China CAPITALIZES as Trump’s Tariffs BACKFIRE | China Decode

This year, China is expected to contribute 26.6% of the world's total GDP growth. That

will mean that China's contribution to the world's growth will be more than all of the G7 countries put together.

Therefore, if China is tweaking its model to rely less on exports to the world and more on boosting consumer

spending of Chinese citizens inside China, then that will have big implications for well companies that sell in China and also for all countries

around the world that import Chinese stuff.

>> Welcome to China Decode. I'm Alice Han.

>> And I'm James King.

>> In today's episode of China Decode, we're discussing the IMF warning China to pivot as the US Supreme Court reshapes the trade war. How China's

emerging as a global hub for medical tourism. Plus, how Seed Dance 2.0 could

tourism. Plus, how Seed Dance 2.0 could be the future of filmm and a threat to Hollywood as we know it. All that is coming up. But first, let's take a look

coming up. But first, let's take a look at how the Chinese markets are starting the week. The Shanghai Stock Exchange

the week. The Shanghai Stock Exchange was closed for Luna New Year. The Hang

Sang Hair Index surged 2.5% on hopes that the US tariff decision will relieve trade pressure on China. But more on that later. The Hang Tech Index rose

that later. The Hang Tech Index rose 3.3%, one of its best trading days this year. Chinese chipmaker Semiconductor

year. Chinese chipmaker Semiconductor Manufacturing International Corporation or SMIC closed the day up 5% and tech giant Alibaba closed up 3.5%.

All right, let's get into it. The

International Monetary Fund just released a major report on China with a very, very clear message. The

export-driven model has run its course.

China grew 5% last year, but the IMF projects growth slowing to 4.5% this year and warns the current strategy for China just isn't sustainable. Nearly a

third of that growth came from net exports and the UN is estimated to be significantly undervalued. That

significantly undervalued. That combination has fueled a record trade surplus and rising tensions with the US and Europe. Now later in last week's

and Europe. Now later in last week's ruling from the US Supreme Court, which says President Trump overstepped his authority in imposing sweeping global

tariffs under emergency powers. If parts

of that tariff stack come off, especially on China, it could reshape USChina trade flows at the exact moment Beijing is being told it needs to pivot

inward and boost domestic consumption.

James, the AIPA tariffs have been struck down. There was a lot of speculation

down. There was a lot of speculation about this in the run-up to the Supreme Court ruling, but 63 pretty unanimous in striking down. China is a big

striking down. China is a big beneficiary. I was looking into the

beneficiary. I was looking into the data. The effective tariff rate has gone

data. The effective tariff rate has gone down 7 percentage points.

How do you think about this ruling and the way that China perceives it and the way that China may even be changing its strategy in advance of that April meeting between she and Trump?

>> Yeah, Alice. Um, as usual, uh, we're reacting to a very fastm moving and unpredictable picture, but I think we need to say, you know, what we think the most important implications are. And to

me, there are three big things. You've

just mentioned the first one. The

overall impact of this is going to be that uh the tariffs on Chinese goods being exported to the US uh will decline

by 7%. Now 7% doesn't sound massive, but

by 7%. Now 7% doesn't sound massive, but it certainly isn't negligible either, especially when you consider that total

Chinese exports to the US last year was 525.6 billion US. So 7% of that is a very big

billion US. So 7% of that is a very big number. So that's the first thing I

number. So that's the first thing I think the the the first point is that US consumers are going to be able to buy Chinese stuff at an average of 7% uh

cheaper than they used to. The second

big thing is that this is likely to reduce the negotiating power of President Trump as he prepares to meet

Cining uh in their summit uh at the end of this month and in early April. Uh

this meeting obviously is of vital importance. It's the first visit to

importance. It's the first visit to China by a US leader since 2017.

So we don't know at this stage whether Trump was planning on using the US tariffs on Chinese imports as a bargaining tool. But if he was then of

bargaining tool. But if he was then of course this weakens his position before he goes into that meeting. And the third

big thing is that it will effectively reduce pressure on China to pivot its economic model. Uh, and this is where we

economic model. Uh, and this is where we get back to the IMF, the International Monetary Fund, because as you said, last week they came out with their annual

report and as they do in almost all annual reports on China, they said that China needs to shift its economic model

away from reliance on exports to boost consumer spending. And here again, I

consumer spending. And here again, I think the context is absolutely crucial.

