The Prof G Pod with Scott Galloway - China Decode: China’s Long Game in the Middle East

Episode Date: March 17, 2026

As the war with Iran escalates, the United States is shifting military assets back to the Middle East — raising new questions about whether Washington can stay focused on the Indo-Pacific and China. Alice Han and James Kynge speak with Gulf Research Center chief economist Dr. John Sfakianakis about how the conflict could reshape global power dynamics and whether Beijing may gain strategic breathing room while U.S. attention is divided. Then, a new set of university rankings is fueling debate over the future of global research. Chinese universities are climbing rapidly, backed by massive state investment and a surge in scientific output. Finally, China’s electric vehicle giant BYD is reportedly exploring a dramatic new move to boost its global brand: entering Formula One. We look at what it would mean for the sport — and for China’s ambitions in the global auto industry. Subscribe on Substack for ad-free episodes and much more! chinadecode.profgmedia.com/ Learn more about your ad choices. Visit podcastchoices.com/adchoices

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to build things. So that tells a lot about China's presence in the Middle East. I think what is clear is that when this war is over, it's going to be a very different Middle East. Welcome to China Decode. I'm Alice Han. And I'm James King. In today's episode of China Decode, we're discussing how the Iran war is helping China, why Chinese universities are rising in global rankings, and why China's EV giant wants to join Formula One. 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, the Shanghai Asia Index closed down. 0.3%. The Hangsang H-Share Index ends the day up 1.5%. The Hangsang Tech Index surged almost 3% after famed investor Michael Burry suggested that it may be undervalued. B.YD jumped 8% its biggest gain in over a year on news of significant demand coming out of Latin America. And China National Offshore Oil Corporation declined over 1% amid escalating tensions in the Middle East. All right, let's get into it. The war with Iran is starting to ripple far beyond the Middle East all the way to Asia.

Now, for years, U.S. officials have said the Indo-Pacific is America's top strategic priority because of China. But now as a conflict with Iran escalates, the Pentagon is pulling missile defenses, warships, and other military assets out of Asia to reinforce the Middle East. Now, joining us to talk about the broader implications is John Svecunakianakus, chief economist at the Gulf Research Center with decades of experience in the Gulf and Middle East region. John, thanks so much for being here. Thank you. This is a very fast-moving situation.

We're seeing a lot happening in the Straits of Hormuz. Would you say that this war risks pulling the U.S. back into the Middle East, just as it was trying to pivot towards Asia? Absolutely. I think they're back into the region. And this is not going to be a short-term. event. It's going to be far longer than what they anticipated or what they portrayed to the rest of the world. One, because regime change hasn't happened, it will take much longer. And two,

for regime change to happen, you need to have more of a firepower, greater firepower, because Iran is a true enemy, a force to reckon with. And they have gone through the decades. And they have gone through the decades of experience war with Iraq, and they don't care of sparing people to fight this war. So the Iranians are notoriously capable in wreaking havoc in the Middle East and in the Gulf in particular. John, a couple years ago, China was involved in it seemed diplomatic discussions between the Iranians or the Saudis to revive the diplomatic relations. And at the time, there was a feeling that China had a diplomatic presence and an interest to bear in the region.

When you look at China today, it's been, I think, remarkably quiet on this issue. How do you think the Chinese regarding what's happening in the Middle East, are there opportunities or are there real risks to China's position in the Middle East and its oil interests, which remain the paramount concern? The Chinese are playing a long game in the Middle East, but also a long game around the world. I don't see any interest, any true gains that the Chinese can have by getting involved in the Middle East, besides the commercial interests, besides safeguarding the freedom of passage and vessels that provide and cater for, the energy needs of China. But for the Chinese to get involved militarily, beyond their commercial interests, I find a lot of dangers and very few gains for the Chinese, especially as the U.S. tries to get involved, as the U.S. is getting involved with Israel in restructuring the Middle

East. Remember, this is not just a game to change. Iran, it's a bigger game, so to speak, but a bigger play to restructure the way the Middle East map has been formulated. So this is a game changer for the U.S. and China doesn't want to get involved. Likewise, Israel won't get involved in whatever China wants to do in Southeast Asia, in Taiwan, and so forth. China sees the same way in a similar vein in the Middle East. And John, just zeroing in a little bit on the Straits of Hormuz, which seems to be the focal point at the moment, President Trump has said that he wants several countries

and he also mentioned China among them to help with the shipping situation to get some of the tankers through the straits. As you've mentioned, it doesn't look like China is responding too warmly to that, But could you ever see a non-military role for China in helping to either de-escalate the situation or maybe help some of the shipping get through the Straits of Hormuz? I'm very circumspect because, one, the Chinese are able to get their vessels or Iranian oil. as we know, most of the Iranian oil goes to China. As long as that oil finds passage through the straits, which the Iranians can safeguard,

