The Prof G Pod with Scott Galloway - China Decode: Hong Kong's AI Crackdown, Lululemon’s Marketing Backlash, and World Cup Fever

Episode Date: June 23, 2026

Alice Han and James Kynge dive into why JPMorgan has cut its Hong Kong employees off from Anthropic's Claude. That comes after Goldman Sachs quietly restricted AI access for their employees in the city. With ChatGPT already blocked on the mainland, are U.S. companies drawing a new line around Hong Kong? And what does it mean for the city's future as a global financial hub? They also discuss Lululemon's Great Wall yoga festival, which was meant to celebrate Chinese culture. Instead, a Japanese-style drum in the promotional imagery set off a nationalist firestorm — over 50 million views on Weibo and counting. It's the latest in a long line of foreign brand missteps in China. Why is it so hard to get it right? And finally: China hasn't qualified for the World Cup — but football fans have found someone to root for: Chinese referee Ma Ning, who has picked up sponsorships from Lenovo and Hisense and 210,000 new social media followers. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Get paid back up to 90% of vet bills. You can use any vet in the U.S. and Canada. Vets are in network. Go to fetchpet.com slash save right now for your free quote. That's fetchpet.com slash save. I've never lived in a country that is as football mad as China. And I come from the UK. But China is more football mad, I would like to say, than the UK. People are fascinated by it. So for China not to have qualified for the World Cup since 2000, too, obviously it's a big disappointment for Chinese people. Welcome to China Decode. I'm Alice Han.

And I'm James King. In today's episode of China Decode, we're discussing private companies limiting the use of AI models in Hong Kong, a Lulu Lemon campaign that goes wrong, and World Cup fever takes over, despite the Chinese team not qualifying this year. That's all coming up, but first, let's do a quick check-in with how the market markets are starting the week in China. On Monday, markets were once again open following the Dragon Boat Festival holiday and saw a strong rebound. The Shanghai composite closed up 1.78% and the Shenzhen component finished the day up 2.13%. Its highest level in 11 years. The People's Bank

of China announced it would keep its key lending rates steady. Notable gains included Bank of China up 2.8%, narrow technology, a semiconductor equipment company up 3.3% and electric battery maker CATL up 4.4%. All right, let's get into it. J.P. Morgan Chase has reportedly cut off its employees in Hong Kong from accessing Anthropics AI models, citing concerns over licensing terms that restrict use in Greater China. Goldman Sachs has already made a similar move in the region. At the same time, Washington is escalating pressure on Dutch chipmaker ASML over concerns that advanced chipmaking lithography equipment could have reached China, a reminder that the battle over AI isn't just about software, but also the hardware needed to power it. So James, I thought it was super interesting to have

those two stories really come to the fore in pretty much the same week. And it reminds me that we are living in a technological Cold War II, where there is an iron curtain increasingly developing, being drawn up between mainly China and the US. We can debate as to whether or not Anthropic has done this move to cut off access to China and now Hong Kong because it wants to be seen as anti-China and pro-US or if it's Kow Tao into pressure from Washington.

But what is clear to me, is that increasingly Hong Kong is getting looped into mainland China. This, I think, may be net bad for the financial services sector in Hong Kong, which relies on being a cross-border hub, not just of funds and financing, but a sort of talent and IP. And then more than that, the SML story just reminds me, the stakes are not just about the models themselves. They're also about the hardware use to power them. Now, ASML is saying that they weren't all involved, but the fact that the Americans are going hard after them suggests that in this kind of tech race, not just over models, but increasingly over chips, I feel as though the US is getting more and more worried, both in the private sector and public sector, in terms of maybe China catching up or China really having real cards to play that we've discussed previously. But, James, do you agree with that?

Yes, absolutely. I mean, of the two strands that you mentioned, Alice, I would say the ASML allegation by the US government is probably the more significant. We don't know if it's true at the moment, but the fact that the US Department of Commerce is escalating its confrontation today, that's Monday in Europe, with ASML on this topic. seems to me to show that the US is at the very least, very angry about this. These are both parts of the bigger tech war, tech rivalry between the US and China. But of the two, I would say the ability of the West to make the world's most advanced semiconductors and China, which is currently unable to make those really advanced semiconductors,

is the most important. It's the area where the gap between China and the US remains the biggest at the moment. And if it's true, and I stress if it's true, that the world's most advanced chip-making machines, which are manufactured by ASML, have actually been sent to China, then this is a massive gain-changer.