You might uh hear that and think, well, big deal. they're just going to be

big deal. they're just going to be boosting consumer spending and reducing their reliance on exports. But because

China is such a huge economic presence in this world, even small tweaks in China's economic models orientation can have massive outside impacts on the rest

of the world. Just let me give a bit of crucial background here. This year,

China is expected to contribute 26.6% 6% of the world's total GDP growth. That

will mean that China's contribution to the world's growth will be more than all of the G7 countries put together. G7

countries of course are Canada, France, Germany, Italy, Japan, the UK and the United States. So this single country

United States. So this single country will supply more growth to the global economy than all of the G7 countries put

together. And therefore, if China is

together. And therefore, if China is tweaking its model to rely less on exports to the world and more on boosting consumer spending of Chinese

citizens inside China, then that will have big implications for well companies that sell in China and also for all countries around the world that import

Chinese stuff. Now, I'm really

Chinese stuff. Now, I'm really interested to get your take on this, Alice, but personally, I think this IMF report is simply wishful thinking. I do

not think that China will change its economic model. I do not think that

economic model. I do not think that China will boost its consumer spending in any meaningful way. And I do not think that China will sort of resile

will backpedal at all on its incredible uh trade export performance which last year gave China a record trade surplus

of about 1.2 trillion US. So I think you know yet again the IMF is whistling in the wind and this is not going to have any effect. It basically uh stands I

any effect. It basically uh stands I think as a barometer of the West's impatience with China to change its model, but I don't think it's going to have much of an impact in convincing

China to change its model. But I I'd love to hear your take on that.

>> Yeah. And and by the way, just to give you a data point to completely vindicate what you just said, James, I looked at the January data for electric vehicles in China. We had uh 286,000 EVs that

in China. We had uh 286,000 EVs that were exported from China in January.

That's up 104% yearonear. And now China represents as of January this year 49.6% share of total auto exports. And that's

again up 13 percentage points year. Uh

BYD which is the clear frontr runner is exporting twice the amount of EVs that that Tesla is at second place. That's

just to give you a sense of the of what is actually happening on the ground. And

to your point, James, even if the IMF and Beijing theoretically understand that China needs to rebalance, we have a lot of private companies on the ground that we're seeing in China that need to

export because all they're seeing is domestic headwinds. So, they are finding

domestic headwinds. So, they are finding ways to export to APAC, export uh even to the US with subsidiaries that they've set up or even to Europe where things

again seem to be softening. So to your point, James, I don't think that any of the IMF's advice or recommendations for the Chinese government will really be

adhered to primarily because this is too big of a ship to really seriously steer in the opposite direction. Uh, and I think that when we get to the NBC, the National People's Congress, the Leang

Huay, in in early March, we'll probably see a government work report and a and a 5-year plan, the 15th 5-year plan, focus a lot on China being a manufacturing

high-tech manufacturing superpower. So,

you know, what Trump is doing marginally helps China because to your point, James, it reduces the effective tariff rate on Chinese goods. Uh, and Trump so far is still in a doubbish mode. He's

more interested in his tariff war with the rest of the world. He's put on a 15% uh global tariff through section 122.

Again, showing that even if I struck down, he's got so many other tools. So,

I think that this trade war hasn't stopped, he's going to continue to use different instruments. But what is clear

different instruments. But what is clear is that he wants to have a good photo oped moment uh with Xi Jinping in Beijing in China in early April. So,

he's going to do everything he can to reduce the tensions in that relationship, tariffs being one of them, because effectively the 10% fentinel tariff has been struck down by uh the Supreme Court ruling. And then we'll

have to see going into the meeting whether or not soybeans are on the table as well. Uh but to your point, this is

as well. Uh but to your point, this is coming at a good time for China.

Meanwhile, China is negotiating better deals on the trade front with Canada, with uh the UK, with Europe. Mertz is

actually going to be there in a few days. Uh so we'll have to see what the

days. Uh so we'll have to see what the German chancellor says from from his high level meetings which is the first in many years from a German chancellor going to China.

>> Yeah I think so and uh I I was just doing a little bit of research Alice on whether or not you know China could actually boost consumer spending.

