The Prof G Pod with Scott Galloway - China Decode: Why China Got Locked Out of SpaceX and America’s Biggest IPOs (ft. Ed Elson)

Episode Date: June 16, 2026

Alice Han and special guest Ed Elson break down how Chinese investors are increasingly being shut out of America’s hottest IPOs — even as China pours hundreds of billions into AI, robotics, and next-generation tech. They talk about the growing financial and technological divide between the U.S. and China, the Pentagon’s decision to label companies like Alibaba, BYD, and Baidu as “Chinese Military Companies” and whether Washington and Beijing are entering a new era of financial decoupling. They also look at the big Chinese companies that could be next to IPO, and who China’s Elon Musk might be.  Plus: the growing worker backlash as AI transforms China’s labor market. Subscribe to China Decode on Substack for weekly analysis, livestreams, and deep dives into the biggest story shaping the global economy: chinadecode.profgmedia.com. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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for a fraction of the cost. That's why over thousands of businesses have made the switch, so why not you. Try O-D-U for free at O-D-O-O-O-com. That's O-D-O-O-O-com. Remember the three R's, reading, writing, and arithmetic? Well, we aren't really doing that second one anymore. On average, teachers report spending as little as 10 minutes a week on teaching handwriting explicitly in kindergarten classrooms. This week, unexplained to me, handwriting's recession and Renaissance. Find new episodes, Sundays, wherever you get your podcasts. China has demonstrated a willingness to forego money in the name of the common good, in the name of protecting workers and protecting labor. And so even if China is more structurally exposed to AI, even if that is the case, my assumption is that the Chinese government will bend the economy.

economy to its will in order to protect Chinese workers. What I know about America is that the total opposite is true. Welcome to China Decode. I'm Alice Han. James is off today on a holiday, but we have the amazing Ed Elson from Prof G Markets. Ed, it is so good to have you here. Great to be here. Thank you so much for having me, standing in for the other Brit, although I have a lot less knowledge than him, but that's okay because I'll be prompting you as well. So thank you for having me. And today's episode of China Decode, we're discussing how Chinese companies and investors

are getting shut out of American markets where the first trillionaire from China could come from and the growing push for workers' rights in an age of AI. 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, markets closed up on the news of a deal being reached between the US

and Iran to potentially reopen the Strait of Hormuz. The CSI 300 index closed up 2.4% while the Shenzhen composite was up 3.4%. The Shanghai composite itself was up 1.6%. All right, let's get right into it. In addition to the U.S. Iran deal, some of the biggest global economic news in the last few days came in the form of the Space X's mega IPO. And it was an IPO that investors from China and Hong Kong were shut out of. over apparent concerns around U.S. restrictions on exports of critical technology.

At the same time, the Pentagon has designated a broad range of Chinese firms as Chinese military companies, which means they will be subject to restrictions. The list includes corporate giants from China, including Alibaba, B.YD, and Baidu. So, Ed, it feels like a very historic week. The NICS won against the Spurs, the first time since the 70s. I don't know if you were cheering on. for the New York team. We had the biggest IPO in history.

Elon Musk is the first trillionaire in history. It feels just like a very historic week. So break it down for us. What is the big takeaway from this huge IPO? And what do you think that that means for the season of IPOs to come? Because obviously we've got anthropic, open AI, coming down the pipeline. Yeah, a huge week for Mark. It's one thing you missed out there is that the World Cup began.

So that's the other thing that everyone was. was talking about. But I noticed China isn't in this year's World Cup, and I was kind of wondering, what's going to happen with the Chinese football team? Surely that needs to show up and become a real player, because they're so successful in the Olympics, but then they just, I guess they haven't gotten their act together on football. So that's maybe another conversation for another time. SpaceX IPO, yeah, I think you said it right. This is the most important week for markets in an extremely long time. This is the largest IPO in history. They ended up raising about $86 billion. They were going to raise $75, but then there was so much demand for this thing and they ended up

pushing it to $86 billion. So this is the largest IPO by far. And by most counts, it was a pretty successful one. The company was priced at around $135 per share as the issuance price. and then when it went out to the public markets, it initially rose around 10 to 11%, which I thought was a little bit low. My prediction was that it would go out at around 25% higher than the initial price. But then what did we see over the rest of the day? It started to rise. It went up over 25% above $135. And then starting the week on Monday, June 15th, it has continued to rise up around 30%. So this has been an extremely successful IPO. It was really a test of the markets. How much demand is there really for these companies? One of the points that I had brought up before is there's

so much new equity supply that is being injected into the market, starting with the SpaceX offering. But then you've also got Google with their $86 billion equity offering. You've got Nvidia now talking about doing an offering of their own. You've got Amazon also considering the same thing. Meta considering the same thing. And then, of course, you've got Open AI and Anthropic, which means tens of billions of dollars of more equity hitting the markets. In fact, it'll probably go out to around half a trillion dollars in new equity supply. And that will be the test. Is there enough money out there that will actually be willing to go and buy these companies, buy these stocks, or is it so expensive that they're eventually going to have to sell some of their

existing positions, some of their existing tech and maybe AI company positions, in order to go buy these companies. So that will be the question. I think the first week and the first day, we all expected this would be relatively successful, but over the next six months, will SpaceX continue to perform? That's the real question for me. My bet is no, it won't. I think that these lockup explorations are going to be really tough for the stock. I think you're going to see a lot of downward pressure on the stock over the next six months. But to relate it back to China, and this is, I found really interesting. It's why I'm glad I'm doing this podcast with you. The fact that China has been, or Chinese investors, have been banned from buying

the SpaceX IPO for some interesting reasons. I'm kind of skeptical of them, so I guess I will just throw this back to you. What do you make of the fact that Chinese investors cannot buy the SpaceX IPO? Does that mean that we're going to see the same thing with Open AI, with Anthropic, are we seeing this sort of separation between the Chinese markets and the U.S. markets? What is your take? Great question. I don't think it's purely about the U.S. side of things being worried about Chinese capital, going into cutting-edge models and companies listing in the U.S.