Because these ASML machines, and I've actually seen them, I've been to the ASML factory in Eindhoven, I've seen the most advanced machine they make. They are simply unique. No other company, no other country in the world can make these so-called EUV machines. And without them, you simply can't make the world's most advanced semiconductors. So if it's true, it's a massive issue. ASML has denied it.

They have rejected every element of the US allegation. So it's a very, very emphatic denial. They say they've never shipped an EUV machine to China. And they've added that they've never shipped any component, module or equipment, specifically designed to be used in an EUV machine. So that's a really strong denial. There's no wiggle room there as far as I can make out for weasel words. But as I mentioned, the US Department of Commerce has escalated.

its confrontation today, they are presenting specific documentary evidence that the company shipped specialized transport equipment and other components compatible with extreme ultraviolet lithography to Chinese entities. Now, the fact that the U.S. Department of Commerce is escalating says quite a lot to me, this basically shows that the tech war between the US and China remains very much in force, in spite of the mollifying summit that we saw between Trump and Xi Jinping in recent weeks. This tech war remains virulent. Now, these LLMs and particularly anthropic, the issue, as you mentioned, Alice, is Hong Kong. The mainland already cannot get hold of anthropics, uh, LLMs. LLMs, the large language models, these extraordinary AI programs.

But now J.P. Morgan Chase is restricting Hong Kong from using the different LLMs that Anthropic makes. And so this means that not only is China putting restrictions on the U.S. in what the U.S. can use when it comes to LLM, but also the US, we know, for a long time has been putting restrictions on China, but now Hong Kong is part of the whole picture as well. Restrictions on the use of these LLMs in Hong Kong is now very much part of the picture. And this goes against what Hong Kong was specifically arranged to be in the past. Hong Kong has always been a special case. It's designated as a special economic zone with China.

China, it's got a high degree of autonomy, et cetera, et cetera. But now the US is treating Hong Kong pretty much as just another part of China. I'm puzzled because to what extent is this decision by Anthropic and OpenAIA prior to Anthropics announcement to basically cordon off Hong Kong and treat it like mainland a political decision or is it a competition concern? What I mean by that is are they motivated to lump Hong Kong with mainland China because they see China as a big risk. Now, Anthropic has been very public in saying that it is pro-American AI and believes that it should be at the vanguard in the competition, national security and technology competition with China. Or is it really, you know, Anthropics,

and Open AI very worried about distillation, because if it's this latter scenario, then there are so many Chinese engineers, tech companies that exist outside of mainland China. You look to Singapore, are you going to extend to that? Are you going to extend to the many hundreds of thousands of Chinese engineers and top-level talents in Silicon Valley, say? Are you going to extend that even to your employees? Now, Anthropic just came out, and we haven't mentioned it yet, but I think this is quite significant.

It came out and said, well, the Chinese nationals who are working for a company can't be working on Fable and Mythos, they're barred from working on that. To what extent is that actually happening? Remains to be seen, but it seems that they're taking that

a drastic action, too, to cut off some of the talent, having proximity to the cutting edge frontier models, fable and mythos. So I'm, I'm not really sure how this plays out, but generally, let's take the other side. On Hong Kong's perspective, I think this is not great, you know, about, I think somewhere in the line of a quarter

of Hong Kong's GDPs and financial services and it employs 250,000 people. This is a significant part of the Hong Kong story. And if you basically ensure that the financial services and tech companies in Hong Kong don't have access to leading models, but also are not, uh, interoperative, or plugged in with the rest of the company outside of Hong Kong, that creates a lot of issues, I think, for the Hong Kong financial services community. So I come away from these announcements, feeling that this isn't great for Hong Kong's pledge to be, you know, a fully international cross-border hub.

And I worry a little bit about what this means for Hong Kong in its financial cross-border position. But also from an R&D standpoint, right? because a lot of, I think, the optimism about Hong Kong from an R&D standpoint is, look, we're going to get access to both the Chinese and the American leading models, and we're going to be able to incorporate the best of each system. Well, that future is no longer apparent for Hong Kong, and that, I think, quite remarkably changes how I think about Hong Kong moving forward.