Obviously you know the whole Fortune 500 the biggest companies in the west they all want to sell into China. They're all

dreaming of a a market of over a billion consumers. So this is a big uh live

consumers. So this is a big uh live topic. Um but it seems to me that the

topic. Um but it seems to me that the optimism as I think we both agree uh is being overblown and from what I was a

able to ascertain basically the problem is that property prices in China continue to fall and also property

transactions in China continue to fall.

uh this year property transactions so property sales are due to fall another 10 to 14% compared to last year and the

crucial way in which this connects with Chinese consumer spending is that first of all most Chinese people have put most of their money into property. So they

feel rich or they feel poor depending on how much they perceive their their flat or their apartment or their house to be worth. The second uh crucial aspect is

worth. The second uh crucial aspect is that a lot of Chinese families they borrow against the value of their house in order to spend on something like

their kids' education or some other crucial service that they require. And

so if the value of your house is falling, you can't borrow as much as you did previously or you don't want to borrow as much as you did previously.

And therefore, you're much less likely to spend on things that you that you either want or you think you need like education or health care or something

like that. And though all of those

like that. And though all of those things fall into the general category of Chinese consumer spending. So I think

that until we see a rebound in China's property market, we are unlikely to see a rebound in China's consumer spending.

And according to the best predictions out there, we're not likely to see the Chinese property market bottom out until about 2027 at the earliest. And unless you've heard

something different.

>> I mean, I I did we we ran regressions and did research on this. I I would probably say 27 to 28. I I think we're probably going to see prol prolonged contraction in the real estate sector.

And and I don't think crucially we're going to see a lot of policy support at this NPC meeting coming from the government because frankly they wanted this to change. They wanted this ass ac asset bubble to break. Uh and they're

more interested in boosting investment and growth elsewhere in the economy namely the manufacturing sector which leads back to the beginning of this discussion. But to your point just so

discussion. But to your point just so people get perspective Chinese households used to have around 2020 to 2021 70% of their wealth tied in real estate. It's now gone down to 60% just

estate. It's now gone down to 60% just purely because people are buying less but also prices have gone down. Uh and

and for reference only 5% is in equities and 25% is in savings deposits. If you

look at America or many of the developed countries that ratio somewhat flipped whether it's more equities and uh heavy as opposed to real estate. So this is a

structurally suigenous phenomenon in China where household consumption is so heavily associated with real estate prices. Okay. We'll be back with more

prices. Okay. We'll be back with more after a break. Stay with us.

Welcome back. For years, Western travelers have raved about China's highspeed rail and glittering skylines.

Now, some are raving about its hospitals. A viral video from a British

hospitals. A viral video from a British patient who flew to Beijing for stomach pain and says she was tested, diagnosed, and treated for about $400 has sparked a

bigger conversation. I landed in Beijing

bigger conversation. I landed in Beijing yesterday and I'm here. It's very blue.

I saw the specialist this morning. She

was very patient. She was really nice.

She could not believe that I'd had symptoms for like 1 to two years. She

could not believe that it taken so long for anything to happen. Why are some foreigners finding faster, cheaper care in China than at home? And as we discussed in the previous segment, China

is under pressure to rebalance its economy away from exports and towards domestic consumption. in particular, the

domestic consumption. in particular, the services sector. Medical tourism is

services sector. Medical tourism is increasingly part of that shift. Last

year, Chinese hospitals treated nearly 1.3 million foreign patients, a sharp post pandemic jump. And under the government's Healthy China 2030 initiative, Beijing is actively

promoting a mix of modern medicine and traditional Chinese medicine to attract both regional and western visitors. But

there's a tension. Public hospitals are already stretched and some Chinese citizens worry foreigners are benefiting from taxpayer funded care. James, you've

been following this closely. What do you make of this rise in in medical tourism?

And is China going to turn into a Korea or a Turkey in the sense that a lot of people around the world are just going to go there for cheap operations and healthcare?

>> Uh the short answer is I think it absolutely will. Um and uh the UK woman

absolutely will. Um and uh the UK woman that you mentioned uh whose video has been on Facebook and probably on other uh platforms really struck a chord with

me personally, Alice, because I live in Southeast London. It's not a

Southeast London. It's not a particularly smart part of the town of the town, but it's it's a decent place.

Um I haven't been able to get an appointment with our National Health Service, that's the free healthcare in the UK, for a couple of years. You've

been on the wait list for a couple of years.