There was a report earlier this year from CSRCs, so the securities regulator in China, that they were going to tighten basically these offshore brokerages that were doing cross-border security operations. So they cracked on a couple of them, Tiger Brokers, Futu Holdings. And the idea behind that, which I think will pick up inertia in the coming months, is that the Beijing government officials don't want to see more Chinese mainland capital going into U.S. tech companies. I don't think that this means that they will completely throw away ADRs or that the US will delist ADRs. But I do think that it means that moving forward, the inevitable truth is that we will see far less Chinese capital being parked in US-listed

companies, both Chinese US-listed companies and American US-listed companies, in particular because this tech war is heating up. And it's a tech war that's not just about semiconductors, about models, it's also about capital, as you know. What does that mean for long-term developments of Chinese capital in tech and AI, it means that in tandem with what the government wants, more of that mainland money will go to Hong Kong, we'll go to the mainland. We've got some big IPOs on the mainland

coming down the pipeline as well in the semiconductor and AI spaces. We've got Unitary, China's biggest humanoid robotics company that has just given the go-ahead in terms of starting the listing process. We've also got two big semiconductor companies, companies, CXMT and YMTC, these are just a handful of what is coming down the pipeline. I've heard that there's at least about 50 robotics companies that are in the process to apply for IPO. So just as in the U.S. we're seeing a bumper crop, whereas seeing a bumper crop

of tech companies trying to list both in the mainland and in Hong Kong. It's really interesting because, you know, I saw this headline that Chinese investors aren't allowed to invest in the SpaceX IPO. And immediately, my assumption is that this is something that is maybe of Trump's doing. Like, oh, maybe America has set some regulation where we're going to try to separate away from China, you're not allowed to get into this thing. And honestly, it wasn't totally clear to me why this happened. But on the other hand, you make it a really important point, which is that China is also

making it harder for their own investors to invest in U.S. markets. It's like they have all of these capital controls and they're limiting these like foreign currency conversion rules and they're making it such that if you're an investor in China, they're trying to incentivize you to continue investing in companies at home. And so it's this interesting dynamic where it's like both parties are trying to break up with the other. Yeah. But the question is who's going to break up with whom first?

Yeah. And what does that say to the markets about who's really on top? Is it that China said, no, we're not interested in SpaceX. We have our own companies at home. Or is that the U.S. says, no, no, this is our own company. You're not allowed in. You guys are the enemy, so you're not invited to the party. Do you know where it stands?

Like, whose decision was what on this? And how might it change going forward, I guess? My sense is that we haven't seen legislation or even executive action from Washington to really block Chinese investors in the capital markets and the flows going into stocks. Sipheus a couple years ago was really weaponized to basically block and highly obstruct Chinese FDI going into M&A activity, going into companies in the U.S. But whether it's Wall Street lobbying or it's some of these companies that are listed that are lobbying, the fact of the matter is that we haven't seen restrictions from the U.S. side

for the capital market flows. Now, we don't know for sure if there are these offshore subsidiaries and capital that are finding its way ultimately into the SpaceX IPO. I wouldn't be surprised if there are heightened with individuals from the mainland that are able to do this

through other loopholes. But right now, what I am sure of is that the modus operandi and the trend for Beijing is to crack down on cross-border flows going into U.S. listed stocks, because ultimately they see the capital conflict as being really, really important for the

broader tech conflict. Because if too much of Chinese money is ultimately going into boosting valuations and boosting profitability and R&D for U.S. companies, that is at a disservice to the government's aim in China, which is to make sure that capital is allocated to the tech sector at home. Yeah, it's really fascinating. Part of the other thing that I found really interesting is that, in terms of US versus China, kind of separating the two out,

making sure that there's none of this cross-border financing, the Pentagon just updated their Chinese military companies list, and it now includes Alibaba, it now includes B-YD, and it now includes Bidu as well. Alibaba is, of course, like the China's version of Amazon, Baidu's Chinese version of Google, B-Y-D is like the Tesla of China. The list has grown significantly this year. And I was trying to understand, like, okay, if you're put on this Chinese military company list, what actually happens to your business? And the answer is, from what I understand, not that much, actually. Basically, all it means is that it prohibits you from doing business with the Pentagon, and then maybe there are some reputational risk as well. But it doesn't prevent you from operating in the U.S., for example. You can still do business here. And that's quite interesting.

because it's almost as if what they're trying to do is create a bad guys list. And if you're on the bad guys list, then that's a problem, and we're going to make sure that everyone knows that you're a risk to the market. And in a way, you could almost put any Chinese company on that list. I mean, if the implication is they are at risk of working with the CCP in some capacity or providing some value to China and China's military, I mean, I'm not sure why we're even making a list. Why don't we just make it all Chinese companies?

They're all highly linked to the CCP. The CCP has massive oversight over all of them. You can make an argument if your view is China equals bad guy, then surely they should all be on the list. I mean, I'm not totally sure if this is actually a substantive policy move or if it's more performance art to say China's bad. I think you're spot on Ed. it's more tactical move as opposed to strategic, and it is designed to show Beijing, at least

from Washington's vantage point, hey, we have a lot of levers at play to make it very difficult for you if you don't play nice with us on ongoing, as you know, trade and technology talks. You're completely right that if you read the fine print, it only means that they can't be involved in selling to the government, so being part of government contracts. but I do think that the broader impact is to keep corporate America spooked about China. And the reason I say that is because I was just in L.A. giving a talk to, you know, Hollywood executives, people in the industry. And, you know, just off the record, a few people told me that they are so in awe of what Biden dance is doing in the video AI space, so C-Dance in particular,

that it is above and beyond what any other company in the world is doing. But their legal team won't allow them to touch it because they're very worried about the political backlash, what Washington, what Trump may say. So I would say that in a way the shadow of this entity's listing of these sanctions is greater than the actual list itself in the sense that corporate America, American companies across the board will be worried about doing business with Chinese counterparts

because they're not sure if in the future they may be at risk of some kind of Washington sanctions regime. Right. Yeah. It's almost, and this actually relates in a lot of ways to what we're seeing with Anthropic at the moment, because it seems as though we don't have necessarily, in America, at least, clear legislation on who you can work with and who you can sell to. And this was the problem with Nvidia. We were spent all this time trying to figure out, is Nvidia allowed to sell chips to China, which types of chips? It went on and off and on and off and over and over again. It wasn't totally clear. But what does seem apparent in the business world is you don't want to become, quote, unquote, friends with the enemy, whoever the enemy might be.