I don't think the Chinese will gain by getting involved, even on a commercial basis, even on issues like safeguarding free passage of other vessels. Or if we get into the issue of mines, getting the Chinese to demine the Gulf. And remember, there is a commercial relationship that binds Iran with China far longer than anything else. So I think the Chinese are observing, watching.

They're staying away from being criticized, providing military hardware to the Iranians. They want to be watchful, because this crisis is going to be much longer and deeper than we initially envisaged, or we were told by the U.S. So, John, on top of being a Middle East expert, you're also a bit of an oil whisperer. So I really want to get your take on what's actually happening in oil markets, you know, where we're going to be in a couple of weeks from now.

And more importantly, for the China perspective, what is actually happening in the street? We get these conflicting stories about tank is passing through. There's a narrative that China gets precedence because of the strategic relationship with the Iranians and the Ayatollah suns abiding by that relationship. Walk us through what's happening in the strait right now, and is it true that China is getting preferential treatment in terms of still accessing the strait moving forward? So far, the Chinese are getting preferential treatment, yet what we don't know is the exact amount of, vessels going through, oil tankers going through, one, because there isn't a lot of transparency. Two, the logistical aspect requires that they go silent for a while. And three, we don't have enough data points.

But it's not just the Chinese, it's also the Indians that can get some vessels and some shipments of crude oil through the straits. But what seems to be going on is that the market last week and the week before was spooked, hence we saw the spike. Now the market is beginning to take notice of what exactly is happening to the war. Is this a long war, a short war? And I think this week it will be very crucial because we will go into the market thinking that this is going to be a long, war, and as a result, prices could be spiking a bit more than we witnessed before. Having seen this, and having said this, if we had this crisis, 20 or 30 years ago, clearly oil would not have been

at $100. I believe that from day one, 20 years ago, oil would have spiked to $150, if not $200. dollars. And I think the geopolitical premium that we've all discussed in the past has in a way been priced in, but also the importance of geopolitics has shifted. The U.S. today exports a lot of oil, itself reliant on oil, and really Gulf oil goes to Asia. And on top of this, China today has stockpiled a lot of oil. Remember, given what what we know, China today has about three months, maybe four worth of crude oil. And also in terms of natural gas, China is able to shift from natural gas to coal. And that makes it a little bit more versatile. And also, the war is happening at a time when we go into the spring and

summer months. So the demand for heating fuel, transportation fuel evolves and changes. But China is a little bit more independent than we could have said 20 or 30 years ago. And also there is storage and the strategic reserve unfolding that will help the market. But this week is very crucial because if the straits remain closed and if the Iranians actually do mine the straits, that becomes very difficult to solve. it's going to be a long campaign, and that could really shift the way markets appreciate the supply of oil, and that could spike oil prices up. You say it's going to be a long war, and some say that it could also become a more regional

war. I'd like to get your take on that. Do you think that there is a very significant risk in that regard? And if that was to happen, maybe that draws China in to some extent. I've been looking at some of the numbers, in addition to the fact that China gets 38% of its imported oil through the Straits of Hormuz, China's also invested huge amounts of money in the major countries of the region, about 300 billion US dollars over the last 20 years or so in Saudi Arabia, UAE, Iraq, Egypt, Turkey, Israel, and other countries, including Iran. If it becomes a regional war, John, do you feel that this basically kind of cannot resist, but, you know, to try to protect its interests, these very significant interest that it has? I completely agree that commercially China is big in the Middle East and it has been doing exactly the same thing as it has been doing in Africa, providing credit, facilities, construction companies, and so forth.

So the China of today is far deeper in the Middle East, including the Gulf, including Iran, including Iraq. When Western companies are not so forthcoming to build things, the Chinese are always there to build things. So that tells a lot about China's presence in the Middle East. Having said this, if we go into a regional war, which I don't expect because the Gulf states will not retire. And if they do retaliate, it will be measured, it'll be more guided by the U.S. This is a U.S.-Israel war, and it's becoming more of a U.S. war, a Trump war, than anything else.