And to your point about ASML, I was looking at some images and videos of the huge equipment, that is required and hyper-complex both to move and to maintain, and they require ASML to be part of that process. It strikes me as very difficult for ASML and the Dutch to reject the American curbs on semiconductor equipment restrictions per the Match Act. So again, I sort of am puzzled as to what Washington is trying to achieve. Are they politically motivated here, or is there a real substance to these accusations? Because if it's politically motivated, are they trying to send a message to the Europeans to other third-party countries to say, hey, don't mess with our restrictions.

This is a serious competition with China. We're watching you. On the ASML front, I really don't know. You know, there seems to be a very strong disagreement between ASML and the US Commerce Department. This is sort of black and white. You either are exporting highly sensitive EUV technology to China or you're not. Of course, ASML has a huge presence in the China market, and the China market is very important to ASML,

but ASML is very well aware that it is banned from exporting EU-fee technology to China. There really isn't much ambiguity about that. Personally, I would be surprised if ASML has done this. Is it possible then that there's some kind of smuggling gone on? again, very difficult because this is really, really high-tech sensitive technology. You need a whole team of top engineers from ASML to travel with these semiconductor tools. You can't sort of make it up after it's arrived in China. So I'm puzzled by this.

I'm genuinely puzzled. I don't know what's happened, but I'm going to be watching it very carefully. because, as I said, if China has got hold of one of these EUV tools, then I can't see any reason why it wouldn't be able to make the world's most advanced semiconductors, obviously, after a period of time. If you were to assess, based on these two developments, is China better off in this AI competition or not? I think in the short term, this isn't great for a place like Hong Kong in the mainland. I think it's a bit of a wash. You know, it doesn't at all impede on the amount of development and CAPEX that is going, although arguably a lot less compared to the US 10 times less,

but still quite significant amount of CAPX that is going into AI development, full speed ahead. And there's ways to keep distilling, even if you ban it from the mainland and Hong Kong. But on the hardware side, I worry that this might be the first innings of even more restrictions that we, you know, we saw the Pentagon back. more Chinese companies based on their military associations with the PLA. I've worried that we're in the first innings of further crackdown on China-related export restrictions as it pertains to semiconductors and chips.

Now that David Sachs has left the White House, he was really, I think, one of the lone voices saying, hey, the export restrictions don't work. So I worry that we may be in for more sustained tech competition. I think the first story about J.P. Morgan Chase not allowing its employees in Hong Kong to use the anthropic models is just an example of how piecemeal, how kind of patchwork the U.S. restrictions have been, and how really largely futile they've also been. You can be a Chinese person in Singapore. You could be a Chinese person in the U.S. or a Chinese person. Or a Chinese person. company, and you can easily get access to Anthropic. If you want to train your Chinese LLM by using Claude or one of the other anthropic models, you've got no restriction on you from doing that. You don't have to do it in Hong Kong. So I can't really see what Washington is aiming at. There

doesn't seem to be joined up thinking on this. And I'd go one step further than that and say that when it comes to AI, the U.S. has been ineffective, I think, in trying to hold China's progress back. I think we can say that maybe China is a few months behind the U.S. on making these LLMs, but I would say for sure that the U.S. has been unable to significantly hamper China's progress in making world-class LLMs so far. Okay, we'll be back with more after a quick break. stay with us. Support for the show comes from LinkedIn.

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Please borrow responsibly. When you finally find your thing, you want the whole world to know about that thing. So you use a thing called Canva to make it an even bigger and better thing. Whether you want to create flyers for that thing, make presentations for that thing, or design merch for that thing, you can do anything. So people can see your thing, feel your thing, love your thing. The next thing you know, it's a thing. Canva, the thing that makes anything a thing. Back. Activewear brand Lulu Lemon recently held a promotional event for the brand at the Great Wall of China.

It was billed as a celebration of Chinese culture, but the intent backfired badly when a Japanese-style drum appeared in promotional imagery, triggering a nationalist backlash on Chinese social media that topped 50 million views on Weibo. James, this is not the first incantiation of some, I would say, hackneyed and ill-fated. PR done by a Western company in China. I looked at some of the pictures. They're very impressive. If anyone wants to see Lulu Lemon mats on the Great Wall of China, people doing yoga, it's a very impressive image.

