The Prof G Pod with Scott Galloway - China Decode: China Walks a Dangerous Line as Iran War Escalates

Episode Date: March 31, 2026

Alice Han and James Kynge break down how China is navigating a delicate balancing act as the Iran conflict intensifies — protecting its energy supply while avoiding direct alignment. They also unpack BYD’s global expansion and what it means for Tesla as the EV race heats up. And in Chongqing, a massive new escalator system offers a striking look at China’s approach to infrastructure, scale, and urban life — plus a quick check-in on the markets to start the week. Subscribe on Substack for ad-free episodes and much more! 👉 chinadecode.profgmedia.com/ Learn more about your ad choices. Visit podcastchoices.com/adchoices

Megan Rapino here. This week on a Touchmore, we've got two insiders to help us unpack the WMBA's new CBA, three-time champion and WMBPA Vice President Alicia Clark, aka AC, and ESPN basketball analyst Andrea Carter. We're also going to take a look at our NCAA brackets and check out what's next in March Madness. Check out the latest episode of a Touch More wherever you get your podcast and on YouTube. The fact of the matter is China is still very vulnerable exposed. if this war becomes more prolonged and it seems as every day that passes, it's more likely that it is a more prolonged conflict, right?

So what is your assessment as to why China hasn't really been as aggressive or visceraphras in its criticism? It's abstained from the UN resolution on the Tehran conflict. And it hasn't really, to my knowledge at least, given direct military aid to the Iranians. Well, Alice, I mean, you know, obviously, first of all, this is a tragedy that is enveloping much of the Middle East now, but at the same time, as you've just pointed out, it provides us with a very valuable chance to get an object lesson in how China conducts its diplomacy and how China's overriding priorities as the world's second most influential geopolitical actor actually play out.

I mean, to put it in short, this is China's game theory. Welcome to China Decode. I'm Alice Han. And I'm James King. In today's episode of China Decode, we're discussing how Beijing is maintaining a neutral position as the Iran conflict deepens, how Chinese ordermaker BYD is poised to become a global force, and an ambitious and unique infrastructure project is ready to open in Chongqing. We'll talk about how it reflects China's values. That's all coming up, but first let's do a quick check-in.

with how the Chinese markets are starting the week. On Monday, the Shanghai A-Share Index gained 0.2%. The Hangsang 8-Share Index fell 0.8%, now down 12% from its January high. On news of Iran striking aluminium plants in the Middle East, aluminium producers, aluminium Corporation of China and China Hong Chao Group closed up 7% and 4% respectively. And EVMaker, BYD fell nearly 5%, but more on that later. Before we get to the episode, a quick announcement. China Decode now has a weekly newsletter.

We go beyond the topics we cover here on the podcast and give you even more data and analysis on the most important stories coming out of China this week. Subscribe at Chinatode.com. It's free for now, so be sure you get subscribed soon. That's Chinatode.com. profgmedia.com. All right, let's get into it. It has been just more than 30 days since Israel and the US launched their military operations in Iran thrusting much of the world into deep uncertainty.

China gets about half of its oil through the Strait of Hormuz, but it has not offered public support for Tehran, nor offered security guarantees or military backing. In part because of the current tenuous moment in China's trade relationship with the U.S., Beijing and is being highly cautious. Call it a fraught neutrality or call it playing the long game. China is clearly trying to project an image of calm, economic stability

to a global audience looking on to judge its next moves. James, China, I think, has been quite withdrawn from the criticism of the conflict relative to, say, Venezuela, we've discussed that previously. But the fact of the matter is China is still very vulnerable, exposed, if this war becomes more prolonged

and it seems as every day that passes, it's more likely that it is a more prolonged conflict, right? So what is your assessment as to why China hasn't really been as aggressive or visceraphras in its criticism? It's abstained from the UN resolution on the Tehran conflict. And it hasn't really, to my knowledge, at least, given direct military aid to the Iranians. Well, Alice, I mean, you know, obviously, first of all, this is a tragedy that is enveloping much of the Middle East now, but at the same time, as you've just pointed out, it provides us with

a very valuable chance to get an object lesson in how China conducts its diplomacy and how China's overriding priorities as the world's second most influential geopolitical actor actually play out. I mean, to put it in short, this is China's game theory. What we're watching now is, a real-time example of how China uses game theory to leverage advantage. I've sort of boiled it down to what I consider to be three main areas. And the first one, I'm rather fancifully calling, you know, the principle of the tiger's front paw, because a tiger uses its front paw as its prime weapon, because it's so powerful. And in China's case, it uses not military or diplomatic muscle as its prime weapon, but economic power.

