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00:00Duncan Clark, chairman of BDA China. It's a tech advisory firm that's also now opening offices
00:05in Japan. And of course, here we are in Singapore. Duncan, good morning. Thanks for
00:09taking the time to speak with us. Thank you very much. We're actually opening office in Singapore
00:12actually also in January. So the China impact is spreading in terms of looking at what's
00:17happening in China. We need to be in places like Japan and throughout Southeast Asia and also
00:21Mumbai, where I'm heading on Saturday. There we go. So the business is picking up. What have you
00:26been most busy with this year? It's really the China impact. So studying what's happening in
00:31China, whether it be open source AI, as we've been hearing with Alibaba and others, obviously
00:35starting with DeepSeq earlier this year. It's not so much about money seeking to go into China,
00:40although there's some sense that that's coming back a little bit, but limited from the US. But
00:45the China impact, understanding China, what's happening there, because it's going to come to
00:49you if you don't understand what's happening. That is driving a lot of demand right now.
00:52And when we talk about that DeepSeq moment, it seems like every few months we get a new
00:56language model that comes out from some of these AI labs in China now. Is that sort of the new
00:59normal that we're spreading to see coming through? Yeah. I mean, you know, people like Mark Andreessen
01:04have been saying, you know, 80 percent of the pitches that come into his office in Silicon Valley
01:07are using Chinese, you know, open source AI. Yeah. Who's going to win, though? Is it going to be
01:12the tech giants like Alibaba, the ByteDances, or you look at some of these startups like Moonshot,
01:18Minimax? I think if you have the infrastructure like Ali Cloud, obviously that's a much stronger
01:22proposition. We're seeing the same in the US, by the way. You know, those, you know, we've seen,
01:26look what's happened with Alphabet and Google's, you know, versus say, you know, Meta maybe just
01:30doesn't have the same sort of cloud business. So with the same dynamic is happening in China's
01:34in the US, that if you have the infrastructure, you have a home court advantage.
01:39On the China impact that you just talked about now, they're the obvious, they're the not so obvious
01:44right now. Let's start with the not so obvious. Like what do people need to understand about,
01:48you know, how this, how I feel the China impact in a not so obvious way?
01:53Yeah. I mean, you're just talking about Japan, and I'm spending a lot of time in Japan also.
01:57You know, there is a gap in, you know, these two very large economies right next to each other.
02:02That's been for some time. For example, you don't see Japanese salarymen and a few women
02:06going into China anymore. I noticed that when I'm flying between Tokyo and Beijing. And actually,
02:11by the way, cheap, cheap deals. I hate to say that. But, you know, there is this disconnect.
02:14We've had that before between China and India. Interestingly now, with what's happening with
02:19India and the United States, it's been a bit of a look again from India towards China.
02:22It's a direct flight again, I think.
02:23Yeah. So, you know, it's Asia, as we know, is huge. But there are some interesting opportunities
02:29now because of information dissimetry or the inability, for example, Chinese to get visas
02:34to go to India easily. But actually, they need to understand each other. The same is now happening
02:38with Japan and China. So, I mean, companies like Bloomberg are in a good place, you know, to like get
02:42the information to where it needs to be. I'm not sort of pitching you for that. But it is true that
02:46we are starved for that person-to-person contact. These events are very useful. So, I think there
02:53is an opportunity to double down on information and insight and, you know, more signal to the noise.
02:59I want to reference your book. I mean, how's that Jack Maubill? How many years ago was that?
03:03The book came out nine years ago, 2016, updated up until 2019. And then, of course, 2020.
03:09So, I heard you're writing another book about Alibaba now. What is it going to be? What do
03:15you pick up? I want to call it AI Baba because, you know, just drop the L. I mean, Alibaba has
03:20reinvented itself. That's the title. I think, you know, it looks like a spelling error, but hey,
03:24let's work with it. But, you know, it is amazing how Alibaba was very much a, you know, more surface
03:30level e-commerce company, one could say, versus a deeper tech. You know, Tencent was more of an
03:34engineering company. But now that's no longer the case because the investments in cloud and this
03:39amazing opportunity with open source LLMs that Alibaba is showing. So, Alibaba is in a better
03:44place from a regulatory standpoint, being a deeper tech company, but it's also in the right place
03:49where it needs to be on AI. We'll see what happens with the results next week. Obviously, there were
03:53some strange stories last week about U.S. defense issues with Alibaba.
03:57The military connection. I don't know. But Alibaba is a serious player now in global tech sphere,
04:02as well as this e-commerce giant. It's no longer seen as the e-commerce giant that was losing market
04:07share. You know, we're beyond that. Alibaba has now changed the dynamic. And so there's a new
04:11generation also of Chinese tech companies coming forward. And you mentioned some, you know,
04:15interesting companies. So it's a highly dynamic market, very competitive. And a lot of these Chinese
04:20companies at early stages want to get out. I'm actually wearing these smart glasses from a company,
04:24in Shenzhen, that is not targeting the Chinese market because it's too competitive. I have what
04:29you have now. What do they do? What do they do? I have heads up display right now. So I have live
04:32translations. I was about to say, because when you move your head, something reflects and I see a
04:36little box there. So I have teleprompter. I can have transcripts. Yeah. So I'm sorry, but
04:41interviewers are going to take on the interviewers. Now we have the same information you guys have.