And Trump has made it pretty clear who his enemies are. China seems to be one of them. If you're on that list, you probably don't want to be working with them. Otherwise, you probably won't get some form of favorable regulation or you might get punished out of the blue. And then we see what happened with Anthropic last week, where Anthropic releases this extremely powerful AI model, Fable Five, a variant of mythos, and the White House is then told by Amazon, of all people, that there are some potential security issues. Anthropic then says, no, it's not a real problem. We've looked at it, and actually it's fine. And the White House says,

no, that's not good enough. We are slapping on an export control. You're not allowed to release this model to anyone outside of the U.S., which was a real problem for Anthropics business. Anthropic then decided, okay, we're just going to cut off this model entirely. But it seems as though this all was probably stemming from their previous dispute, where Anthropics said, we're going to set the terms and the rules on how we interact with the Pentagon and interact with the Defense Department, which pistolized. lot of people off over at the White House. And then Pete Hegseth goes on Twitter, or X, and he says, you know, this was a long time coming, essentially. And it makes me think, again, this isn't

because there was a certain rule that was actually broken. It's because we've decided, or at least the White House has decided, these are our friends, these are our enemies, we're going to treat our friends nicely, and we're going to treat our enemies harshly. And it seems that Anthropic has been branded as the enemy in this situation. I wonder if you, agree. Yeah, I would agree with that. And I think it cuts deeper in the sense that, you know, now that David Sacks has left, somebody who would have been a strong voice lobbying for Silicon Valley, Open AI and Anthropic, included. We've got Scott Besson, who's probably taken over, I think, a large amount of that portfolio. And he is somebody, you know, coming out of the financial worlds,

who is deeply worried about the financial risks of an unbound, anthropic, anthropic endbound. And beyond that, the national security risks, you know, there was some speculation that having the model open would invite the Chinese to distill or to jail break into it. I thought it was interesting over the last few days that Anthropic has announced that no Chinese nationals hired by Anthropic will touch both Mythos and Fable Five, clearly that I think is in response to pressure from Washington. But in a way, it reminds me of SpaceX. I remember visiting the SpaceX factory about a decade ago.

I'm Australian, so I was able to visit it. But they made it illegal to, or unpermissible, to Iranian nationals, Chinese nationals, because increasingly that technology was seen as a national security technology, a national security risk. And AI is in that weird space where it is, as you know, Ed, very consumer-facing, but it also has massive national security cyber implications.

And I just think that with Scott Bessler, now at the helm, those concerns are taking primacy over, concerns about innovation and technological preeminence. And it does seem to all go back to China. Like when you ask anyone about why is this a problem, why do we need to be accelerationist when it comes to AI? Why do we need to build out our data centers? Why do we need to up our game on frontier AI technology? The answer is usually because we have to beat China. And the same is true of AI safety. Why do we need to make sure that we put on all these protections?

Why do we need to make sure that we have these export controls? Because we're worried that China will get ahead of us. I tend to be quite sympathetic to that view. Like, I'm someone who does believe that we need that the U.S. should do what it can to maintain some level of hegemony, maintain its power on the global stage. I do believe that the next competitor is China, and we should probably be doing whatever we can

to prevent China from getting ahead of the US when it comes to this kinds of technology. But I wonder if that's, I don't know, some sort of jingoist element in my mind that is trying to, forcing me to think we need to be really protectionist about all of this. And I wonder if that how real that threat actually is. From your seat, do you see this as a real

threat in the U.S. that if we don't put enough protections on our AI, then China will indeed go and steal it and potentially use it in ways that could harm the U.S. from a security perspective? Well, I think what we've seen with trade and semiconductor export restrictions is that actually decoupling or putting barriers to getting access to technology or goods, that is very hard to do in practice. In theory, it makes sense. In practice, very hard to do because there are loopholes. China has been smuggling, cutting-edge rubens chips from third-party countries in the Middle East in Malaysia, for instance. And same with trade. There's a way in which China has rerouted very massively trade through Southeast Asia, through Latin America,

to go back to the U.S. So I take a view that having these restrictions are not enough because you cannot rest on your laurels that if you, you know, tomorrow decide to put in all restrictions in terms of blocking China from access to cutting edge models, either by making it very hard to distill or by firing all Chinese nationals employees, I find it hard to believe that that seriously kneecaps the Chinese because, you know, history, recent history shows that their countries find ways to work around to tinker. to make up for lost capabilities. And one last point I have on this is that if they were very serious about the China threat,

then they would have to put pressure on, and this is not by any means my policy advice, but I think it's an acute observation nonetheless. They'd have to put pressure on the number of Chinese nationals, you know, PhD students, post-grads that they hire, because by far the plurality, and that's about 38% of, the top talent AI people come from China. They're not Chinese Americans. They're actually Chinese nationals. And anecdotally, when I speak to people who work in tech, and I'm sure you have the same view, Ed, they will tell me, look, we can't build the kind of AI models we want to without

high-level AI talent coming from China that wants to stay in America. Yes. So I think the administration needs to think long and hard about balancing those priorities. You know, in a way, you cannot avoid as long as you have some level of China dependence on the talent side. This is why I actually like making the comparison between AI and the nuclear bomb, which is a comparison that a lot of people have made. Some people complain about it. They say it's kind of a false equivalency. But, you know, Dario Amadeh, as an example, is someone who said AI is like a nuke.

And the reason that I like it as a comparison is because, I mean, we have a precedent to look at and to examine. which is that, and you and I have talked about this, but the U.S. builds the nuclear bomb, and then the question is, what do we do about it if other people get their hands on this technology? And then everyone does get their hands on the technology, because other countries figure out ways to put resources together, invest in their scientists, invest in their research institutions, and they build that technology. One of those nations was China. China figured it out. And so this is a great example.

Despite the fact that China does have a nuclear bomb, they haven't dropped it on America for reasons that are quite obvious to all of us, which is, and we've, again, we've discussed this, mutually assured destruction. They're not going to do that, unless they have a really, really good reason to do it. And so I think when it comes to AI policy, when you think about, when I hear the argument, we have to make sure that China doesn't build the equivalent of the nuclear bomb when it comes to AI. it seems to me that it's quite obvious that they're going to build it either way. They're going to figure it out. They have immense capabilities when it comes to power, actually far greater than our own.