>> For a couple of years. Um gosh, just just for sort of routine tests. I mean,

I hope nothing major. Um and so when I listened to the video from this uh UK woman that you mentioned, I was really struck. She's there in Beijing. She's on

struck. She's there in Beijing. She's on

day one. and she said the first thing she says to the video is I couldn't get an appointment for over a year so I flew out to to China to see somebody and I've

been seen immediately. So when I heard that I thought well maybe I need to go to China to see a doctor. The other

thing is the costs that you mentioned are really very reasonable. I mean you you you mentioned it was about uh £400.

That's £298.

But for that, she got an endoscopy. She

got blood tests. She got an electroc cardiogram, a biopsy, she got various drugs, she had consultations with the consultants at the hospital. And it all

happened immediately. It was like she

happened immediately. It was like she went in the next day there were tests.

The day after that it was tests. And she

says, "This is phenomenal." And I have to tell you, Alice, well, you're in the UK too.

>> It's broken Britain. It is, I'm afraid, we have to be honest about this. It is

phenomenal that you can get that type of health health care in China that quickly at that sort of price. So, I think in answer to your question, will this

create a flood of foreigners from probably all over the West heading to China for medical treatments? I think

the answer has to be yes. Um, and we're already seeing it now. I would say I think people all over the world are going to be looking at this. Just one

extra little statistic here. The Chinese

Hospital Association has said that according to incomplete statistics about 850 hospitals and clinics in 57 cities

across mainland China are offering international medical services. That was

in 20 24. So by now it could well be quite a bit more than that. But yeah, I mean this is an incredible trend. Don't

you think, Alice?

>> I have so many thoughts about this.

Where do I start, James? I start with broken Britain. When I first moved here

broken Britain. When I first moved here two years ago from the States, I thought, you know, you can't get worse.

I'm Australian. You can't get worse than American healthcare. But I actually

American healthcare. But I actually found worse, which is British healthcare. What I've realized is that

healthcare. What I've realized is that you until you have an emergency or cancer, you basically don't get seen by a doctor. And I think that James, a lot

a doctor. And I think that James, a lot of your doctors in the UK have just moved to Australia where they get paid better this they get more vitamin D and sunshine. But to your point, u um what's

sunshine. But to your point, u um what's been interesting, a couple of threads that I want to pull on. So in China, there is a culture which I don't think

is very um familiar to a lot of Westerners. It's called Uzza means to do

Westerners. It's called Uzza means to do a 30 to 40day confinement. It's a

post-natal confinement after childirth where they effectively, you know, treat the pregnant woman like a princess in a spa. All her meals are made for her. She

spa. All her meals are made for her. She

has to do particular exercises. She's

not allowed to leave the house, hence it's confinement because she could catch a cold or be exposed to bacteria. So,

she's she stays in inside a hospital or a spa clinic. And she's get given massages, the baby's taken care of, she's fed well. There's a lot of in Chinese we call it bouyang. A lot of

nutritious soups and food that are given to her, a set menu. So she effectively gets to check into a clinic and I've got girlfriends who've been doing this. They

pay probably a,000 to 2,000 USD. There

are some offerings of this in the US that I think 10 times amount that amount. I mean just factoring in labor

amount. I mean just factoring in labor cost alone. So I could foresee this

cost alone. So I could foresee this being a big trend where not just Chinese or ethnically Chinese people go to mainland China, check have a baby there,

check into this postnatal clinic, uh and then um get treated to great service, that could be something uh that I think could be very very trendy to your point.

But if China can get the quality of service right on top of much cheaper labor costs and medical services costs, I think it's a no-brainer that China

becomes like a Turkey or South Korea.

And and I as I was doing research, what I found was interesting was that the Hainan Island is actually uh listed by the state council of of Beijing as a

special medical zone. You know, we all know about special economic zones like Shenzhen for instance, but this is a special medical zone in Hainan. Uh it's

a first of its kind and basically they allow international travelers, foreigners to come in relatively easily and get cutting edge foreign approved u medical treatments

and equipments and and drugs. Uh some of them in stem cell research and coccleia implants to name a few. So, this is an interesting direction for China and it fits well with what we've discussed

previously, James, how they're really building up tourism. They're really

building up music tourism now medical tourism. It's all part of an effort to

tourism. It's all part of an effort to get the services sector more booming. Uh

because, you know, China traditionally does not have a strong services sector.

>> I'm actually going to Hainan next month.

I think it's vis Well, it certainly is for UK people. You

can go in there without getting a visa.