And so this crisis in the Middle East is one in which China has to back off in terms of military and diplomatic initiatives and concentrate on its economic power. And so in this regard, you've already mentioned, China's main priority is. is to keep the oil flowing through the Strait of Hormuz and so that it can keep its cities and factories running back home. And it needs to avoid antagonizing the U.S. you know, too much, in order to avoid economic reprisals from Washington, such as tariffs or other forms of economic sanction.

Second, I think China always tries to keep its powder dry. And in this regard, I'm talking about it strictly prioritizes its crucial theater of focus, crucial theater of interest. Iran and the strait of Hormuz are, of course, important to China, but China's crucial focus is on the areas around its borders, Taiwan, the South China Sea, and of course, Japan and Korea. So China doesn't want to spread itself too thin. It can't focus on everywhere all the time. The official word for this is periphery diplomacy. It's focus on the countries and the regions around China. And this has been the case for actually thousands of years. So I think that's the second crucial kind of guiding philosophy that China's diplomacy has.

The last and probably the most important is that China is still a highly transactional power. It doesn't have allies, with the exception of one, and that is North Korea. It has a formal treaty with North Korea signed in 1961. But aside from that, China has no treaty obligation to go in and protect and defend any other country were that country to be attacked. It has many so-called strategic partnerships with countries around the world, and in fact, it had one, or it has one, still with Iran. but these mean really next to nothing when push comes to shove.

A lot of these strategic partnerships are really just to flatter countries that China wants something from. And in the case of Iran, China wanted cheap oil and it got it. And it also probably wanted to use Iran somewhat to undermine the US on the world stage, certainly in the past. I'm not so sure about the present. So these considerations, or if we prefer, China's game theory, means that I think China's response in this war has been a mix of the following things, some of which you've already mentioned.

It's moderated its criticism of the US. It's been using measured relatively low-key language to criticize the US. It's said that the US attack was unacceptable. It said that the Washington is adopting a law of the jungle. It's creating a vicious cycle. But these are fairly mild criticisms really in diplomatic terms. And crucially, at no point has China ever offered military support to Iran, either in terms of money or technology or combat reinforcement. So China's remained aloof in that really important sense. And lastly, China's going ahead with the delayed summit with President Trump. That is now on again for May. And that's hardly the action of a country that would be really annoyed with the US or wanting to score points against the US or harshly

criticise the US. So I think what we can see through all of these is China focusing on its own interests, mainly economic interests, focusing on keeping its focus and discipline on the countries that surround it, where China's destiny really can be made or lost, and lastly, maintaining a transactional view of its relationship with the rest of the world. In other words, getting what it needs and not pledging too much and not getting bogged down in any kind of military adventures anywhere in the world. Would you agree with that, Alice, or do you have a different take on this? Well, I like the way that you framed this James' game theory.

You know, to borrow the vernacular of game theory, I think China's dominant strategy, and maybe you and I agree in this respect, is to have the Strait of Hormuz open, but on its own terms, and ideally through diplomatic means, right? I think the fact that you have a back channel between Washington and Tehran via Pakistan

is a key indication that China is probably strongly involved. Remember because Pakistan is effectively a client state of China, heavily funded and military aided by Beijing. So I could see China playing a big role in if there is some kind of a peace agreement. Now, Iran is rejecting Trump's 15-point plan, and there may be escalation in the coming days where Trump is going to put troops on the ground starting in Kag Island to open the strait on American terms. But I think China's strategy to your point, James, is to disassociate the U.S.-China trade talks and relationship from the Iran issue. And then be seen by both the Gulf states, but even the G7 countries as being a key diplomatic, honest broker. Because remember, it's not just the relationship with Tehran that's at play. It's also the relationship with the Gulf states that have been key suppliers of oil and natural gas to China.

