I want to bring it home to one sector in particular because we've talked about chips just now. We discussed ASML last week, and we mentioned that Washington was putting more pressure in the Dutch chip maker. This is a bit of a left-filled question, But what I've learned from the South Korea example,

and we see this reflected in per capita GDP now overtaking the UK, the market cap of Taiwan and South Korea both overtaken the market cap of the London Stock Exchange, primarily driven by TSM, Samsung, SK. Hynix. What we learned from the East Asian Tiger example is that maybe you shouldn't try to compete with China on autos, because China will always be able to price-compete you now that it has the scale. And maybe you should be competing on the more value-added industries in chip-making, right? Chip equipment, chip-making. And here, ASML really is the leader and prime, maybe even the sole example.

But I try to figure out why in particular Europe, the Germans, the French, haven't really gone into that. And maybe you don't have a view. But it seems puzzling to me at a time where they're still desperately trying to compete with the Chinese on autos, increasingly on chemicals where China is becoming even more competitive. But whereas they should really be, you know, shifting their attention to defense tech, to chipmaking, to some of the more higher value-added industrial technological products. It seems a little bit of a, I think, fruitless attempt.

Some of the European analysts are recommending a quote-unquote reverse dung effect. And if you recall in the 80s, Deng Xiaoping, who was the leader at the time, was mandating foreign companies to do tech. transfers in exchange for access to the Chinese market. And now the Europeans are saying the same to Chinese companies like CATL and BYD. We have seen some increase in greenfield investment in Europe in the last year or so. But I'm hearing from the Chinese is that they don't want to have all their eggs in one basket and export their IP and tech to Europe. They want to have

some of the more critical IP staying at home in China. Yeah, this is such a big topic. we could do a whole episode on this. I think you're absolutely right. You know, what we have at the moment is the result of, I'm afraid to say, a couple of decades of complacency in Europe. Complacency at many different levels. I'm not just talking about the Eurozone. We definitely have complacency here in the UK,

especially with regard to industrial policy. Look at what's just happened in South Korea. $520 billion U.S. dollars being pledged to go into the AI race. Can we see any kind of a pledge like that in Europe? Nothing so far comes close to that. Now, there are all kinds of reasons for this. It would really take a long time to go into them. But where is European industrial policy?

Where is the clarity of European bureaucrats in the Eurozone in the national countries? saying we need to prioritize this sector or that sector, we need to recognize that this particular sector is all, you know, the game is already over. China's already won. So let's not put resources into that. There is very little clarity at the moment. I think Europe has just woken up to the fact that China is a peer competitor in technology with the US and has left Europe far, far behind. This is in spite of the fact that many of us have been writing this for many years. Why has Europe been so slow to wake up to this crisis? I really don't know.

But that's the situation we have at the moment, just to answer your question on reverse dung. In other words, getting Chinese investors to invest in in factories in Europe and as part of the price for the entrance into the Eurozone market, having to form a joint venture, to maybe hand over technology to a joint venture partner, I completely agree with your take. I think although Europe may want this, and I don't think it's a bad objective for Europe to have, I think it's a good objective, there are so many complications with it right now, one of which is you'll see a flood of Chinese investment going into countries like Morocco. Morocco has a trade agreement with Europe, so they can manufacture in

Morocco and export into Europe without extra duties. So why wouldn't they do that and keep their technology rather than invest in Europe with a joint venture partner under conditions that force them to hand over technology? So, you know, we're into a very complicated period. in EU-China relations. At the moment, I would say the cards are mostly with China, and this is largely because European member states do not have unity over what trade policy they should adopt with regard to China.

This is a structural European problem. And for as long as there's no unity, there will be no clear policies. Okay, let's take one last quick break and stay with us. support for the show comes from SOFI. If you're a parent helping your child navigate college, you know just how fast the costs can pile up. Between tuition, housing, textbooks, and everyday living expenses, funding higher education is a major financial commitment. That's where today's sponsor, SOFI, comes in. SoFi offers private student loans that can cover up to 100% of school certified costs, not just undergrad and graduate tuition, but SOFI can also help cover housing, books, food, and other.

other education-related expenses. So-Fi's private student loans are all about flexibility. They offer competitive fixed or variable rates, multiple-term options, and monthly payments so you can build it around your budget. The application process is completely online, and you can check your rate in minutes. And for families exploring their options together, adding a qualified co-signer may help improve chances of securing a lower interest rate. And there are zero fees required. That means no origination fees or late fees, no surprises. What you see is what you pay back. Head to sophy.com slash profjee student to check your options and get your education funded the smarter way. That's sophy.com slash profcci student. Originated by Sofi Bank, N-A member FDIC,

terms and conditions apply. Please borrow responsibly. Support for the show comes from IMA. Every day it seems like there's a new fad diet that wants to tell you what to cut out and what to add in. But before you go and fill your fridge with beef tallow and salmon skin, ask yourself if you're actually getting the full scope of vitamins and minerals you need in a day. Here's a tip to help you fill in the gaps. IMAID's daily ultimate essentials drink. IMAID uses clean ingredients.