But it seemed like somebody dropped the memo internally about including a Japanese drum at a point in time where I think Japan, China relations are as bad as we've ever seen, really since 2010, 2011. when you started to have the Sinkaku Islands incident and the rare earth embargo. I think we're in a similar patch of really bad Japan-China relations. So the timing couldn't be worse, James, what was your reaction when you saw the imagery? You know, to be honest with you, I feel a bit sorry for Lulu Lemon here because is this actually a Japanese-style drum?

It does seem to be, that does seem to be a question. I mean, certainly this is a big double-sumption. drum. It was played by a top-tier Chinese actor called Zhu Yi-Long. But what happened was people online in China began to say, oh, this drum looks like a Japanese Wadaiko. And then this clip went viral on social media. And so that's where the allegation of this being a Japanese drum really started. then, according to the Chinese company that have been responsible for getting this drum onto the Great Wall, they then said,

oh well, hang on, this is not a Japanese drum. This drum is a replica of the Jia drum from the Tang Dynasty. That's a Chinese dynasty that ran from 618 until 907. And apparently the Jia people, apparently they're an ancient ethnic minority, living in the northwestern part of China, and the drum, this type of drum,

was supposed to have been praised by the Chinese emperor of the time. So to me, there is a real question as to whether or not this is an old Chinese drum that was perhaps borrowed by the Japanese, but its antecedents were first Chinese, but then the nationalists in China online have been getting very adjudiced, agitated about it. And that's why Lulu Lemon had to apologize, as they now have done. They've

apologized for this marketing campaign and for using the drum. So I suppose the moral of this whole story is, if you are a brand operating in China, be very careful. Because maybe the truth of these matters is less important than what the online nationalists could construe as the truth. And once you get into that situation, I've seen it so many times in China, once you have the online activists building up ahead of steam, it doesn't matter what the truth is. You just have to apologize and pull the marketing campaign. And that's what's happened in this case. Yeah, I read a similar backstory to this, and I'm glad you raised it. But Lulu Lemon has come out and obviously apologized. China is a huge and growing market.

for Lulu Lemon. Actually, I've been really surprised by how successful they've been in China, who would have thought that this very West Coast Athesia brand would find inroads, but it reflects a growing fitness, wellness trend in China in the middle to upper middle and upper classes that Loulelelelemon's really trying to tap into. It actually reminded me to some extent of some previous campaigns, which we can get into, which I thought were actually worse. Or at least they were not as, well, they were not as in good taste, is what I mean. They were in poor taste, frankly. And one of them I distinctly remember back in 2018, the Daltrowan Gabana ads. I don't know if you saw the Chinese model eating a pizza with

Chinese chopsticks. Netizens in China got really offended by that. I won't weigh in, but certainly people were very heated and that led to huge boycotts. And I think DNG, Dutche and Gabana hasn't really revived itself since that. 2018 fiasco. And then we had a Versace coach Jivanchi issue in 2019 where we had t-shirts that listed Hong Kong and Macau as countries separate from China. Again, this created huge virality and complaints on Weibo and Chinese social media and, you know, several Chinese brand ambassadors canceled their contracts publicly with the brands. These are just a couple, but it reflects the fact that when you're a brand, even if you're domestic, you have to,

deal with a very heated population of consumers and netizens with strong opinions. And New York point is completely spot on James. If they believe something to be, especially if they believe it to be anti-China or against their cultural country, they will come out in spades and complain. And because China's a huge market, you know, 1.4 trillion people, but a huge consumption engine, a lot of these brands have to kowtow. ultimately because they want to protect their bottom line. You know, the regularity of these flare-ups is really quite remarkable. Even in April this year, the French fashion brand Le Maire apologized after its advertisement

caused a public backlash because of an image of a long braid and a white long gown. This is supposed to, or, you know, was seen as alluding to a period of humiliation in Chinese. history in the 19th century, and I suppose at that time, people would have worn a costume like that. There was also in 2021, there was an H&M, Nike, Burberry, and Adidas issue. In 2022, there was a Dior issue. In 2025, there was an Arcterix issue. So this is something that the foreign brands seem to get into on a very regular basis. And I just wonder whether there's a mismatchezer.

of communication between the China office and the head office. These are big mistakes. I mean, you know, China is a huge market for these luxury brands and you can poison your reputation in China with the merest of slip-ups, cultural slip-ups or political slip-ups if you claim that, you know, Taiwan is a separate country or something like that. So I guess this is another cautionary tale and another reminder to the big Western companies that they should really look at their internal controls when it comes to China and marketing. Okay, let's take one last quick break and stay with us.