They have immense capabilities when it comes to AI research and their models and their model capabilities and their model efficiency. Like, it's going to happen. So then the question becomes from a policy perspective,

what do we do if China has AI that is as capable or more capable than our own? Then what? But I feel like that question isn't really being asked in the administration. It's sort of all about how do we prevent them from ever getting to that point. Yeah, I completely agree with that. And history proves your point, Ed, is that when it comes to these technologies

we're in a multipolar trap, the dominant strategy for each player is to assemble as much capability as possible in whatever technology it is that they're pursuing, whether it's nuclear or AI or in the next field, quantum. And it's going to be very hard, I think, for the administration to really suppress China's AI rise. And I think that the, you know, history will look at the AI arms race as being very comparable to the nuclear arms race. Yeah. Okay, we'll be back with more after a quick break. Stay with us.

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Head to sophy.com slash profjee student to check your options and get your education funded the smarter way. That's sophy.com slash profcci student. Originated by Sofi Bank, N-A member FDIC, terms and conditions apply. Please borrow responsibly. The U.S. and Iran say they've agreed on terms to end the war and reopen the war. the Strait of Hormuz. You already see oil prices from a high of $126 a barrel down to about $80 a barrel today. That's a lot of progress. The war, of course, drove up the price of gas and other essentials and has led to some ugly polling for President Trump. Sixty-one percent of adults pulled by

NPR, PBS, and Marist disapprove of his handling of the economy. His handling in a certain light makes sense. His priority was preventing Iran from getting nukes. But Trump's messaging was unusual unusual for a president. Last month, the reporter asked Trump, to what extent was he thinking about Americans' finances when he negotiated with Iran? I don't think about American financial situation. I don't think about anybody. What's he doing? Coming up on today, explained from Vox. Welcome back. As Chinese investors are being shut out of major IPOs, including one that's made Elon Musk a trillionaire, we wanted to dive into what big Chinese IPOs are on the horizon and whether or not China could in and of itself create the next trillionaire.

Ed, we've just covered this. We've got a massive wave of tech IPOs in the US. What are you most excited about? And do you think that there could be somebody bust on the heels of Elon taking the trillionaire crown? Short answer, no. This guy is not only the richest guy in the world, but potentially the richest guy in history on a relative basis.

I mean, we've just run the numbers. He's now worth more than a trillion dollars a little bit more now that SpaceX stock has climbed further during the week. But that is equivalent to 3.2% of US GDP. And I say this a lot because it's important. The richest American in history is known to be widely regarded to be John D. Rockefeller, who at the height of his wealth, was worth 1.5% of US GDP. So on a relative basis, Elon is more than twice as rich as the richest American ever.

And so we're now getting to a point where we have to like consider. I mean, who else do we compare Elon to in terms of his pure wealth? A lot of people say that Mansa Musa was the richest person to ever exist, because there are stories of how much gold he had and his control over the trade routes throughout Africa. We're getting to a point where now we need to compare Elon to that. And then compared to everyone else, I mean, no, it doesn't come close. I mean, Sam Altman is not going to become a trillionaire.

Dari Amadee is not going to become a trillionaire, at least not any time soon. The level of wealth that Elon has accumulated is just spectacular. Now, when you compare this to China, will we see a similar level of wealth out of China? I don't think so because the richest man in China is Zhang Ye Ming, who is the country, who is the co-founder of ByteDance, which of course owns TikTok. He's worth a report in $93 billion, though I guess it's hard to tell because it's a little bit difficult to value BightDance at this point. It's not a publicly traded company. But certainly far off from Elon, but I do think it's a fun theoretical question is, would China ever have a trillionaire, or more importantly,

would China ever let itself have a trillionaire? Because China is a communist nation. It would seem to go against all of China's principles, though at the same time, they have allowed themselves to have plenty of billionaires. The rich list in China continues to grow. So I would throw that question back to you. Like, would the CCP ever allow for a Chinese trillionaire? Number one, I think that you're spot on. It's hard to see and draw out the curves into the future

that will ever get a trillionaire in the next decade, let alone the next two decades. I don't think bite dance will IPO within the decade. I think that they don't need to. They're a highly profitable company. They're worried that if they IPO, that they'll be subject to more regulatory scrutiny, both within China and globally. So that takes that off the table in terms of his future growth curve of wealth. And he's the richest man in China, to your point.

When I look at other companies, again, in China, in China, in general, the IPO sizes are a lot less than what you see in America. But as a result, valuations of companies that are comparable in comparable fields compared to their American counterparts are just orders of magnitude lower than what you get in the US. And so by that nature, I would say we won't get the same blockbuster IPOs, you know, just for reference, at its height, this was at least six years ago. So in 2020, when Alibaba was trying to IPO its Ant Group, which is the big financial platform.

It was seeking to raise $35 billion at the time, which was a blockbuster IPO for mainland China. As we know, the way that history played out, Jack Ma made a speech that did not play well to the regulators a few months before that IPO was supposed to happen. And then it was shut down almost the night before. in a very, very dramatic fashion. And that answers my second point, which is I do suspect,

and this is just a gut instinct not necessarily based in data, that when you get into trillionaire territory, when you get too rich, that becomes politically problematic. And we've seen a crackdown on high net worth individuals displaying their wealth. We've seen a crackdown on the platform companies, partly because of the wealth factor and its political implications. think mainly because the government was concerned that without regulation, people's data, consumer welfare would be further compromised. In a way, it was the wild west of internet platform

companies from the 2010s through to the early 2020s. So all in law, I think put simply, we will not get a trillionaire in our lifetime ed coming out of China. The stock markets in the mainland are just not at the same market cap levels as we see, and valuation levels as we see in America. And I think that you're right, there is a political angle to this, which is that it gets problematic when you have a rich person who, in the case of Elon Musk, his combined wealth is larger than a country like South Africa that he's from, that becomes problematic. That's crazy. Yeah, I mean, Jack Maher seems to be like the perfect example where you had this larger than life, charismatic personality,

who's sort of, you know, rags to rich his story, and then he becomes this incredible billionaire, and then he gets, I guess, too cocky, he flies too close to the sun. And I forget exactly what his comments were, and maybe you could remind me, but it was something about,

it was something kind of self-involved or self-aggrandizing, and then there was some slight criticism of the government, I believe, which is like just a fractaliener, of the kinds of rhetoric that we hear from Elon, which is basically constantly shit-posting the government, constantly saying how the government was getting in his way, and he was able to take advantage of the system despite the fact that everyone was against him,

and Joe Biden didn't invite him to the White House, and that was such a problem, et cetera. And so when that happens in China, it does seem like there is a policy of, we're going to shut you down, we're not going to let you, I mean, we're not going to let you IPO. That was one thing that they were able to do, and that it seemed like they basically just disliked,

disappeared Jack Maher for several years, and we didn't hear from him for a long time. I think we're starting to hear from him a little bit more, so I guess they didn't just fully take him out, but they shut him up for sure. To me, it's a very interesting model, because over in the U.S., when you compare it to the U.S., yes, we have a glorification of billionaires in a lot of ways, but the tide does seem to be turning, and we're starting to see a lot of resentment among Americans. for the billionaire class. One in five Americans say that it's morally wrong to be a billionaire.