And China wants to be on good terms with the Saudi Arabia's. of the world. So I think that, you know, moving forward will have to see how involved Beijing is in the talks. I take your point, James, that, you know, Iran is not Russia. And I would, you know, the question back to you is, is why is it that China has invested so much in the Russia relationship? She personally has invested a lot in the relationship with Putin. I don't I think that same sentiment is shared with the Iranians, for instance. But I agree with you, James. Iran is seen as a key strategic partner and foothold for China within the region.

Iran also creates more conflict and difficulties for America and the Middle East. So in this respect, it is somewhat like a client state for China. But moving forward, we'll have to see what happens with the new Ayatollah, what kind of a relationship we're going to have between Tehran and Beijing. To date, we haven't seen any Chinese direct or indirect financial or military aid to the Iranian regime. I think before the conflict started, we saw a change in the navigation systems used by the Iranians. They now used the Chinese Bidot satellite navigation system. There was word on the street that the Americans, you know, before they started striking,

were trying to take down some of the system and infiltrate it in order to pick up on where different assets were in the region. And then before that, there was talk about China selling precision missile technology to the Iranians. We'll have to see moving forward if China is willing to do that. But thus far, I think they've been reluctant to. And then one last point that I will make is that even although I think China benefits from this geopolitical game theory, multiplayer game theory, I think we still shouldn't understate the

difficulties this puts China in in terms of the energy fertilizers sides of things, right? Because, you know, you effectively have about 100 days of strategic reserves. China is now cutting down pretty much on all exports of oil and fertilizers, and I think potentially even petrochemicals. And right now, they're putting in oil caps to protect everyday consumers and corporates. if this conflict drags on for longer and the straight in particular is not securitized for more than two months moving forward, I think that that puts China in a difficult position that has ramifications for the economy where again growth is quite fragile. But I want to end on one last question for you, James.

I think this sort of sums up my thinking, why is it that this relationship with Iran is so different from the relationship with Russia? On the surface, these are both huge oil-producing countries. they're all part of the access of ill will. They all cause troubles for the West. Why is it that I think China's more hitched to Russia and has supported Russia throughout the conflict much more than Iran? Absolutely, Alex. And before I answer that, let me just say that I think you're dead right to point out that there could be things happening behind the scenes that we don't know about. You mentioned missile technology. We don't have any evidence that China is helping Iran in any regard like that at the moment.

But if that was to happen, then I think we would. be in different territory here. For the moment, we assume it's not happening. But anyway, Russia versus Iran, I think this very much falls into the kind of category that I mentioned in terms of periphery diplomacy, which is obviously China's core criteria. Russia and China have a border of several thousand miles. So that makes Russia much more important to China than Iran. China also gets a huge amount of liquefied natural gas from Russia through pipelines, which are actual fixed infrastructure. So that's another reason why Russia is so important.

But also, Russia provides China's access to crucial other supply lines, such as the Arctic. You know, shipping through the Arctic goes ahead in the summer months. And it's possible that in the future it could also do so in some of the wind to months if global warming continues. I do also think, and this slightly goes against the argument that I was trying to make, that Xi Jinping and President Putin have a bit of a personal relationship. I said that I thought China was mainly transactional and it focuses on its periphery diplomacy. And you can see that Russia falls into those categories. Russia's vital for China's supply lines, vital for China's LNG supplies. But there is a...

a little bit of an emotional content, I think, between Putin and C. So, you know, perhaps that goes against my sort of framing argument of what I think motivates Chinese diplomacy. Chinese game theory in this regard actually is rather similar to something that goes right back into China's ancient history. There are principles of diplomacy set out in Chinese cannons from about 2,500 years ago, they're called the 36 Strategums. And they're all about how one state can use psychological warfare, ruses, deception,

to gain the advantage over your rivals. And I was looking through this list of these 36 strategies. I would definitely recommend this to any listeners that don't know about these. You can find them anywhere on the internet. and they are really colorful and really interesting. And one of the key aspects of these strategies is that fighting is always considered a last resort. And I think that underlines what I was saying about economic development being so crucial to China's sense of statecraft.