But the other thing is just to add a note of caution because my own experience of Chinese hospitals was not that great. Um I I had a colleague and

that great. Um I I had a colleague and we were on a business trip, a Chinese guy and his lung collapsed um while we're on a business trip and I took him straight to hospital uh because it was

an emergency. And when we got there uh

an emergency. And when we got there uh we were told um that he could have the standard treatment um which meant that he'd have to wait a couple of days. that

was clearly not going to be an option given the fact that he was gasping for breath. Um or he could have the express

breath. Um or he could have the express treatment. Um but that cost 10 times the

treatment. Um but that cost 10 times the amount. Um, and it seemed to me clearly

amount. Um, and it seemed to me clearly that there was corruption going on there, that they knew that we were in a desperate situation and they and they they could see that I was from a big

foreign company and they wanted the money and of course I of course paid up because when your colleague is uh is gasping for breath with a collapsed lung, you don't have an option. So I

would just add that in there. You know,

Chinese hospitals are are not paragans.

Uh, put it that way.

>> Yeah. Where which province was this James?

>> It was in Beijing actually. Yeah,

>> it was in Beijing. What year was this?

>> Oh, it would have been about 10 years ago now. So quite a while. So maybe

ago now. So quite a while. So maybe

things have changed somewhat, but I can't really believe that all practices like that would have changed.

>> Yeah, I agree. I I'm sure that there's a level of corruption and you know, I've had per personal experience with my grandparents who are still in Shanghai and elderly. um they've had largely good

and elderly. um they've had largely good health care, but I've also heard some horror stories from some of their friends anecdotally. So, to your point,

friends anecdotally. So, to your point, James, it's not all peaches and cream.

Uh and certainly, I'm sure that there are tons of stories of things not working out as well. But I think more broadly at a macro level, this is an interesting trend that I could foresee coming up in the 5-year plan. We've

already got the Healthy China 2030 initiative that's been uh launched uh in order to turn China into international medical tourism destination. So I I I just foresee a lot of top- down

initiatives to try to make China a more attractive uh place for medical tourists. But the market is expected

tourists. But the market is expected apparently to grow from $1.2 billion in 2025 to $3.4 billion by 2035. Last year,

Chinese hospitals received 1.3 million foreign tourists, and that was up about 75% from 2022, although arguably that would make sense given 2022 was the end

of uh zero co in China. Okay, let's take one last quick break and stay with us.

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Welcome back. Seance 2.0, a powerful new AI video model from Bite Dance, the company behind Tik Tok, is generating viral clips of Tom Cruz and Brad Pitt

brawling on a rooftop and Donald Trump battling kung fu masters in a bamboo forest. None of it is real, yet millions

forest. None of it is real, yet millions are watching it as if it is. The tool

can create hyperrealistic scenes in just minutes, thrilling some and alarming others. Paramount Pictures and the Walt

others. Paramount Pictures and the Walt Disney Company have sent cease and desist letters. SAG After is pushing

desist letters. SAG After is pushing back, and critics warn it could turbocharge deep fakes and just completely upend Hollywood. Meanwhile,

China's rapid AI push is fueling what some are calling a new tech space race with Washington. James, did you watch

with Washington. James, did you watch the video of uh Brad Pitt and Tom Cruz?

I spent a big chunk of this afternoon just being absolutely amazed uh by this technology uh playing around with Sea Dance 2.0. It is just mindblowing. I

Dance 2.0. It is just mindblowing. I

mean, I think people who who live in Silicon Valley and Hollywood and uh Los Angeles, San Francisco, all of those places, they they know about this already, but I think a lot of the world

uh has not yet really cottoned on to how good uh this technology has become and you know, Seance 2.0 is one of the

leaders. Um but there are others as

leaders. Um but there are others as well. Google Deep Mind has got an app

well. Google Deep Mind has got an app that's equally impressive, I would say.

Hey, I was playing around with that, too. Basically, Seance 2.0 can generate

too. Basically, Seance 2.0 can generate cinema quality video complete with sound effects and dialogue, and it can do so

just after you give it a few written prompts. So, you would tell it, you

prompts. So, you would tell it, you know, I want uh a video of, in the example you gave, Brad Pitt fighting Tom Cruz. I want it to look realistic. I

Cruz. I want it to look realistic. I

want it to look a little bit like X film or Y film that you remember or hazily remember and then it does it for you. Um

I was also watching um videos of waves crashing onto a little boy on a pier. I

can't remember what film that reminds me of, but I'm pretty sure that's another echo from a famous film. And again, it was incredibly lifelike. It seems to me,

Alice, we're living in a world now where these binary questions are coming thick and fast. You know, like you said in

and fast. You know, like you said in your intro, Hollywood is in a panic about this. Could this upend Hollywood?

about this. Could this upend Hollywood?