They think that that's a problem. If you look at young people, especially if you look at Gen Z Americans, half of us say that there should be no billionaires whatsoever. Billionaires just shouldn't exist, which is why we're seeing a lot more interest in the wealth tax, for example. Over in California, they're talking about a wealth tax where they literally create a cutoff at if you have a billion dollars, then we're going to issue this. wealth tax, I'm going to take 5% of your assets. And then that's becoming a lot more popular

at the federal level as well, which was introduced by Rokana and Bernie Sanders, and it's been co-signed by Elizabeth Warren. This is sort of the momentum is growing in America, where we say these guys have too much money, they have too much power, and this is a problem for the country, which is such an interesting parallel. When you look at it compared to China, I'm not totally sure maybe you can tell me how the population feels about billionaires, how they feel about people like Jack Ma. But my understanding is the government doesn't like them so much, or at least they don't like them if they ever get in their way. So I guess my question would be, what is the sentiment towards billionaires and how does it differ between the population in China and the government in

China? Yeah, it's interesting to ponder a hypothetical in which you have in a parallel universe, Elon being Chinese, and would he have A, become a trillion, B, been as successful as he has. And I would probably argue no, in a way that Elon relies as much on America as America relies on Elon to drive the kind of growth and innovation and crazy numbers that we see. I would say that I detected in the late 2018-19, 19s, going to 2020, finally enough, in tandem with the crackdown on the tech platforms on Chinese micro blogs. and amongst the Chinese netism community that people were starting to get very upset

about the billionaire class and the tech billionaires. So if you think about the recent history, you know, you see the growth from 2010s onwards of these huge social media platform companies, you know, Tencent, Alibaba and the search engine by Dahl. In these early years, people were so keen about the pony mars and jack mars of the world. They saw them as people to look up to,

that they represented Chinese heroism, and innovation. And then really you start to see this nihilist more skeptical view coming just before 2020 online, which is starting to criticize the fact that they have so much money that they can continue to monetize consumer data, that they, through M&A activity, very anti-trust. You know, they have these monopolistic or duopolyistic effects on the internet and digital economies. And then, fast-forward, 2020 onwards, you see this huge crackdown across tech companies in China. And it's the second part of my answer to your question, Ed, which is that there is a weird, I would say, tightrope walk that the government has to do. On the one hand, yes, it's politically problematic when you

have such wealthy people when your mandate is to achieve common prosperity and to make sure that the everyday people's livelihood standards are good. But at the same time, you need these people, which is why I think why Jack Ma was brought back into the fold after a brief stint in Japan, you need these people to be driving innovation, to be doing the necessary R&D investments into frontier emerging technologies like AI and semiconductors. So I ultimately come down to the view that, you know, they are kind of tolerated with varying degrees of, you know, tolerance, but generally tolerated. because they are seen as really important cavalry for the Chinese competition with the Americans over technology. Yeah, sometimes I wonder what Xi Jinping actually thinks. Like, if it were up to Mao, there would be no billionaires, I don't think. I don't think that he would be happy with learning that almost 100 years later,

you have a guy who started a tech company is worth $93 billion, The guy who started 10 cent Mahatang, it's worth $63 billion. The guy who started PDD, formerly knows Pinduoduo, which now owns Timo, of course. Colin Huang, he's worth $45 billion. Like, these numbers would make Mao sick to hear. And I'm sure Xi Jinping knows that and understands that. But at the same time, he clearly has an understanding of the benefits of these kinds of people, the benefits of capitalism, the fact that it creates these incredibly wealthy people,

which does incentivize more innovation, more effort, more research, just a general hunger to create value and build wealth in the nation. But as you say, it's a tightrope that he has to walk, because that isn't the mandate of the nation. And it seems to be very paradoxical by its nature, by its nature. And I guess I just wonder, like, how does Xi Jinping get that messaging correctly? Like, how does he present China's view on billionaires and on innovation and honestly on capitalism without defying the cultural history that created China?

This is the contradiction at the heart of China's unique blend of capitalization. and socialism. They call it socialism Chinese characteristics. And it is that you have in essence a socialist DNA, but you behave like a capitalist country. And the reason for that is because the social contract increasingly has been one of, since Dongshu Ping forward, enriching everyday Chinese people. And you need the private companies to do that. They hire the most number of employees, I believe somewhere in the order of 80 to 90% of the workforce is hired by private companies alone. And these aren't necessarily the big tech companies. There are also small mom-and-pop shops, you know, manufacturers, etc. And they, the drive is a productivity

innovation far beyond what the state-owned enterprises can do. And I would also say that there is a geopolitical or global dimension, which is that, you know, as from the 90s onwards, there was this going out strategy from Zhang Zemin to tell the SOEs to go out and buy up companies or sell Chinese industrial products globally, there is a going out implicit strategy that Xi Jinping gives to the Chinese tech companies through Belt and Road initiatives, for instance, that they should go out and sell electric batteries, electric vehicles, AI models, semiconductors to the rest of the world. Because as we've spoken in the past about, you know, 30% of GDP growth is made from the manufacturing sector. It's a key part, 25% from net exports. It's a key part

of China's growth strategy. And he deeply depends on the private sector in order to achieve this. So I don't sense that there will be a turning back or a pivot in that strategy. I think in general, he has co-opted the billionaires and the private sector, the tech companies, as part of a broader strategy to build China economically and also in technology realm, to build what he calls a wealthy and strong nation. I mean, you mentioned bite dance. This is sort of the last big tech company that should really, that everyone's been waiting to go public. I mean, the last valuation was reportedly around $600 billion. They did $186 billion estimated in revenue in 2025, that valuation is tiny just compared to the U.S. companies. Like, if you look at like meta,

for example, meta trades at around 10 times sales, and it's down pretty significantly right now. So if you were valuing this company like you valued meta, this is a $2 trillion company. Yeah. But in the private markets, valued at $600 billion. This is sort of the trade. China tax because there's a lot of concern among the investment world that if you're trading in China, then you could get Jack Maude for whatever reason. And it's not going to go public. Why do you say that? I mean, it sounds like you believe they just don't really need to raise the money, which is an interesting point. Are there any other reasons? Yeah, I just don't think they need

the cash right now. Their revenues, I mean, they do far less R&D CAPX compared to META, and they just disclosed is that they're probably going to do CAPX up to $70 billion in $2026, mainly for data centers and AI, and I believe that's a lot less than meta has been doing. Last year, their revenue slightly exceeded metas.