04:44I kind of see what you're looking at. But the point is, this is a Shenzhen company. A guy used to work
04:49at Apple, came back to China. So there's a talent explosion in China. Chinese
04:54talent is a global good, I would say, whether it be AI or biotech. The U.S.-China tensions have
05:00obviously made it very complicated. But, you know, China and India together graduate most of the
05:04talent in engineering, as we know. So whoever is going to win in this new world will have to tap
05:10in somehow to this talent. And that's the game right now. And it seems like in some ways investors
05:15are rewarding that approach that China has had with open source is that, you know, it's less
05:21advanced chips, but the budget spend is much lower than the U.S. And the return on equity or return
05:29investment seems to be more... Because it's cheaper. Because it's cheaper. Exactly. Or free in some
05:32reason, in some cases. Yeah. I mean, there's an English saying, a British saying of, you know, cheap
05:35and cheerful. This is like chip and cheerful alike. You know, China doesn't have the chips at the high
05:39end, as we just heard. I mean, Mike Waltz was confirming this morning, you know, the blackwells are not
05:43going to go to China. But China is finding workarounds. It's driving innovation. And so the level of
05:48activity and drive. And the competition within China is so intense. It's creating companies.
05:52And the irony is, companies like OpenAI are not open, as we know. And indirectly, the Chinese
05:56government stumbled into, you know, open source models actually being a way forward for them.
06:00So it's a very confusing world when the open company is closed and the supposedly closed China
06:04is open. I, you know, I find it very confusing. That's why I need the help of information.
06:07Yeah. Well, what we've seen this year following the DeepSeek moment is the government's reset its
06:16relationship somewhat from the outside when you look at things with the private sector,
06:20specifically the tech sector, really as a way to, when you look at a competition between the U.S.
06:25and China. In fact, when you look at what the U.S. is doing with Intel, it's almost like the U.S.
06:28is also getting involved in their tech sector. Confusing, right? Yeah. It's almost like you
06:33interchange the names and then you get a sort of more consistency. Which is the state plan.
06:36Yeah, anyways. Ooh, let's get us into something different. But what I get your take is,
06:40what do I need to be watching out for in terms of that relationship between the government in China,
06:45the Chinese government and its tech sector? Clearly, I mean, there was an over clampdown,
06:51let's say, on the back of the property sector clampdown, the Jack Ma and other tech sector,
06:56you know, we saw with zero COVID, it was like three things together. The government ultimately,
07:02I think, recognized the fact that it needs to work closer with the private sector. And don't forget,
07:06this came on the heels of President Trump's inauguration, where he was literally, his family
07:10was amidst the tech titans in the United States. So there's been a shift. I mean, you know, the rise
07:15of tech companies to become almost nation states internationally, but within countries, very
07:20powerful players. China's, you know, the CCP is not going to sort of hand over the keys to, you know,
07:24tech companies. But there is clearly a desire to cultivate innovation in this all effort against the
07:30U.S. and attempts to isolate China. So, you know, one can argue whether, you know,
07:34the U.S. is helping or hindering China's rise. It's a bit of both, I would say. But I think
07:39governments now realize the importance that AI and other areas like quantum, advanced manufacturing,
07:45I mean, China's 55 year plan, which is coming out, it gives you a very detailed blueprint of
07:49their ambitions. And, you know, China is run by engineers, as, you know, Dan Wong wrote in his
07:53great book, Breakneck, you know, too many lawyers in the United States, maybe too many engineers in
07:57China. But, you know, maybe too many engineers is better than too many lawyers. I don't know how many
08:00in the room here, but you have to be careful. Yeah, we can check the glasses for you. Yeah, exactly.
08:06And how do you see that play out, though, this whole AI race? Is it just going to be something
08:11that's decoupled between the U.S. and China? Or do you see that there is going to be some
08:15bilateralism in some ways of these two different paths? Yeah, that's a great question. And I think
08:20that's the essence of what I'm trying to get to in my new book is going to be about how if AI is,
08:25you know, an American AI for the U.S. and China for China? No, it's actually one that's the global
08:30south and even Europe, you know, we see and even the U.S. buying like open source AI. I mean,
08:34Airbnb, for example, is adopting Alibaba, you know, so that's confusing. One theme I'm really
08:40interested now is like the elite may talk about national security and all this stuff, but the
08:45laobaihing, as we say in China, you know, average Joe, the main street, they want cheaper
08:49robotics, they want better products, EVs, etc. If China is increasingly making stuff that
08:55people want and in a high inflation West, we're going to see some interesting debates like saying,
09:00yeah, fine, national security, that's great, but I just want to reduce my cost of living. I want to
09:04improve my mobility, for example, these strap on robots that you see, you know, so it's an
09:09interesting dynamic that China is making stuff that people want. They're making too much of it,
09:12by the way. Yeah. And as a result, they're having to go global very early on in some cases
09:17forgoing the Chinese market, which is suffering under almost like a K-shaped, you know, the same thing we
09:22see in the United States. We see a split screen economy in China with flashy objects, tech,
09:27and actually the property market, which is what yesterday the Chinese government is saying they
09:31need to stimulate, you know, house mortgage market. So both China and the U.S. kind of resemble each
09:35other, actually. They have these split screen economies.
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