And if we apply some of the stratagems to what's happening now between China, Iran and the U.S., I think there's a couple of stratagems that actually could do some work to help us understand what's happening. One of them is called kill with a borrowed knife. Jia Dao Sharren in Chinese. I'm not saying that China's using Iran to kill the US, but I certainly think that it is disadvantaging the US by its tight relationship with Iran. And the other stratagem that jumped out at me was Li Dai Taoyang, which means sacrifice the plum tree to preserve the peach tree.

And this is basically a sense of sacrificing short-term objectives in order to gain the long-term goal. In other words, keep your eye on the prize. And in this regard, I would say that China is sacrificing the short-term of. objective of being highly critical of the U.S., which is what China really believes in its heart, in order to gain the longer-term objective of getting Trump to come to Beijing and hopefully, in China's eyes, to win some concessions from Trump, maybe some de-escalation in the trade war between China and the U.S. Yeah, yeah, I think I agree with that.

It's funny that you quote Chinese history. I would have said that one of the analogies that we're looking into is the Suez Crisis in 57, in which the Brits and the French were involved in trying to stop NASA from nationalizing the canal and controlling it. And the U.S. under Eisenhower came in after diplomacy failed and basically economically coerced the Brits and the French to back down, thus paving the way for America overtaking the British Empire. And so the big question as we look forward is, is Iran, the Suez's, crisis of today. And does that mean that China is ascended and the U.S. isn't declined? So I'll leave that big epic thought for a future episode. But I think that's something worth

bearing in mind. Okay, we'll be back with more. After a quick break, stay with us. Support for the show comes from Hymns. You've got places to be sitting in a waiting room for hair loss treatment isn't one of them. Hymns makes expert care accessible on your schedule so you can skip the line and focus on feeling like yourself again. Hymns offers convenient access to a range of prescription hair loss treatments with ingredients that work, including chews, oral medication serums and sprays. These are products that use doctor-trusted ingredients like Finistreed and monoxideil, which may be able to stop further hair loss and regrow hair in as little as three to six months. Think of Hymns as your digital front door that leads to better hair health. They bring

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8% in 2025. But competition from other Chinese manufacturers, along with weakened demand at home, has made them less of a behemoth domestically. B.YD's net earnings declined by 19% to $4.7 billion U.S. dollars last year. the first profit decline since 2021. But a broad BYD is ascendant, and this comes at a time when Tesla's market dominance continues to decline in the U.S. Tesla is investing heavily in artificial intelligence and robotaxies, while BYD is pushing ultra-fast charging technology in batteries and overseas expansion.

James, I think this story is timely, and it somewhat links to the Iran crisis issue, right? because if we see oil prices continue to rise in the U.S., for instance, I'm hearing they're up a dollar a gallon at the pump for consumers, this may incentivize a lot of consumers across the world to go. Maybe I'll buy an EV instead. And actually, these Chinese EVs are very, very competitive and energy efficient, right? So I think maybe one of the winners beyond China geopolitically is Chinese EVs. What's your take on that? 100% agree, Alice. I think that, you know, the BYD phenomenon is a true phenomenon. I mean, the growth of BYD sales outside China has just been so rapid. But I really do think that its impact is only going to grow. And it's gathering a following wind by, you know, from the crisis, as you describe in Iran and obviously the rising cost of petrol gasoline around the world. But I think the bigger point here is that BYD is just the first of many. or one of the first of many, a wave of Chinese companies are finding it easier to make money

abroad than back in the hyper-competitive Chinese domestic market. And this is why Chinese exports this year are likely to rise, in my view, above four trillion US dollars. That's up from about 3.8 trillion last year. And that will be the biggest proportion of total world export. ever in history, according to my research. So I think, you know, this BYD phenomenon is connected to a much bigger phenomenon, which is truly epoch-making in terms of global history. When it comes to BYD itself, I think the salient characteristics are the ones that you've described. It's technology is world-class, but it comes in at a price point that really blows Western car companies out of the water. I drove B-YD.

