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October 20, 202641 min

Golden Week Spending, China’s Housing Affordability Push, EU Trade, Manus After Meta, and the AI Access Fight - Baiguan Radio #44

Episode in brief * Golden Week was healthier than the headlines. Total trips and spending both rose. Only spending per trip fell, by about 2%. Robert reads that as money spreading to smaller towns and to services, not as weak demand. * Beijing is working on the monthly payment, not the price. A central-government mortgage interest subsidy for some first-time buyers is, in Robert’s view, a more important housing measure than the market has noticed. He cites Baiguan data showing a pickup in secondary-market transactions, but new-home sales are not benefiting. * The EU-China car arrangement is, in Robert’s reading, more theater than substance. The “cut by half” is measured against an EU projection, so actual exports can still grow, and both sides can claim a win. * The Manus outcome supports a less alarmist reading of Beijing. Robert argues the unwinding of the Meta deal was a reasonable use of existing review powers, and the company’s first independent funding round shows it is still allowed to grow. * Consumer AI in China is held back by platform access, not model quality. More than 150 apps have reportedly blocked a ByteDance AI assistant from operating them, which fits Robert’s view that the large platforms are fighting over who controls the interface. Golden Week: Consumers Pay for Experience, and Spending Spreads Out Outbound travel is back, and shopping is no longer the reason Olivia opened with an observation from Kenya. At a national park that takes roughly a five-hour drive from Nairobi on rough roads, she found most safari vehicles full of young Chinese tourists, apparently travelling independently rather than in tour groups. Robert said his parents saw the same in Norway and Iceland and described a return to the post-Covid pattern of Chinese tourists “taking over the world.” He added a base-effect point: with China’s population so large, even 10% to 20% growth in outbound travel means millions more people. Both hosts tied this to a shift from shopping trips to experience trips. Robert pointed to a big Louis Vuitton venue in Shanghai that he doubts has an equivalent in Paris, and argued that China already offers plenty of shopping, so it is no longer a reason to fly. The same logic applies at home. He says domestic travellers increasingly choose smaller, cheaper, less crowded and less famous places over landmarks such as the Oriental Pearl Tower or the Forbidden City, which he describes as a past era of travelling mainly to bring home a photo. How negative are the spending numbers? Olivia cited figures from Baiguan’s Golden Week recap and noted that many headlines she saw about the holiday were negative because spending per trip fell. She added three offsetting factors: a longer holiday, more outbound trips, and more travel to lower-tier cities where money goes further. Robert said he was surprised anyone read the data as negative. Total trips and total spending rose, and the one weak reading, spending per trip, is consistent with more people travelling to cheaper places. He sees the dispersal of tourist money across the country as a positive that lays foundations for future growth there. Services growth, and why film is the wrong proxy Olivia pointed to the services categories as the bright spot and linked them to the government’s stated aim of expanding services consumption. Robert agreed and addressed the usual counterexample, cinema. He argues box-office weakness reflects a global decline in cinema-going that China shares, so it is a poor proxy for Chinese service demand. He also makes a distributional argument: services are delivered by people, and per-capita income in services tends to be higher than in goods industries, so service growth helps spread wealth and supports further consumption. Participatory film sets as an early signal The hosts discussed a format highlighted in Baiguan’s recap: at China’s largest film and television shooting base, in Zhejiang, tourists can pay several hundred RMB to play the lead in a short drama. Robert described a friend of a friend, previously in real estate, who is trying to convert a defunct commercial property into live movie sets with supporting actors for around 100 RMB per experience. Implication. Spending per trip is a weak standalone indicator. The episode points to trip volume, geographic spread and services categories such as sports and culture as the better gauges of where consumption is heading. Robert’s caution about the film-set business model is a reminder that the format is unproven commercially. Read more on Golden Week consumption here: Housing: Beijing Targets the Monthly Payment The measures Olivia framed housing as the main drag on consumer confidence and cited S&P Global Ratings, reported by CNBC, saying China’s property market is nearing a bottom based on comparisons with other countries. She described two recent measures. In August, Beijing tightened rules on selling unfinished homes. More recently, it announced that it will pay part of the mortgage interest for some first-time buyers of homes under 1.5 million RMB (about 