This year, in the Q1, it was slightly down, but I'm generally positive about Bidance's reach and its ability to continue to monetize ads. There's been some good data to show, and it's funny you asked this question to show that of the top

100 internet platform companies and their apps. By far, the majority of the top 10 within that from China. So in terms of user reach, that is. So China has huge user reach. It's not able to monetize as effectively as Americans, probably because of the pricing at play and just the competition amongst a lot of players in the field in China. But I'm very optimistic about growth and user reach for a bite dance or for a lot of these other social media companies and these other offshoots of them. We haven't talked about this in the past. Kling AI, which is a photo editing platform that is getting a huge popularity in China and

around the world. There's some speculation that that might actually be carved out for a separate IPO, who knows. And then related to what we just talked about, C-Dance, which is their video editing platform that everyone is a fan of, including people I spoke to in Hollywood. I just don't get the sense that, you know, they are looking to IPO, they don't need the cash. They're worried about the regulatory scrutiny that might come, because as we know, Ed, and we've discussed in the past, they play this weird magic rabbit out of the hat game with TikTok. Like, how do you price, how do you value a bite dance and how will the Chinese regulators approach it

when clearly it is somewhat in violation of the export restrictions or export controls for Chinese data companies because you've effectively exported some of the algorithm to a now TikTok US entity. So I think it's just a way too complicated right now. And I don't think that they really are pressed to raise the kind of cash that they need to continue to grow. They're doing pretty well in terms of growth. That's just my hard take. Yeah, which to me, I mean, if I were dictator of China for a day. I mean, one of the first things I would do is just loosen up the regulations on the public markets, because the amount of wealth and value that is waiting to be captured in China, if you didn't have this multiple overhang, which essentially just scares off

Wall Street investors, I mean, if I could invest in bite dance, I mean, I would do anything, I mean, to invest in bite dance at a $600 billion valuation. I mean, especially the TikTok US deal, which was arguably rigged. I mean, actually not arguably, it was rigged. And the price was just ridiculous and unbelievably cheap. I mean, these businesses are incredible. What ByDonce is done with TikTok is just totally insane, the way that they were able to disrupt the social media market,

which everyone said for many years was undisruptible after Meta came out with Instagram. And TikTok entirely changed the game. It's been such a success story, and we're continuing to see these incredible companies coming out of China. BYD, I mean, we could do a whole episode on BYD. We could do a whole episode on Deep Seek as well. Maybe that will be the next IPO. But it does seem like that is, I understand they have their issues with going public,

and what that means in terms of sharing information and perhaps what it might mean in terms of companies and their ability to or incentive to partner with other nations, partner with other governments. I mean, China's just very sensitive about, as you said, cross-border capital. They don't like it. And so it's better for them. They believe to keep everything private, to keep everything within the borders. But I do believe that they are missing out on so much value, so much wealth. They could be created if they would just click a button and say, let the markets have at it,

let the IPO market rage on. But they've decided, no, it's not. I'm worth it to us. Yeah, they've optimized for control, and they are very, very worried about volatility historically in stock markets. So I completely take your point, Ed, and it's just a feature, not a bug, of how the Chinese government approaches markets. Yeah. Okay, let's take one last quick break and stay with us.

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Welcome back. China's Workers Daily, the mouthpiece of the government-backed National Trade Union, recently ran a series of articles on artificial intelligence and labor rights. This comes as China's GDP grew 5% in Q1 of 26, but warning signs in the labor market are growing. The unemployment rate for 16 to 24-year-olds held at 16.9% in March, while the 25 to 29 cohort hit a record high of 7.7%. And just for reference, nearly half of China's urban labor force has shifted into flexible gig employment. And it's so startling to see a tale of two synonymous. in the U.S. and China play out in the AI realm. And who would have thought that on the Chinese side, we have a government that in some

respects is proactively saying, hey, this AI thing could be really bad for everyday people, for the labor market. We should start to think about the implications of digital cloning through avatars or of digital platforms having way too much control over their employees and consumers' data. On the other hand, in the U.S. scenario, which I was, want to get your take on. It seems that the administration hasn't really done any regulation, but is still going out and trying to willy-nilly target anthropic because it's unhappy with Darya Amadeh and it wants to make an example out of him. Again, it's not clear what their intention

or their intended outcome is, but right now it seems like on the one hand you have a country in China that seems to be caring about its people with regards to AI. And then when it comes to America, care more about trying to tell Anthropic who's boss. But Ed, what's your take on just the news that has come out in heaps and leaps and bounds over Anthropic v. Washington? Yeah. Well, it's so funny because for the longest time, the White House said that any form of regulation when it comes to AI is a form of stifling innovation. And so that's a problem. But then suddenly, as soon as they get their feelings hurt by Anthropic, suddenly they're taking regulation seriously. Now it is a problem. Now they do want to stifle innovation. I mean,

this kind of headline is exactly the sort of thing that David Sacks, if it were being done by the Biden administration, David Sacks and his group and his buddies would be all up in arms about this. You're stifling innovation. You're being too protectionist, too paternalistic, about safety issues, etc. But now they decided because, basically because they got into a scuffle a few months ago, now it's okay. So I just think that there's a lot of double standarding going on in the White House. Again, this goes back to our first conversation, depending on whether you're a friend of the administration or whether you are a quote-unquote enemy of the administration. So that, I think, is what's going on. But in terms of overall protection for workers for the American people