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Well, welcome back. Finally, we have to talk about the World Cup today. China failed to qualify this year. In fact, it has only been in the World Cup once in 2002. But football fans in China have found something else to cheer about. The World Cup referee, Maning. Manning is huge in China right now because he's the only Chinese guy being represented in the FIFA World Cup. And he's a referee.

He apparently has now hundreds of thousands of followers on social media platforms. He's kind of seen being belovedly called the cardman because he's quite strict and his delivery of the rules as a referee. It's interesting because, you know, clearly there is a big social media and online following and presence that's happening for the World Cup. But it's it's shifted from, I would say, previous years, right? I think so much of this is now online short form. We previously speculated that China might not even have the rights to disseminate, World Cup in mainland China, but it seems that in the last innings, there was finally a deal worked out by China Media Group, a state-owned media organization that inked the broadcast rights

with FIFA for the World Cup, and Shao Huxu, which is China's Instagram, is effectively the strategic partner to China Media Group. They won the distribution rights to co-stream the World Cup games for free to all users. So a lot of effectively, you know, millions of Chinese, you know, watching this online, on the phones, some on the TV. The big question is, you know, why isn't China, I think, better at soccer? I have some theories, but I wanted to get your quick take on that and whether or not, you know, you think this is a growing industry, because after all, Xi Jinping is a huge stand of football. We know this given his pledge to make China a real football power. And yet we have, you know, haven't really seen great football participation from

the Chinese since 2002. So what explains all that, James? I wish I knew. Xi Jinping in 2011, he's famous for saying that he had three wishes. He wanted China to qualify for the World Cup, he wants China to host a World Cup, and he wants China to win a World Cup. And I'm afraid China is really falling down badly

on all of those wishes at the moment. I remember when I was a university student in China, people used to play football every day, all hours of the day. Our dormitories looked onto the football pitch and it was, I mean, of course, they had stop off at dark, but it was constant. And I've never lived in a country that is as football mad as China. And I come from the UK. We're pretty football mad over here. But China is more football mad, I would like to say, than the UK. People are fascinated by it. It's very regular that you'll meet somebody or you'll be talking to a taxi driver who will not only know all of the top teams in the UK. They'll know all the top teams in Spain,

in Italy, in America, they'll know some of the top players. They're very, very well-informed on China. So for China not to have qualified for the World Cup since 2002, obviously it's a big disappointment for Chinese people. And the other juxtaposition, I think, is relevant is that China's very good at sport. China won the Olympic Games in terms of the medal count in 2008. And I believe every year since then, it's played second fiddle to the United States, which, as we all know, is excellent in athletics and other sports like that. So what explains the fact that China has been so poor when it comes to the World Cup. Well, a lot of different people have different views.

There is definitely corruption running through Chinese football, Chinese soccer, and so perhaps that is part of it. Perhaps there's a problem with the coaching. Perhaps there's a problem with the pathways. But given that it is the case, as you've said, Alice, the focus of 1.4 billion people in China, watching this World Cup unfold, has turned to Manning, the referee. He's called the card master in China because he doesn't take any disobedience on the pitch. He just doles out the cards. In one game, he doled out nine cards. And the Chinese, you know, football fans, soccer fans,

they love him for that. So maybe Manning, he goes somewhere in this World Cup. Maybe he gets close to roughing a final. I don't know. But it's an interesting situation. And even though China's not at the World Cup, it is certainly galvanized by the spectacle unfolding in the U.S. and the other countries that are hosting. Yeah. It's fascinating. Your point. The football enthusiasm is there in the everyday people. You know, this is why I remember a couple years ago, Shenzhenoping had this national initiative to get all kids to play soccer. And I remember seeing very much. videos of him playing soccer, this is a big thing pre-COVID, to try to get everyday people, especially children healthy, playing soccer, making sure that China would have great teams to go