YD-EV in Germany a couple of years ago. It seemed to me like an excellent car. The biggest problem I had was understanding the instructions, because, of course, the car speaks to you, but I don't speak in any German, and this was all in German. So that was a bit of an issue. But the one I rode was the BYD Atto 2.

That costs about $22,990 euro, which is a lot less than, you know, the Teslers and some of the other EVs on sale in Europe. And as you've already mentioned, Alice, the key aspect now, and the new news here is the charging technology, because BYD this month has just unveiled something called the Blade Battery 2.0. This is a game changer, complete game changer.

This means that you can charge from 10% of the charge to 70% of the battery charge in just five minutes. It just takes five minutes. That's equivalent, I think, to about the same amount of time that somebody spends at the pump putting gas into their car. So that is a complete game changer. I remember that BYD car that we drove in Germany, we had to spend about 35 minutes trying to charge it.

All the time we were fretting about whether or not we were going to miss our plane. So I really do think that what we're seeing now in terms of BYD's penetration into global markets is just the beginning. Just a couple of numbers to put a little bit of flesh on the bones. BYD's registrations in Germany have jumped 10 times in January 26 compared to a year ago. And BYD now ranks sixth globally in terms of total auto sales. So that's EVs and non-EVs, and that puts it ahead of Ford for the first time ever. And we don't have to remind any of our listeners that Ford's been around for more than 100 years.

So this is a true phenomenon that we're trying to describe here. Do you like BYD or Tesla's or, you know, have you driven any of these cars? I've actually driven both Tesla and a BYD. You know, they're both great cars, but I think at least from a standard, point of, you know, being a passenger, I think BYD was a better experience. They just have thought of a lot of the, you know, internals, the look of the car, and it feels very good. Even the operating systems within the car dashboard are pretty intuitive. I've actually been very, very impressed. And for that price point, I just think that it's a no-brainer for a lot of

people, if they're just purely thinking about, you know, cost per use as well as energy efficiency, BYD is a no-brainer. But when you were talking, James, I was thinking that it actually is really significant that a company like BYD in February of this year finally saw its overseas sales, its exports, exceed its domestic sales. That is, I think, a very critical turning point for a Chinese order maker. We're at a point now where it can export more to the rest of the world, then it can, you know, be consumed domestically. So just for the numbers, 100,000, around 100,000 units were sold abroad in February versus about 90,000 sold in China, and overseas sales in January to February jumped 50% year and year. That suggests to me that

there is going to be legs in terms of an external overseas market for BYD. And remember, they're, you know, building plants all over the place, you know, in Hungary and Latin America and Southeast Asia to obviously avoid some of these tariff concerns, but also some of these, you know, industrial policies in countries that they're selling into. If they can build local manufacturing, that helps, I think, reduce some of the trade backlash against a Chinese evemaker like BYD. But your point, James, about the batteries, that's going to be crucial. You know, a company like BYD where everything's done in-house, it has a fully closed supply chain will continue to carry the cost advantage in a time where we could see gas prices being at sustained highs, right?

You know, WTI might be north of 100 for at least the foreseeable next couple of months. And then the last thing that I will say that I think is super interesting is the domestic environment, right? So the stocks have, I think, seen some dampening BYD stocks and EVMaker stocks early this year because of the cost pressures, the price wars that are still happening domestically. and you know my takeaway from the government work report in the five-year plan is that the government still cares about this anti-involution drive, you know, this so-called drive to stop these aggressive price wars and deflationary prices in the economy and in sectors. So potentially maybe that will reduce some of the cost pressures and profit pressures for BYD this year. But by far the most important point is the point that you're making, James, is that they are, you know, really enjoying, positive tailwinds in terms of overseas market demand for the cars. Yeah, I'm in Hong Kong at the moment, Alice, and I just had a BYD experience today, actually.