It's NSF certified, which means all the ingredients are third-party tested for purity. Our colleague Ed Elson has been enjoying IMAID. Ed, IM8. Love it. hydrating, refreshing, makes me feel like I'm healthy. I hope I am healthy, but this makes me really feel that way. So big fan of IM8. Nice. Give your body what it deserves with IM8. Go to IM8health.com slash prop G and use code prop G for a free welcome kit. Five free travel sachets plus 10% off your order. That's IM number 8, h-e-a-l-t-h.com slash profg code prop G for a free welcome kit,

five travel saches plus 10% off your order. IMAidhealth.com slash prop G code prop G. These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose treat, cure, or prevent any disease. Hey, y'all, it's Kelly Clarkson with Wayfair. Ever order furniture online and wonder, what if? Like, what if it doesn't hold up? That sofa was four days old.

You should have ordered from Wayfair. With Wayfair, there's no what if. Just style you love and quality you can trust. Visit Wayfair.ca. Welcome back. There's a new sign that the middle class in China is growing and changing. The economist reports that there's a quote-unquote californication of food happening in this segment of the population. I've been shocked and, I mean, this is completely an observational statement as opposed to being backed by data. But the amount of overweight people that I see in China, you know, in the last couple of years compared to a decade ago.

And, you know, you could look at it in terms of GDP outcomes. you could look at it in terms of access to food. You could look at it in terms of people's work habits and sedentary lifestyles. But it is interesting that as we've seen the prevalence of obesity rise, we're also seeing this pivot towards organic food, towards eating better, knowing where your food comes from. I've never, you know, it really has happened since COVID. I've never ever been in a Chinese supermarket prior to 2020.

where I've seen, you know, and these are not necessarily the best high-grade, you know, Beijing, Shanghai supermarkets. They're pretty run-of-the-mill, but you will get organic fruits, you know, that packaged really nicely, as you know, people really care about how their fruits and food produce look. But people are getting educated about the provenance of food, the importance of organic. And you see a lot of these live-streaming organic farmers in China who are on Quayshul, for instance, you know, live-streaming about their products. juice, they sell direct to the consumers via the platform. You have this real dichotomy

between a population that is increasingly obese, although not to the level of the U.S. I think it's around half in terms of the share of population relative to the U.S., which is around 40%. But at the same time, you're seeing a real supply side and a demand side push for organic products. Yeah, I mean, the Chinese middle class at 500 million people, obviously, if those people wanting to eat healthier and to prioritize their health, as you said, then this theme of the Californication of the Chinese food market is going to run and run and run. And already, I'm absolutely amazed by some of the numbers that we're seeing, emerge, particularly in terms of the amount of money that some people are willing to pay for premium products in this regard. There's a caviar company in China, and of course, China is these days the world's leading producer of caviar. It's making organic caviar. It's

called Kaluga Queen. And it's supplying Michelin-Star restaurants all over the world. And the Caviar prices from companies such as this range from about 3,000 to 9,000 euro or $3,150 U.S. dollars to $9,450 U.S. dollars per kilogram. So that's an enormous amount of money, it seems to me, but there's a ready market for that in China going even more extreme. We've got something called the caterpillar fungus. Now, this is not on everybody's dinner plate every day, but these are hand-foraged from the Shanghai Tibetan Plateau.

I'm sure you've heard of this, or you've seen these being sold in markets in China. They're just little funguses. They look a bit like cucumbers, but very small. I've actually seen them before. I've tried them in Yunnan. Have you? I've never tried them.

What are they like? I mean... I had them in a big mushroom hot pot in Yunnan in Khome. and the texture was, I couldn't remember the taste, but the texture was really interesting. If anyone's a mushroom enthusiast, you should definitely go there. Apparently half of the world's mushroom breeds are from Rurnan, just this province in southern China. Well, Alice, you were having a very expensive meal there if they were genuine, because wild premium Chinese caterpillar fungus sells from anywhere from $20,000 U.S. dollars to over 110,000 US dollars per kilogram.

So, yeah, I mean, it's just incredible. I remember, I remember once meeting some guys who go foraging for these fungi when I was in China as a journalist. And, you know, they would spend days and weeks camping on the Tibetan plateau trying to find these fairly small fungi, aren't they? I mean, they're not very big. I mean, their size of your thumb, maybe. So, you know, what we're seeing at the moment is this trend of middle-class Chinese becoming more health-conscious, as you say, partly in order to avoid what they're seeing in terms of the large, you know, increasing number of obese people in China. But, you know, just to live healthy lifestyles. And then at the top end of this trend, to eat healthy, we're seeing incredible premium prices for life.