And I don't think the Gulf states, unless they're heavily attacked, more so than what we've witnessed over the last two weeks, the Gulf states will not get involved, because they're just 20 miles across the Gulf, which the Iranians call the Persian Gulf, and the Gulf called the Gulf. So I don't think we're going to see original war. If we do, however, see a regional war, then the Chinese could take a different position. But again, I do caution, and I do believe that the Chinese will stay out of it. And they will prefer to be observers, commercial participants through vessels, through the commercial routes they have established negotiators, remember, it was the Chinese who offered their good offices to mediate between

Saudi Arabia and Iran to the surprise of the U.S. So in a way, China is there, but they don't want to be really at the forefront, especially when the U.S. is taking the lead on this war. Really interesting. Well, I look back to last year and how markets were very much disturbed by the April Liberation Day tariffs. And then, you know, fast forward a month, the markets digested it. Some of the tariffs were walked back or done in Swiss cheese style, so we did see carve-outs. How do you feel about what's happening now in the Middle East John and where do you think will be at the end of 2026?

Is this going to be something that blows over? Or as to your point, if it is a longer conflict, is it going to have ongoing ramifications for U.S., for China, for all? for commodities at large? I think what is clear is that when this war is over, it's going to be a very different Middle East. The Middle East geopolitically is moving towards a Middle East that is led and thought by what Jerusalem decides.

And that is on the geopolitical side, on the military side, on the political side. On the economic side, of course, the importance of the Middle East stems from the fact that you have a Gulf region which still produces a lot of assets, it still produces wealth, it still invests in different parts of the world. They have invested upwards of $5 trillion throughout the world as a result of the petrol money that they have collected amassed over the decades. But this will be a very different. Middle East. It will be more unstable. It'll be fragmented. It'll be smaller states. It'll be decided on the basis of Israel having the military upper hand with the U.S. providing additional

security measures, but also a fragmented Middle East because the Gulf, remember, although it is six nations, they also have seven different opinions. They're not all friends. and they're more kind of frenemies trying to vie for power, not just within the Gulf, but beyond the Gulf in the Middle East. And that changes a lot the situation after the war. More specifically, with regards to Iran, if you do have regime change, the big question is what happens to Iran. Do you have one Iran?

Do you have three Irans? Do you have four Iran? what is the role of Turkey because it has a Turkic minority, what happens to the Kurds, what happens to the majority who are Persians, or so 65% of them, how do they decide their future? And then if there is a spillover effect into other parts of the Gulf, but for sure what you see out of all of this is long-term instability, which makes Beijing acutely concerned. because they have commercial interests, and they do want to continue and further these commercial interests.

But eventually, they don't want to see their construction companies being unpaid. They don't want to see construction workers returning back home, and they don't want to have a negative ROI on the balance sheet of many of these Chinese firms. This might be a little bit on the nose, but, you know, could it possibly be that as the U.S. attention is diverted to Iran and the Middle East, that China sees its moment to make a move on Taiwan. We all know that China's got longstanding strategic interests, and it says very clearly it wants to recover Taiwan.

Do you see this as a danger that, you know, the U.S. is preoccupied over here, and China seizes its time? It could be. They're moving a lot of hardware, although I'm not a military expert on Asian geopolitics, They are moving a lot of hardware. As you know, they're moving another aircraft carrier group from Asia into the Middle East. And they're moving a lot of assets, military assets, which eventually have to be replenished. The U.S. defense sector will need time to replenish those military hardware goods.

And so that could give an opportunity. But if I may forecast into the reality, of the unknown into Asia, I would say that the Chinese take their time. China will take their time. And eventually, China would come out more of a winner than a loser from all of this. Really interesting. Thank you so much for joining us. Dr. John. We'll be back after a quick break. Stay with us. Support for the show comes from Serval AI. Having a successful business means having a well-functioning IT department. But if your team is always inundated with tedious tasks, including working on password