Well, not really a BYD, but certainly a Chinese EV experience. I was talking to somebody at an event that I was at here, and they said to me, so I'm assuming that you drive an EV, and actually I don't. Back in the UK, I drive internal combustion engine car, like an, an, an old-style car, and they looked almost offended, you know, that I would have the temerity to be using a gas guzzler at a time like this when oil prices are rising so much, and the environment is such a big topic.

So I also think that peer pressure is going to have an increasing influence on this topic as well. BYD has comprehensively overtaken Tesla now in terms of vehicles sold around the world, In 2025, it sold 2.26 million vehicles against Tesla's 1.64 million. So, yeah, BYD is really streaking out ahead now when it comes to EVs globally. Yeah, and then one last point, just the battery side of things, China continues to dominate, right? So China's power batteries currently have about 70% of the global market and the anode materials overpass 90%. So if we just think about the other aspects of the EV supply chain, China has really continued to dominate. And then beyond that, I think what will be interesting to see is further industrial consolidation in the market. When I was in China a couple years ago, there were 400 odd different EVs.

And it seemed like every province in China, you know, from Hangzhou to Xinjiang, had its own, you know, set of national champions. and now I think there's going to be even more regulatory and cost pressure that is going to force further consolidation. So apparently, according to one outfit, Alex Partners, we could see the number of EV brands dropped from about 130 currently to 15 in the next five years, which will be super interesting, and definitely BYD, I think, will be at the front of the pack.

That would be amazing. If that transpires, that really will be another game changer. I guess it means that more of these, Chinese EV companies will be able to make a profit because there'll be less players in the market. Yeah. And that's a really important point because a lot of these brands are effectively not making any money. They're making negative profit because they're trying to subsidize and compete with other makers. So really interesting. All right. Let's take one last quick break. Stay with us. Hi, I'm Bernay Brown. And I'm Adam Grant. And we're here to invite you to the Curiosity

Shop. A podcast that's a place for listening, one. wondering, thinking, feeling, and questioning. It's going to be fun. We rarely agree. But we almost never disagree, and we're always learning. That's true. You can subscribe to the Curiosity Shop on YouTube or follow in your favorite podcast app to automatically receive new episodes every Thursday. This week in two different courtrooms in the United States, juries handed down verdicts that suggest that social media platforms,

while not responsible for the content on their platforms, may be responsible for the way their platforms actually work. And that might change the way that social media works. This week on The Vergecast, we're exploring all of the ways that social media could change and might not. Plus, the 50th anniversary of Apple and why, after trying every other phone I could find, I wound up just buying another iPhone. On the Vergecast, wherever you get podcasts. Welcome back.

In the rapidly growing area of Chongqing, a unique project has just been finished. and turned on. In what is being called the world's longest outdoor escalator system, the Walsan goddess is a system of 21 escalators, eight elevators, four moving walkways, and two pedestrian bridges spanning over 905 meters in length and traversing an elevation gain of over 240 meters. That's the equivalent of an approximately 80-story building. The project took over four years and significant engineering prowess to complete. Some 9,000 people now use the Wuzan elevator every day, paying a small fee the equivalent of 43 cents, that's in dollar terms, to ride in each direction, which can take 20 minutes.

An official said 450,000 people used it during last month's spring festival. James, I've recently watched this on the FT. I think the FT had a good piece on this, and it's really dystopic, but in a good way. It feels like you're on some kind of joy ride. It's kind of crazy. It reminds me a little bit of a modern version of, you know, there's Hong Kong escalators that you see in the mid-levels, central mid-levels. We know where people just can stand on them for, you know, 10, 15 minutes as they get to the top. This seems like a similar thing. Although I think the difference is that you have to pay to use this

as opposed to what they do in Hong Kong, right? Yeah, absolutely. I was just going to mention the same thing. Actually, only today was I going up the escalator in central Hong Kong island. But this is, you know, well, what can I say? This is one long escalator or series of escalators, really, isn't it? But I think it also plays to a much bigger topic in China, and that is the big trend for gigantism, for huge things, for statement projects. And I've been doing a little bit of looking around at some of the biggest, fastest, tallest, longest, longest, quickest, you know, the superlatives. and there really are a lot in China.