That seems to be an incredible question to be asking, but it has to be a justified question given the speed of the development of uh Seance 2.0 and the

other American alternatives. Of course,

the Chinese AI app costs much less than the US AI app. We're seeing this across the board when we compare Chinese AI

with US AI. Just to give you the numbers here, seed dance 2.0 costs roughly 60 US cents for a 10se second uh generation of

your kind of standard video format. and

Google VO3.1 costs roughly $2.52.5 US for the same 10 seconds. The Chinese

uh app is cheaper, but I don't know whether that's going to be a big differentiator. One of the things that

differentiator. One of the things that fascinates me is what about the legal situation here? Is there going to be a

situation here? Is there going to be a big backlash from Hollywood? I can't

imagine that this enormous American film industry is just going to roll over and let this happen. What do you think, Alice?

>> 100% agree. I think that it's deeply concerning for these traditional content creators, the cinema studios, uh the streaming platforms because their

copyright and IP are being violated illegally. Uh now whether or not they

illegally. Uh now whether or not they can crack down is something that I'm not so sure of that I think that you would really need the pressure of the US government to weigh in on this debate. I

don't think that Trump is incentivized anytime soon to do this. He probably

hates most of Hollywood. Zooming out a little bit, what I think is interesting is that the Chinese government clearly has an initiative. A couple years ago, they started doing AI regulations really

at the forefront and inspired in part by GDPR from Europe to go after deep fake uh AI technologies. like they actually saw that this was coming down the pipeline and that they needed to

actually put in these guard rails. So

the cyerspace administration of China, which is basically the large cyber security authority, has penalized more than 13,000 accounts and removed hundreds of thousands of posts that were

propagating this kind of AI generated content illegally and and an unlabeled fashion. I don't see America doing this.

fashion. I don't see America doing this.

Maybe the Europeans will pretty soon.

Europe Europe seems to be pretty good at regulating or at least setting up guardrails for for technologies. Uh

America I'm less certain of. So my

concern is that we are giving China full reign in creating the wild west of this unregulated AI content outside of China

uh that infringes upon other traditional companies and media platforms IP. as I

look to I don't know what you watch nowadays James but there's so much computerenerated uh content and AI slop even in films nowadays and let alone TV shows so now I

really feel like the difference between a seance 2.0 generated video and what I see on the screen is getting uh far smaller as as time goes by.

>> Yeah. I mean, I've just been having a look down a list of some of the actions that uh some of the big US companies are taking. So, Disney, Paramount, Warner

taking. So, Disney, Paramount, Warner Brothers, and Netflix have all sent individual cease and desist letters to Bite Dance. That's that doesn't seem

Bite Dance. That's that doesn't seem like a legal sanction, but it sort of implies that if they don't cease and desist, then there might be some kind of

action that that is taken by those big American companies. And in those

American companies. And in those letters, those big American companies are accusing Bite Dance of quote systemic infringement and treating their

intellectual property as a quote free public domain clip art. Uh so you know you can see that the big names of

Hollywood are really limbering up here.

There's been several other actions taken as as well but I think we're at the early stage of this. It seems to me that this is going to be a big bust up in the courts.

>> Yeah. They just don't have any leverage on China do they James? I mean China has as of really 2016 onwards really pushed out Hollywood. Um most apart from

out Hollywood. Um most apart from Zootopia more recently most of the highest grossing films in China are Chinese. They're not coming out of

Chinese. They're not coming out of Hollywood. Uh and more than that uh they

Hollywood. Uh and more than that uh they don't really have legal authority to get Bite Dance to step down. The only real pressure they can do is to pressure uh

some of the shareholders uh and to lobby Congress and the Senate to pass some kind of a bill. But that would require a more thoughtful debate about deep fake technologies. I'm worried about this

technologies. I'm worried about this Pandora's box that uh Cadance 2.0 and VO and Sora coming out of OpenAI and Google are creating because

I don't think we're far off from a place in which people could be using our content online and creating fake videos and if we don't do a regulation of this,

it's really very much the wild west and that keeps me up at night sometimes. I

don't know. What do you feel, James?