luxury products. And, you know, given the fact that we're still at the beginning of the Chinese organic trend, I reckon that we're going to see higher prices and more interest in buying the very luxury products as time goes on. We've got some numbers saying that Chinese sales of organic food were 16.7 billion U.S. dollars in 2024. That was up about 19% from 2023. Just as a point of comparison, the U.S. organic sales in 2024 were 71.6 billion U.S. dollars. So obviously we can see that the U.S. market is still much bigger. But as we mentioned at the top, 500 million Chinese are now in the middle class. If these guys really take this trend to their heart, we're going to see Chinese organic food sales go in one direction only, I'd say. I'm really bullish on the organic food market

relative to the luxury bag market or luxury goods market, because my spidey sense from the culture is that people would rather eat well at this point. I feel like we've had a bit of a pivot in the cultural zeitgeist where people want to live well, you know, be well, eat well, as opposed to buy expensive foreign, flashy, you know, logo goods. And so as a result, you know, we have now China is the third largest organic product consumption market in the world. I think it's not unrealistic that that might end up being the, you know, the biggest, just given the size of the population, especially the middle class. And we also have a lot of supply side shifts that are supporting it. So for instance, there's a Norwegian

Nordic aqua company that does aquaculture of fish, including salmon in land-based tanks in Zerjiang, Yunnan, which we just mentioned, which has, you know, the amazing, I think, topography and geography to support agriculture is becoming a blueberry and avocado hub. You now have these, you know, fresh hippo-Ali-Baba platforms that just create organic food, supply chains that go direct consumer. In the market, the organic farming area itself in 2024 is doubled from a decade before. So it used to be less than 0.4% of the country's total farmland. Now it's 0.7%. That's still not a huge size in the scheme of things. I think there's more room to grow. But it certainly points to the fact that I think on the supply and demand side, we're seeing a lot

of positive trends supporting the organic food industry in China. And I think this is just the beginning. There's the, there's a forecast that by 2008, it'll reach about 31 billion US dollars, doubling from 2022 levels. So I'm pretty optimistic about this. And I think that beyond China, this has big implications. So I was just in Florida, where I was hearing, because of the greening of oranges in Florida, they're importing a lot of oranges from China. And I have this theory, that as the agricultural sector gets more developed and the quality of produce gets higher, we'll start to see China being an agricultural power. So another example that I think is super interesting is I was actually in Piedmont two months ago

with a friend, and that's an area that's known for growing some of the Kiwis in supply to Italy. But they've been competed out by Chinese Kiwis that are much cheaper and more plentiful. And this is also happening in the mushroom market. I was in Yunnan two years ago, and there's a... Italian guy there that says the majority of the dried porcini sachets and dried porcini mushrooms come from Yunnan, come from China. So I think we're in the first innings of China becoming a really interesting agricultural power. All right, James, you know what time it is? It's prediction time. As you peer into the future this week, what do you see? I'm going back to this issue of inflation.

I think that some of the issues that we were mentioning at the top will coalesce. And we will see China's export of inflation turn consistently positive for the first time since 2023. There is something in China called the Export Price Index. I reckon that in a few months' time, we'll be seeing China exporting inflation consistently month after month. This is partly because of what we were talking about in terms of AI and chips and those pressures feeding through into the electronic supply chain. And it's partly due to what we're seeing

in the Middle East, in terms of oil prices, which are affecting the inflationary environment all over the world. The reason why I think this is such a crucial topic is that if China starts to export inflation, then I think, you know, we're going to see Europe, in particular, catching more inflation, and that really starts to hit countries that have high debt service requirements, which is pretty much all of the countries in Europe right now. If they catch inflation, if they import more inflation, they might have to raise interest rates, and that will increase the amount of money that they have to pay to service their debts. So I'm afraid it's bad news.

I see China exporting more inflation as the year goes on. Really interesting. And that also plays into some of the political dynamics for the midterms, right, in November, in the U.S. Absolutely. Really interesting. All right. So my prediction is in the oil market. I mean, we've since got something like a bit of a shaky MOU between Tehran and Washington. Now the big question is how plausible is that this piece will hold and what does it mean for oil markets? but I think one thing that we can be certain of is that in the next couple years, China's oil demand will peak.

The IEA says that it's between 2027, 20 to 30 that will start to see peak Chinese oil demand. I would take the bet that it's closer to 2027 to 28 because I think one of the big takeaways from the Iran crisis, but also the ongoing, I think, stress to oil supply globally

is that China needs to rapidly diversify away from crude oil into, say, natural gas, into cold to chemicals for the petrochemicals, feedstock pipelines, into electrification of traditionally diesel-powered trucks. So I would take the bet, and this might ultimately be a bit of a risky bet, but that by 2027 will start to see signs that Chinese oil demand is going to peak. And that's about 15% of global demand for oil. So China is still a considerable player.

and as China slows down in its oil demand, that's going to have massive implications for oil prices globally. All right, that's all for this episode. Thank you for listening to China Decode. This is a production of ProfG Media. Make sure to follow us wherever you get your podcasts so you don't miss an episode. And we'll talk to you again next week.

If you want a $3,000 a month payday for life, what would you feel free to do? take a long weekend, every weekend, or try a bunch of new hobbies? Would you feel free to upgrade and listen ad-free? Don't worry, we get it. Every $20 ticket could win you $3,000 a month for life and supports life-saving cancer research at the Princess Margaret. Feel free to buy your payday-for-life ticket today.

Raffle number 155-2194. Please play responsibly.