A lot of them revolve around the built infrastructure. So there is the longest sea bridge in China. And again, that comes to Hong Kong here. And then it goes to Zhu Hai. And then from there it goes to Macau. That's 55 kilometers or 34 miles long. That is a long bridge. There's also the highest bridge in China, the Huayjiang Canyon Bridge.

that is 625 meters above the ground. And that's not the only big bridge in China. In fact, eight of the 10 highest bridges in the world are all in China. Of course, China has the longest high-speed rail network in the world with 45,000 kilometers of track. So, you know, China's got lots of huge things. And I think it's quite interesting to think about why. One thing we can say for certain is that this goes right back into Chinese history. Of course, there's the Great Wall of China that was built more than 2,000 years ago or more. And Tiananmen Square in the heart of Beijing, that's 100 acres in size. That makes it five times larger than red square in Moscow.

The free gorgeous dam, that's the biggest dam in the world. I would say that really, I don't know about in the past, but certainly now, I'd say that some of this gigantism owes its heritage to China's self-image, an image of itself as a civilization at the center of the world, a really consequential player. And I think this filters through into, I don't know, central government wanting to build big things, make big statements, and local governments too. what's your sense of that, Alice? So I'm glad you raised that because I would have taken a completely economics perspective as opposed to historical and cultural, which is to say that, you know, embedded in the modern Chinese system is the incentive structure for local governments

to have these vanity infrastructure projects that they can point to, right? Especially ahead of the big party Congress in October 27. You know, there's an incentive for these party secretaries in each province. in this case Chongqing to point to these big infrastructure projects that they successfully led that, you know, raise China's profile globally, but also employ people. They generate GDP. Now we can debate whether or not it's efficient or inefficient use of funding to make these infrastructure projects. Some of them end up not being used and end up turning into ghost cities, for instance. But certainly I think it makes sense at the locality level to be,

doing these infrastructure projects in order to get promoted in the next party Congress, right? That was my first instinct when I saw this, which is that, you know, this is a party secretary and, you know, a network of officials that are doing this big project so that they can get promoted next year. But, you know, your point about gigantism in Chinese culture, you know, certainly I think that there is this desire to break records, right? You saw that in Olympic Games in terms of the biggest number of performers during one of the Olympic ceremonies. In China, obviously, until very recently, was the most populous country in the world. So there's also this feeling that things need to be bigger, right,

to encapsulate the awesomeness and the grandeur and the size of China. In any case, I think it looks now as if the government is wanting to curb some of the excesses of this sort of wave of gigantism. It turns out that a... there is a proposed tower in Wuhan city, which is supposed to be one kilometers tall. That would make it the tallest building in the world overtaking the Burj Khalifa, which is that huge building in Dubai. The Birch Khalifa, just for your reference, is 828 meters tall or 2,717 feet. but this one, if it was built, the one in Wuhan, would be a full kilometer tall.

But it looks like that has been kiboshed by the government. And there have been a couple of recent directives that have come out. In 2021, the Ministry of Housing and Urban Rural Development said there's a ban on new skyscrapers taller than 500 meters. and there's a smaller threshold for smaller cities. And they've started to name and shame local authorities that kind of get too caught up in this kind of urge to build big things. So, as you said, Alice, these vanity projects,

I guess some of them are vanity projects, and some of them are not. I mean, some of them, you know, maybe this escalator in Chongqing seems to be, as you said, a fairly ergonomic and efficient way of moving people up a very steep hill. But some of these are probably vanity projects, and it seems that the government wants to crack down on that. So maybe we'll never see that kilometer high building. I don't know. Especially they're charging people 40 cents per trip. You know, if you have like, they said over the spring festival, 400,000 people, that's like 200,000 U.S. is a pop, right, for the spring festival.