against AI, basically there is AI going to take your job question? The White House currently is doing everything it can to make the answer to that question be, no, it's not going to take your job. That is essentially their approach, and so they've been completely hands off. They said, we're not going to have any form of regulation whatsoever. I call it the libertarian mind virus. I think that there is a mind virus that has infected the minds of many in Washington, where they view that any form of regulation whatsoever is a problem. And it's almost is if they cannot hold two truths in their head at the same time, which is that, yes, we want capitalism,

we want free markets, we want innovation, but at the same time, we also want to create rules in the same way that there are rules in a sports game, and we want to make sure that there are referees there to enforce those rules, and that hasn't happened. So the question, I mean, for Americans at this point is, do you believe that the government is going to,

protect you from the possibility that AI is going to wipe out millions of jobs. And for most Americans at this point, they believe no it won't. And so they're scared to death of this thing. And they have every reason to be because we are seeing tens of thousands of job cuts which are stated to be the fault of AI. I mean, AI has been responsible. It's been said to have been responsible for nearly one and five of all job cuts in America. here, 50,000 jobs. We saw layoffs from Pinterest and Amazon and block. And they all say, yes, it's because of AI. Now there is a debate as to whether they're lying. Are they just saying it's because of AI to increase their stock price because it means that we're very tech forward

and we're figuring how to implement AI into our business. But to me, I don't even care about that. Because the reality is they're saying it's AI. Jobs are being lost. So let's, if we're policymakers, is let's assume that it's probably AI, or let's at least assume that they are doing whatever they can to use AI such that they can eliminate tens of thousands of jobs. That is clearly what's happening, and yet we have seen no regulation. In fact, we've seen an executive order that has been, the directive was to limit regulation to not allow states to come up with their own regulation for AI. That's why Americans are so freaked out about this. Maybe it's a different story in China. Yeah, it's slightly less of a freak out, and it's more of a, the government is trying to get ahead of the curve.

It's like if they see the tsunami, which is coming for all of us, and it's trying to get ahead of the curve. And I detected that on recent trip earlier this year. You know, the narrative has shifted from AI is going to be a panacea for the economy to we need to start to think about digital inclusivity, inclusive growth. these are sort of catchwords for, you know, we need to avoid an AI apocalypse in the labor market. And I think it's interesting just to get into some of the details of the papers from Chinese Workers Daily. So the three core threats that were identified for laborers, for workers in the AI era were digital cloning. So companies requiring that employees train AI digital avatars of themselves. Sometimes this is tied to their performance reviews. This has raised

concerns about data privacy and who owns IP. Number two was AI being used to your point, Ed in the US, but in the Chinese context, as a cover for illegal firing. So some employers are using AI replacement as a pretext to fire people, and the Chinese courts have already ruled that this is unlawful termination. And number three is this concept of algorithmic digital overseers. So basically these opaque platform algorithms that are blurring working hours, and a cutting pay and making it impossible for workers to basically, you know, gather enough evidence to defend their labor rights. That is another area of concern.

And just putting it all together, it suggests to me that, you know, the government is very, very worried about what I believe will be the next decade of structural unemployment across the world as we try to figure out how AI is going to cut jobs. disrupt sectors, what are the new sectors that are going to come up in instead? History shows that any massive technological revolution begets a period of structural change in unemployment and then begets more innovation and more labor demand as people start to transition to the new economy. But it's true that in the Chinese case, because they're so exposed to the gigging economy in particular, I just mentioned that half of the labor force is in this flexible gig economy work that's like

delivery drivers, Chinese equivalent of Uber drivers. These are the jobs that I think very easy to cut in the world of autonomous drones, autonomous cars, humanoid robotics or robotic installations. My bet is that China in a way is even more exposed to the AI revolution because it is so exposed to the gig economy. And we're starting to see that in the data. According to researchers from Peking University, Naming University, and a host of other universities in China, AI could displace up just 278 million Chinese workers by 2049. That's one in three employees in China currently. And then one of recruitment site in China basically noted that job postings for college grads

fell 22% in the first half of 2025 compared to the previous year. We've also seen protests in China in Wuhan, where drivers are protesting against Biden doing out robotaxies. We're just beginning to see this wave, I think, of an AI backlash in China. And I think it would surprise people to note that people do protest in China and that the government, to some extent, listens. We saw this with the wealth management products coming out of the real estate sector a few years back. when there was protests about illegal fraud and manipulation from these real estate companies,

the local governments tried to intervene on the side of consumers. And we're starting to see this play out in China. And what's your view on the labor market in the U.S.? How disruptive is this going to be? And do we end up in a scenario where it's just as bad in America as it is in China, you think? I would just want to comment on a few things that you said there about how China is, dealing with this, you said that China listens, or at least the Chinese government, listens, that to me is apparent in the framework of concerns that they have laid out as to how

AI could disrupt the job market in China. And that is, it's quite nuanced their observations about digital cloning, about using AI as a pretext for firing and then creating legislation around that. Like, they clearly have real concerns, concerns enough that they're investigating the problem, they're coming up with creative solutions to the problem. And it also goes back to a previous conversation about IPOs and, you know, allowing for trillionaires or not. And that is,

China has demonstrated a willingness to forego money in the name of the common good. Yeah. In the name of protecting workers and protecting labor. they have demonstrated a record and a history of doing that. And so even if China is more structurally exposed to AI, based on the way the economy is set up, based on the amount of gig work, as you mentioned,

and it's a really interesting point. Even if that is the case, my assumption is that the Chinese government will bend the economy to its will in order to protect Chinese workers. And I wonder if Chinese workers believe that and assume that, that ultimately at the end of the day, the government will do what it can to make sure that there is at least like a base level of economic security. What I know about America is that the total opposite is true. This White House has basically said our main priority is wealth creation.

Our main priority is making as much money as is humanly possible. and then we'll ask all of the other questions later. What will it mean for wealth inequality? What will it mean in terms of disparity? Are we going to think about creating a floor of economic security? Are we going to think about issues related to work and displacement over the long term? No, we're not going to worry about any of that. All we're going to do is make sure how do we increase shareholder value as quickly and as much as possible.

That is the MO in America. And so when you just think about like how do the population feel about, it. This was a survey that I looked at a few months ago, and maybe it's changed, and this is from KPMG in association with the University of Melbourne. They polled different populations on how excited they are about AI, whether they are excited about AI. Less than half of Americans said that they were excited about it. It was around 40%. And in China, that number was nearly 90%. Now, I don't know what their methodology was or how much we should actually trust. it, but that was the number. And I wonder if one, you think that's true, and two, why, if it is.