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scaled up its scientific output with massive state investment. Some experts say this signal, a real shift in global research power. Others argue that the rankings reward the quantity of papers and not necessarily the quality of discoveries. James, as a Harvard alum, I have to say, actually Harvard and Stanford alum, I'm pretty shocked at what's been happening. And it seems to reinforce this view

that the locus of science and technology research, the locus of high education, is shifting eastwards towards Asia. What was your quick take on on these rankings. You're still okay for now, Alice. I see in the QS World University rankings, 2026, Stanford is number three and Harvard is number five. So don't worry about it. You're okay. I was at Edinburgh University. I think we're something like 34th, so you're doing all right. But the point you make is a very valid one, which is that Chinese universities really are

leaping up these tables, and a lot of the time it depends on which table you look at. The QS World University rankings, the one I just cited, is generally seen as the most rounded measure, but there are some really eye-catching rankings that have just come out. The CWTS-Liden ranking, that comes from Leiden University in the Netherlands, shows that 19 of the top 25 universities ranked as being Chinese. Harvard is the only foreign, well, the only U.S. university that gets a look in in the top 10, and it's ranked number three. There's no Yale, no MIT, no Stanford.

The only other university in the top 10 is the University of Toronto, and that comes in at number 10. These rankings are, you know, are rather different. the one that I've just mentioned, the CWTS-Liden ranking, that looks very much at what's called bibliometrics. That's looking at how many papers are published, how many times those papers are cited, whereas the QS rankings, the one that we mentioned at the top there, is a much more comprehensive, reputation-heavy ranking, and it looks at things like teaching, employability, research, and also internationalization. internationalization is one area in which Chinese universities really stumble, because there aren't

that many international students there. I also went to a Chinese university. We were really like a rare breed, foreigners in the Chinese university campus that I was in. So you do have to take these rankings one by one, I would say. But my final point is that this is very much a strategy of the Chinese Communist Party. Although these universities, that independent institutions, the Communist Party, of course, lies behind them and orders them and informs their policies and strategies. And so this is a big national push to push Chinese universities to the top rank and then to gain the kudos, I suppose, that that brings with them. But what's your sense, Alice? Did you go to a Chinese university as well?

I didn't, James. I'm going to have to ask you, a lot of questions about that. I only went to universities in the States. So I don't have a clear sense, but, you know, what you've just said to me, James, gels with, you know, my own understanding of some of the metrics used to assess China's AI publications. You know, there's an argument that China is vastly overproducing, or rather producing way more in terms of AI-related research than any other country. But then this begs the question, what is the quality of this research? You know, And there's a figure, for instance, in 2024, China produced over 870,000 journal articles and reviews in journals, while the U.S. produced roughly 500,000. China's AI research publication output is the combined output of the U.S., UK, and EU, and now is about 40% of the global citation attention.

And just in terms of most of the STEM graduate students, Chinese STEM graduates make up about 50% of the world's total. you've got 12,000 PhDs coming out of China every year. That's three times coming out of the US. So numbers aside, the big question is, what is the real productivity or innovation that's coming out of this research and out of these graduate students and PhD students? And it's hard to really find a metric that captures that.

And I think this story that you've cited, James, about the conflicting rankings is at the heart of how we in the world, struggled to really understand the degree of innovation coming out of China, because we don't trust the volume of research alone, and it's still very much a black box in terms of really figuring out what is actually happening on the ground in terms of innovation. But James, you're the only one of us here who's actually been to a Chinese university, so please tell me what that was like, and whether or not it can, you know, reveal things about China's education

system at the tertiary level. My sense is that there is absolutely no doubt that Chinese universities have really sharpened up their act. And, you know, the level of teaching, the level of determination among the students is really very close to, you know, the global standard right now. The difficulty comes because there are stories that are true and appear to go against what I've just said. The Financial Times wrote an article about Chinese universities, and they quote Ivan Oranski, who's co-founder of an institution called Retraction Watch. And what this researcher has found is that there are huge numbers of papers issued by university academics

that are then retracted later on. According to his statistics, in 2024, about 3,000 retractions of Chinese authored papers from journals took place, and that compared with just 177 retractions from US authors. So there's no question that faking of papers in China is a big deal. And actually there's a whole business model, you'll be surprised to hear, so-called paper mills, are companies that are paid to create fake academic studies. So some people focus on that and they go, oh, well, you know, everything in China is fake. You can't trust this. They appear to be leaping up the rankings, but it's not real.

But my sense of it is absolutely, very, very clearly, it is real. China is leaping up the rankings. The academic output of Chinese academics is going through the roof. And the other side light that I think we can shine on this is to look at how many Chinese academics from abroad, particularly the U.S., are going back to China. There has been a study done by Princeton. Princeton University's Paul, Marsha Wise Center on Contemporary China, and they found out that 80 to 90 professors are returning annually from the U.S. to China in recent years.