into the World Cup. It still hasn't since she launched that initiative. I have this pet theory that I'm borrowing from a friend of mine who's an economist in China, David Lee, who has this theory that it's all about economics at the other day. So everyday Chinese parents, would rather the ROI of investing in an athlete who is doing an individual sport like golf or tennis or skiing like Eileen Goo or gymnastics, because then they can control the variables. They can know from a very early age if they're genetically, you know, physically gifted for that sport. And then they can cash in on the prize money, whereas it's less sure if you're going to do it for a team sport, if you're even going to be able to qualify for a team,

and then what the future payouts will be, it's hyper-dependent on the team performance, not just the individual performance. So I'm borrowing that idea because I think that my suspicion is that economics play a role in China being generally very good, and you see this in the Olympics at individual sports and not so much at team sports like soccer, basketball. That explains to me why China's been so bad

because really they haven't, and so far as I understand, James, correct me, they haven't won a single goal. That's right. Not since 1938 has China scored a goal at the World Cup, and it's the only qualifying country with that dubious distinction. So it is really a bit of a disaster. One other thing that I'll mention is that it's not just that Chinese Shokhong

Shul, the Instagram, was streaming the performance for millions of users in China. The other thing that was worth mentioning is the CCTV's app for streaming the World Cup, was the second most downloaded app this past week on Chinese Apple app store and the official sports betting app was ranked sixth most downloaded. And then Chinese tech companies like Tencent Cloud are actually responsible for two-thirds of the official World Cup

broadcasting in APEC behind the scenes at the back end. We've got Chinese tech companies that are involved in the distribution and streaming of the FIFA World Cup. All right, James, you know what time it is? prediction time. As you peer into the future this week, what do you see? Okay, Alice, I am sticking with football, with soccer, and I'm going to stick my neck out and say China will qualify for the next World Cup. And the reason I'm forwarding for this is that there is actually an interesting new model of football, of soccer in China. And this is the Jiangsu football, football,

City League. It's known as the Sioux Super League and the difference between this league and the way that the game is played in the rest of China is that this is bottom up and this is in stark contrast to the top-down government attempts to build a football superpower that you have in the rest of the company. So in Jiangsu province, you have this league. It draws teams from local residents and students. and it's creating, you know, a real buzz. In my view, this is the only way to run a football system. You have to have kids all over the country galvanized and playing, you know, playing in a carefree way,

playing in their local clubs, and not being kind of hand-picked by government mandarins from an early age and put into academies and all of that. I mean, think about how Leonhardt, Messi, Cristiano Ronaldo, even Pele, back in the day for Brazil, how they grew up. They grew up playing football in the streets. Diego Maradonna was the same, right? So this Jiangsu Football City League, I think, I'm putting my hopes on it anyway,

is creating a whole new football culture in China. And that's why I'm going to stick my neck out and say, next World Cup, China qualifies. Okay, it's a bold claim. We'll have to check that out. So mine is in the realm of Iran and what's happening in the Middle East. We haven't discussed it yet, but we've got a memorandum of understanding between the Americans and the Iranians. What does that mean for the future of the region, especially a physiomat for the Gulf states, that remains to be seen? But I think that one of the big geopolitical winners from this whole Iran fiasco is China, long term. The Gulf states will hedge even more and get closer to the Chinese. We're already starting to see that in some public announcements and trips. That concretely means, I think that some of the Chinese telecommunications tech, AI companies, even the AI model companies in China will have inroads in the Gulf states and building out their new smart cities. and that is key for these Chinese tech companies that are being ring-fenced and other parts of the world, notably America.

So I think we'll start to see greater integration of technology stacks and systems between the Gulf states and the Chinese. And I feel that coming out of this conflict, we'll see a more geopolitically influential China in the region. All right, that's all for this episode. Thank you for listening to China Decode. This is a production of Prof G Media. Make sure to follow us wherever you get your podcast so you don't miss an episode. We'll talk to you again next week. Hey, y'all, it's Kelly Clarkson with Wayfair.

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