So maybe the ROI on that escalator is better than a skyscraper. Maybe that's the yardstick. But I remember, and you must have been in China at this time, young decade ago in the 2010s, China was in a competition across different cities to build the biggest skyscrapers in the world. I think the last time we had the biggest skyscraper in the world was in 2015, Shanghai and the Peace Tower.

You see that from the Bund. And since then, they have really had a hiatus. Because to your point, James, there's been a crackdown on excessive local government vanity projects in infrastructure and development. Yeah, the craze I remember so well, this goes back to probably around 2005, 2006, 7, 8, sometimes around then, when local governments all over China, well, a lot of local governments in China wanted to build replicas of the White House as their local government headquarters. and there were some replicas that looked identical to the White House. And all of us journalists used to run around the country trying to find these places and take pictures of them and write stories about them.

But that was also curbed by the government. I don't really know why, but I think they weren't comfortable with the idea of too much mimicry or imitation of America. Yeah, they didn't want the Washington consensus in architecture, right? That's it. All right, James, you know what time it is. It is prediction time. As you look into your crystal wall for the future this week, what do you see? Thanks, Alice. Yes, I just want to return for my

prediction to the question of Chinese exports. Last year, Chinese exports to the whole world was about 3.77 trillion US dollars. And this year, I think it will go up above 4 trillion for the first time, it'll probably come in at significantly more than $4 trillion, maybe $4.2, 4.3 trillion US dollars. But the important part of the prediction I'd like to make is that for the first time ever, Chinese exports as a proportion of total global exports will rise to about 17 or 18%, which is a historic record, overtaking the previous record, which was 16% by the United States way back, I think it was in 1968. So we're headed into new territory again in terms of Chinese trade and the dominance of Chinese exports around the world.

That's such a great point. I was running the historical figures earlier this week, and we've never seen a country in our modern history that has run as big a trade surplus as a share of GDP, its own GDP as China. The US, even at its peak, and it was a net trade surplus plus country in its own right from 1870 to 1970, at its peak it was 1% of GDP. Its trade surplus. China is 6%. And if you're telling me that exports are going to continue and consumption is flat, that number, that ratio could rise, which, you know, again, this is a historical abnormality that we're currently living through. So my prediction is more germane to the present. I am befuddled by Trump's announcements. I'm befuddled by a lot of them, but his announcements of particular about this May

trip to China. As of yet, I do not believe that the Chinese government and foreign ministry have yet confirmed that that trip is going to happen. Trump visiting China in mid-May, remember, the summit was delayed from early April. I just think, especially if we see an escalation in the U.S.'s involvement in Iran and the Middle East and the U.S. being distracted. I don't see the U.S. having, you know, really the attention span to do the homework before a Trump summit with Xi in Beijing. And I don't think that the Chinese are willing to, you know, have a meeting where there isn't any meat on the bones in terms of concessions and trades, right? So I'm a little bit skeptical about that, and I do not think that that summit will happen in May. And I, and I, and that,

the data point that I used to reflect on this, actually two data points, is the following. Number one, the two trade probes that have been launched by the Chinese government into America. And number two, I believe in any point soon, there should be the completion of the agreed upon US arms sales to Taiwan. And remember late last year, there was a record number that agreed by Congress that was passed as part of a deal. If that comes through from now until May, I just just don't see the Chinese saying, look, we're going to have a summit right on the heels of a historically high-arm sale package to Taiwan. Well, that's fascinating, Alison. You've been dead right in, I think, at least two previous

predictions about the summit between Trump and C. So I would say you're, at this point, you've got a status of Summit Whisperer. Okay, thanks so much. I'll take that. Maybe, hopefully my probabilities are better than Trump's. I'll take that. All right, before we go, just a reminder, China Decode is now available on Substack. Subscribers get ad-free episodes, our exclusive newsletter, and a place to engage with James and me and other listeners. Find us at Chinaddecoad.profgmedia.com. That's all for this episode.

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