And these include some really big names. We've mentioned before on the podcast, Song Chun Zhu, Consumer scientists at UCLA, who went back to Peking University. He is top of the tree in his. area. There's another one called Nying Yan, who is a biologist who left Princeton. And then there are also some famous name foreign intellectuals who are going as well. There's a field medal winning mathematician who joined Tsinghua University, et cetera, et cetera. So I would like to say that this is a very real theme. My own time at a Chinese university was a long time ago. It's not really relevant

to the current day. Aside, as a point of comparison, I would say, when Chinese universities were really nowhere on the global rankings. And, yeah, as I said, foreigners were seen as a kind of rare species around campus. That's fascinating. A friend of mine is actually a professor at NYU, Shanghai, and I'm actually going to be there doing an event in a couple weeks' time. And what he said to me, I think, chimes with the concern that you raised, James, about the lack of international students in Chinese universities. Now, this is supposed to be more of an international program that invites people from around the world, but they heavily rely on Chinese students who want an NYU brand name going to university in Shanghai. Another key market for them is actually Central Asia, where they're

seeing a lot of growth, and some, you know, a mix of students from Europe, Africa, Latin America, but really what I've noticed is a decline in American students going to China. There's an example of the Schwartzman program that I think has been suffering in the last couple of years and it's relying more on non-American students. But there's a bigger, broader question at play, which is to what extent can China be truly international? You know, putting aside how cutting edge and innovative the research can be, can it ever become, you know, at the U.S. or Europe, level of international university or even the British level of international university with international standing. For cultural reasons, I'm deeply suspicious of that. But I think, James,

you raise an interesting point about ethnically Chinese people, Chinese passport holders, coming back from potentially being educated or working in the States to the mainland. And I often hear anecdotally that it's not just because of the financial or patriotic rewards. It's oftentimes times a decision to come home and take care of their parents who are getting older as well. I see that a lot amongst my peer group, for instance, who have lived and worked in the States are coming back to China. James, do you feel that there is a change in the way that Chinese universities are being regarded in the West? Is that something that you're, you know, plugged into? Kind of, but as it happens, I met the son of an old friend the other day here in London. I knew him

when he was a kid in China. He grew up entirely in China and speaks Chinese like a native. He went to university in China, but he was put into the foreigners' stream. And this, to me, shows the real problem with the internationalization of Chinese universities. His Chinese is definitely good enough

to sit alongside the Chinese students in the Chinese stream. But he wasn't allowed to do that because in general, foreigners are not given that kind of access. They're shunted off into foreign-only streams. And that isn't real internationalization. That is fake internationalization. And quite honestly, very few foreigners speak native-level Chinese. So it is a problem for them to sit alongside Chinese students. But even those who do are not allowed that opportunity,

or very rarely allow that opportunity in Chinese universities. So I think Chinese universities really do do have a long way to go to genuinely internationalize and give foreign students the same kind of treatment that a Chinese student would have at a university in the US or in the UK, where they sit alongside students from everywhere in the mainstream course, not in some adjunct course for foreigners. It's interesting that you raise that the language aspect, James, because it's coming at a time where in the last week or so we've seen announcements that the government really wants to reinforce the use of Mandarin, Mandarin Chinese in the schools. And this is especially targeted to minority groups and minority schools around the country. And the idea is that all courses need to be taught in mandatory

fashion with Mandarin Chinese. I don't know if you've been following this, but certainly I think in the West there is a bit of consternation anytime anyone raises this issue, especially as it pertains to minority rights. But as you were saying this, this definitely came to mind. Okay, let's take one last quick break and stay with us. Support for the show comes from Quince. Building a wardrobe you actually like comes down to pieces that mix well and last. That's where Quince shines. Lightweight cashmere sweaters, short sleep 100% Mongolian cashmere polos,

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entering motorsports. The company is exploring options ranging from the Formula One Championship to the FIA World Endurance Championship, which includes the famous 24 hours of Lamans. It would be a major move for a Chinese automaker in a sport long dominated by European and American teams. It also comes as BYD's expanding globally after recently surpassing Tesla in global EV sales and pushing into higher-end vehicles. But getting into F1 isn't cheap. Building and running a competitive team can cost up to $500 million a season and can take years to pull off. James, are you a car enthusiast? I have to confess that I love drive to survive. It really got me into F1 driving. Oh, really? Okay. Well, I'm going to come straight back to you on this.