Yeah. I saw that same data set. My instinct, having seen the way that the digital tech companies developed in China and how quickly adoption picked up in China, you know, compared to, say, a Japan or some of these other EM countries, let alone, you know, a Germany or, or, you know, a Germany or or European countries, is that Chinese people are remarkably keen to adopt new technologies, and they generally see new technologies as being a good thing, as opposed to looking a scan at it with skepticism. And we're seeing this play out in the AI realm where they go, hey, wouldn't it be nice to have an autonomous vehicle? And here again, I think adoption will be faster in China for AVs versus the US. Hey, wouldn't it be nice to have a robot in your home doing

all these different things. And then that comes to the cultural element whereby everyday Chinese people believe that updating yourself into new technologies will improve your life. But to bring home your point about the government, I do believe that the government is going to do its darned hardest to try to cushion the blow of AI. It has a history recently of doing this. If you look back to the 1990s when you saw the last major structural unemployment phase in China, hundreds of millions of jobs lost as SOEs went bankrupt. You know, you had this policy of letting SOEs go, letting them go bankrupt because they were inefficient and highly indebted.

And then you had this policy from the Premier at the time, Zhu Longuid, to create iron rice bowl effectively subsidies to try to offset some of the pain for these laid-off workers in SOEs. That obviously led to the next wave in the 2000s where China really rode the wave of WTO and of the export engine, creating new factories, new growth. But again, I think I point to that period for people just to show you that the government is a responsive organism. It is looking at real-time data. And I think we'll move quite aggressively to my suspicion is maybe put on some taxes on these AI companies or robot companies. and find ways to cushion the blow for these people who will be left out by the AI wave.

And I wonder if that ultimately plays to their hand in the AI race, and this is something I've been talking about, which is that the biggest obstacle to AI in America, it isn't really supply chains and it isn't really power supply. It's lack of popularity. It's the fact that so many Americans have decided they hate this thing, and they are now taking to the street, and protesting AI, protesting data centers,

which is one of the largest reasons. It is the largest reason why data centers aren't being built in America. Tens of billions of dollars worth of data centers were blocked in the U.S. in 2025 because of political pushback. 19 states are considering restricting the construction of data centers or just restricting it outright. And we're now seeing more and more interest in America of just a moratorium on data center's full stop. Just stop building them. This is a problem. The billionaires are getting too rich.

It's leaving the workers behind, which, I mean, I think that that is a stupid argument. I think that that doesn't make any sense. And I think it will ultimately put America behind. But it speaks to the fact that we don't really have a hold on how to, one, market this thing and to regulate it. And the less effort you put in and the less creativity you put into regulating this stuff, the more people are going to get worried about it, and the more they're going to try to make sure that it never materializes. And so I wonder if over the long term, that might actually play into China's hand

where they said, we're worried about this, we're going to create these frameworks, we're going to make sure that workers are protected, which leads to workers feeling generally more positive about the technology, which leads to more technological innovation, more creation, more building of these data centers. I think it's just something that we should think about, And, you know, I don't glorify the CCP by any means, but there are some ways in which they seem to have their issues down correctly.

And I think this is something, at least the interest in regulating AI. That's something that the White House could certainly learn from. Yeah, I would generally agree with you, which is that, you know, in the U.S., you're getting a political blowback that comes out of a vacuum of regulation or regulatory frameworking. My pet peeve with a lot of the CAP-X numbers that get used for US versus China, you know, US, I think, will do at least 750 billion CAP-X alone this year for data centers. China just announced that by 2030 it wants to do about half of that. And when you compare those numbers, I don't think it's favorable to China, obviously, because infrastructure costs are much lower in China.

Energy and infrastructure costs, and the build-out will cost less per unit than it does in the But yes, the US is ahead in KAPX, but I just think those numbers really distort the investment that is coming down the pipeline from China because they, historically, they're only about half in terms of gigawatt capacity of data center build out compared to the US. They have a lot, long ways to catch up. But when people use those figures at me, I kind of am skeptical and I wish there was more thoughtfulness about cost comparison. It's a really good point.

And it should also be equally applied on like the enterprise. level of actual model usage where the models themselves are also orders of magnitude cheaper than the US models. Like DeepSeaks model is, from my understanding, it's 96% cheaper than the open AI model. And now that we're seeing a lot more sensitivity towards all of the AI spending, now that we're starting to see at least in America, companies are trying to put spending caps on the amount that they are dishing out to these frontier labs for their AI capability. we're now seeing a lot more interest in cheaper AI.

And that means more interest in Chinese AI, because the reality is the Chinese models are significantly cheaper. It's more cheaper on the infrastructure layer, cheaper in terms of energy, and then there's also the fact that they are figuring out how to distill U.S. models, which I would say is tantamount to stealing them. But that results in cheaper models over the long run, too.

I think it's a really interesting point. Yeah, and people ultimately, as you know Ed vote with their money. I was surprised at this Hollywood conference and I won't name names, but there's some big tech companies that actively are using Quinn, they're actively using Chinese open source models

because it's just cheaper, it's faster. They can fine tune it really easily compared to Open AI or Claude. And I thought that was super, if you aggregate that across the industry in America, it's just, it indicates to you that, you know, we haven't seen the massive decoupling in AI that people have expected.

I don't know if the administration would crack down on that. It might be hard, but at least from the annex data that I've observed, a lot of big U.S. companies are still using Chinese open source models. 100%. It's fascinating. 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.

Talk to you again next week. Formula One, so hot right now. It's like if traders in succession had a baby, on wheels. Teams lying. Drivers beefing. Celebrities everywhere. And scandals. Lots of scandals.

So we made a show about it, the Red Flag's podcast where we recap races and break down all the latest F1 headlines. But no nerdy tech talk. We only cover the stuff you'll want to hear about. Yeah, and the only thing hotter than the drivers are our takes. And now we're doing it on Vox. Oh, we're so legit now. We're basically thought leaders. Ted Talk incoming.

And we do a podcast with Gunter Steiner called Venka Hours. I still can't believe that's true. Well, believe it. There is so much for the beautiful Vox media audience to enjoy. So come check out the Red Flax podcast every Monday on YouTube or wherever you get your podcasts.