>> Yeah, I I mean I feel the same. I hadn't

actually thought about myself in this regard but I mean uh this basically does the work of all creators everywhere and

you know so um it it it is a big concern and I think what we've got here is a situation in which the technology is advancing quicker than potential legal

sanction against it and when you add into that the complexity of different geographies such as you've just mentioned you know China has different rules from the US. Uh it doesn't

necessarily abide by what a court may find in Los Angeles or San Francisco or New York or wherever. And so if you want to use legal sanction against Chinese

companies, you're facing a very different process from what you would be used to in the US. Meanwhile, the

technology is charging ahead and you know all kinds of intellectual property is being used to create these videos.

The videos themselves are amazing. They

look incredible to the consumer. And do

consumers really care about the providence of the videos that they're watching? And what about all of the

watching? And what about all of the global platforms that these videos appear on? Who controls them? What about

appear on? Who controls them? What about

the jurisdiction for all of those guys?

Um, so we're facing an incredibly complex world bolted to a technology developing at warp speed.

>> Yeah. I don't know if you've seen this, James. I highly recommend it. One in

James. I highly recommend it. One in

particular that strikes me as very Chinese that has been somewhat viral.

There's a video of Kanye West in Imperial Chinese attire doing a very traditional Chinese music video. For

people who watch a lot of imperial Chinese dramas, they'll appreciate this, the tropes in it. Uh, and his wives, including Kim Kardashian, are in it.

It's crazy the amount of uh content that I'm seeing on Chinese social media uh and and doing which is China's Tik Tok and Instagram of stuff that is coming

out of Cance 2.0 or just you know AI generated content. It's it's really

generated content. It's it's really really you know dazzling to see but also deeply worrying. And I think that I hope

deeply worrying. And I think that I hope at least that there will be more pressure uh put on governments around the world to get their act together because the technology is already here.

The barbarians at the gates.

>> Very much agree.

>> James, here is our favorite uh part of every episode. Prediction time. What is

every episode. Prediction time. What is

your prediction for uh the coming weeks?

>> Well, uh given that we don't script these conversations that we have, Alice, I think we kind of touched a little bit on on my prediction earlier. I think

2026 will be the year of litigation by Hollywood towards Chinese AI video apps.

Um, and I think these actions will fall behind the technological advance of the Chinese AI video apps. That means the

lawsuits will pile up while the apps march ahead and the film industry will be thoroughly disrupted in its wake. It

kind of reminds me of remember back in the day you had those Chinese piracy DVDs. I remember as a kid in the 2000s

DVDs. I remember as a kid in the 2000s every time I went to China I would just pick up I probably shouldn't admit this but they were just selling this on the street for uh one

these pirated >> DVDs of people that literally just gone into the cinema and just videoed it and so and and really Hollywood couldn't do much about it until really China cleaned

up its act. The government started cracking down on piracy if you recall.

So like when I think about the future pathway, I mean I agree with you James.

I think the only way out of this is if there's a government um related set of regulations to really clamp down.

>> I agree. Maybe Trump and Cinping will talk about this uh or maybe their officials will talk about this when they meet at the end of this month and in April. Um you know it really is a big

April. Um you know it really is a big topic. I mean we're talking about the

topic. I mean we're talking about the future of Hollywood. I mean there is no more iconic word probably in the world than Hollywood. And now we're fa we're

than Hollywood. And now we're fa we're talking about its potential extinction.

I mean it's just extraordinary.

>> I could foresee some kind of statement about AI corporation even though nothing comes out of it substantively between Trumpy and China in April. So my

prediction is more markets related. Uh

you know by the time we air this uh the mainland stock exchanges will have opened. I think we're probably going to

opened. I think we're probably going to see uh pretty good um performance in Chinese mainland stocks in advance of the NPC meeting on March 4. And that's

primarily because in the leadup historically in the leadup to the NPC meetings, we've seen stock markets uh actually uh rise. And so I think that we'll see a similar momentum happening

in advance of that NBC meeting with a lot of market anticipation about uh some of the announcements related to hardware especially semiconductors some of the upstream and downstream providers to the

semiconductor industry as well as AI.

All right, that's all for this episode.

Thank you for listening to China decode.

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