Just a couple of things. I'm not a massive fan, but I do follow it a little bit. And I must say, Alice, when we were thinking about this segment, I just thought a few episodes ago we did a piece on how C-Dance, a video generation technology, which has been created by ByteDance, is disrupting Hollywood. And it can't help but think that what we're really talking about today in this segment is the next potential Chinese tech disruption story, and that is Formula One. I had a quick look at some of the speeds involved. Now, I guess there's a bit of essential background.

Formula One cars are almost all conventional, combustion engines. They do have batteries, but that's not what they're mainly about. And BYD, which, as you said, wants to break into Formula One is a pure battery car. And yet, if you look at their fastest car, the Yang Wang U-9 Extreme, it's purely battery, and it's set a world production car speed record of 308 miles per hour. That's 496 kilometers per hour. That's 496 kilometers per in September last year. That's quicker by quite a long way than any of the modern Formula One cars around.

So, you know, if we're just talking about pure speed, I don't know about cornering, going around the car, I don't know about driving technique, but if we're just talking about pure speed on the straight, this BYD car could lick any of the Formula One cars that are currently out there. Tell me your sense of this. do you welcome this?

The battery cars coming in. Are you a traditionalist? Do you like seeing the, hearing the roar of the engines and listening to those combustion cars? I have to say the combustion cars probably went out. There's something very special about a motor, the sound of a motor and a combustible vehicle. So I'm not sure if an EV would be able to deliver

the same kind of satisfaction from a drivers or even a viewer's perspective. But certainly, you know, when I see, saw the story, I had a couple of thoughts. Number one, what I've seen trending in social media is the virality of F1 driving, especially amongst young females, educated females in China. They seem to be really keen on F1 driving. And over the weekend, we just saw the Shanghai F1 Grand Prix of about, I think, 230,000 spectators. This is a world record, according to Chinese press. This is the biggest record in two decades. And a lot of these drivers, in particular,

one Chinese one that I have to shout out for, Joe Guan Yu, who's the driver for Cadillac, now this is an American company, is very, very popular in China, is originally from Shanghai. You know, we also have Lewis Hamilton, who's been going around China. He was actually just in Tibet with his mother and posting about the beauty of the Chinese landscape. The reason I raised this story in these. anecdotes is that it's clear that the government seems to be in favor, and this goes back to previous episodes when we talked about concert tourism, of these sorts of experience economy-related tourism. There was, I think, a statistic from Trip.com, which is a big Chinese tourism platform,

online tourism platform, that during the F1 weekend, there was a 20% year-on-year increase in inbound tourism bookings and hotel reservations in Shanghai rose 96% year-on-year. So that's just to give you a sense of how much enthusiasm that has been from everyday Chinese towards the F1 Grand Prix. And I get the sense that this could be like what, you know, snow sports were for China a couple of years ago, if you remember before Gu Ailing-Ingu came on the scene. There was a big, I think, government-led push, but also supported by everyday people to get more people into skiing, into ski sports, snowboarding and skiing.

I could see something similar where the government. government is super supportive because it sees this as being actually really beneficial for consumption, for tourism. What's your feeling, James, about whether or not this could be popular in China moving forward? Do you sense that the market is ready for an F1 story in China? There's a separate question about whether or not F1 is ready for a Chinese brand, but do you think that the market in China is primed for F1 mania? I remember when some of the first F-1 cars arrived in China, it was mania at that time. And I think this is exactly what a lot of Chinese people will love to support and do and follow.

You know, I mean, we've often spoken about it on here, Alice. Chinese people in general, I would say, are very interested in technology. You know, when you go to China, you find to an extent that I never find over here in the UK or even in the US, you know, people love to talk about technology. They will kind of interrogate your mobile phone or ask you about whatever technology you're interested in. It will be the font of many conversations. So I think the level of interest in this type of thing is sky high. And then, of course, there's the glitz and the glamour that goes with F1. There's the sort of howl of these cars going around those tracks. And then there's the winners and the losers. It couldn't be

better designed for a Chinese consumer audience? Yeah, I think that's honestly what is prompting the head of FIA, the Formula One's governing body, to actually be open to having China potentially join. Now, there's a separate discussion of whether or not they would be allowed to with EVs, you know, as we mentioned. But certainly, I think as F1 grows more popular in China, I think it economically would make sense for FIA to really start to take BYD seriously. And it seems that BYD is really at the forefront and it would be the front-runner candidate if China is allowed. And currently, I think, insofar as I understand, it's just the, it's dominated by the Europeans and the Americans. China doesn't really have any representation, apart from that driver, Joel, that I mentioned.

But aside from BYD, some of the other car brands potentially that we've mentioned, Gili, as though has participated in an international touring car racing through Cian racing, Neo won the Formula E electric championship back in 2015. So there's a lot of other car brands out there that could want to get into this Formula One ecosystem. But it, I think, tells a bigger story, which is my sense that the EV industry and the auto industry in China is starting to evolve and really want to capture the high end or luxury end of the market.

We had more recently in the last few months, BYD's Danza model that just came out. This is the premium model that's being marketed differently from the other BYD offerings. And you already mentioned James, the Yang Wang high-end model that was tested recently in Germany, that had huge, very, very high speeds. But certainly I get the sense that as this auto industry is maturing, they really are trying to rebrand and create alternatives that are more high-end luxury as opposed to, you know, mass market and cheaper. And I think this F1 story is a good indication of the ambitions of a lot of these Chinese order makers, not just BYD.

All right, James, you know what time it is. It is prediction time. What is your prediction for this week? This one might sound a little bit left field, but actually when you look at the numbers and you think about it, it's pretty mainstream, really. I would say this year is going to be a bumper year for AI emotional companions in China. these are, you know, avatars online. They don't forget your birthday. They don't forget your anniversary.

They'll never ghost you. That's a given. Because, you know, the software of these AI companions these days is so good that you can have a proper interaction with them. They're good company. They lend a sympathetic ear. They're witty. They can be humorous, etc.

So I have a prediction. This year, the market for Chinese AI emotional companions. will grow to about one billion U.S. dollars. That's up from 530 million U.S. dollars in 2025. And by the way, there are predictions out there that see even more aggressive market growth by, let's say, 28 or beyond that. So this is a huge market. It's really catching on. I have not yet tried an AI emotional companion, but I might give it a go. How are they monetizing it, James? Is it through online platforms, online chats?

I think you have to pay a subscription. So you pay probably a monthly subscription for your AI companion. And I was searching. There are lots of different competing names there. You know, some of them are quite famous. I think Xiao Ice is the most famous. that originally was a Microsoft product. I'm not quite sure what happened to it,

whether it still belongs to Microsoft, but it's huge in China. And I saw a number online. I don't know how real this is, that there are 660 million people worldwide who look at Xiao Ice or interact with Xiao Ice. That's crazy. I mean, it's all feeding into the Silicon Valley fears

that people aren't going to have kids because they're all going to be with AI girlfriends and boyfriends. But I think in East Asia, that's going to be a pretty developed market, given where things are heading, fascinating, James. So mine is a bit less left to field. I would say it's very much in the vein of what is happening right now. I get a spidey sense.

I don't know why. Don't ask me why. That we might have a delay of the Trump visit to China. I was, you know, reading some of the coverage of the Helleefeng and Scott Bassett meeting in Paris over the last few days. And even though there were no real bad news or signals coming out of that meeting, I just got the sense that there hasn't been anything really substantive, that the Americans are still very much distracted by, you know,

as Dr. John mentioned, what is happening in a fractured Middle East in Iran specifically. So I just see an alignment of a lot of stars that point towards Trump potentially delaying. And now he's even said in the last 24 hours that he could delay that trip. So I think we'll see in the next few weeks if that indeed, happens, but that certainly changes, I think, the nature of daint, you know, which was very much the base case for a lot of people and investors when thinking about the U.S.-China relationship, because certainly if we don't have that Trump meeting, which I think was a key sign of the continuation of d'aunt, that opens the doors for a lot of challenges and risks in the relationship

to my mind. That's such an interesting call. Yep, I'm going to be attuned to that as well, Alice. Thank you. Before we go, some very big. news. China Decode is now available on Substack. Subscribers will get ad-free episodes, our exclusive newsletter, and a place to engage with James and me and other listeners. Find us at Chinaddecoad.proggemedia.com. That's all for this episode. Thank you for listening to China Decode. Make sure to follow us wherever you get your podcast so you don't miss an episode. Talk to you again next week.