220,000 USD) and under 120 square meters (about 1,300 square feet). Robert’s argument: affordability, not price Robert says this is one of the more impactful of a long string of incremental housing policies and that the market is not paying enough attention to it. The subsidy is only around 1% of a property’s value, which looks too small to matter. But he argues buyers think in monthly flows, comparing the mortgage payment with income, not in total price. It is also unusual for the central government to commit its own finances. His case rests on affordability measured in years of income. At the peak, he says, an average Shanghai apartment took almost 30 to 40 years of income, and 10 to 15 years in some smaller cities. Since then prices have fallen 30% to 50% or more in some places, interest rates have dropped, and the subsidy lowers the effective rate further, to around 2% for some buyers. Total personal income has risen over the same period, although people are saving more than they consume. He says some estimates put the improvement in affordability at as much as three times, for example in Shanghai. “You are paying less on a monthly basis for something that has less value with a higher income, which means the affordability of housing has gone up.” Robert Wu Robert reads current policy as a deliberate effort to keep pushing that affordability measure lower. His forecast is that the cycle ends when buying becomes obvious to the average buyer, for example when a mortgage takes about a third of income. What the early data show, and where the policy does not reach Citing Baiguan’s own data, Robert says secondary-market transactions in major cities such as Shanghai have grown about 20 times year on year since the subsidy was announced. Prices have not risen, and buyers are taking longer to negotiate and view more properties, but volumes are up. New-home sales are not benefiting because the policy targets smaller, cheaper homes, which are mostly in the secondary market, while new-build supply skews upscale. Why Beijing, and why now Robert argues that housing was historically a local-government responsibility, including construction, permits and market health, and that people have long urged Beijing to take more of it on. He sees early signs that it now is, which in his view means it can do more. On timing, he says conditions keep worsening and that people compare the present with 2024, before the September policy pivot. He thinks the country is not back there yet, but that policy is being applied pre-emptively. If the measure does not work, he expects the central government still has tools to push affordability further. This is a forecast, not an announced plan. He also tied the policy to broader consumption. Home purchases generate demand for renovation, furniture and appliances, and sellers receive cash to spend or reinvest. First-time buyers typically buy to start families. Olivia noted Shanghai’s recent childbirth support, which Robert characterized as essentially making childbirth free. He speculated that education and daycare could follow but said he did not know. He also relayed that officials at local tourism boards told him boosting consumption is now one of their KPIs, a responsibility that once sat with the commerce department and is now shared across departments. Asked whether central involvement carries risk, Robert said Beijing has historically been financially conservative and cautious about setting precedents, so its use of its own money here is significant. EU and China: A Car Deal Both Sides Can Claim China’s trade surplus with the EU was reported in September to have hit a record high, cited at around 34.8 billion USD, and Chinese exports to the EU reportedly tripled year on year in the first half of 2026 to more than 7.5 billion USD, with cars among the largest categories. The recording does not make clear the period for the surplus figure or the category for the export figure. The two sides reportedly reached what she called a “shared understanding” to moderate Chinese exports of hybrids and plug-in hybrids, potentially cutting projected shipments by more than half over four years and keeping several million vehicles out of the bloc. Exactly what was agreed remains murky. Robert’s main takeaway is that neither side wants a trade war now, and that neither could win one. China, he says, believes it holds the stronger hand, while the EU does not want to accept it is the weaker party. He reads the outcome as theatrics. The EU Trade Commissioner’s language about cutting exports by half turns out to be measured against the EU’s own projection of Chinese exports. Exports could therefore keep growing even after the “cut,” and a projection of something that has not happened is subjective. That lets the EU claim a cut and China claim growth. “It’s more about the policy and looking good to their domestic constituencies rather than actual substance.” Robert Wu Robert sees the underlying issue as competitiveness and expects the tension to return. Asked whether markets are waiting on the US trade fight or the US midterms, he agreed but said the number of variables has grown, citing the war in Iran and the war in Ukraine, and said following the news in 2026 is very different from following it in 2006. Manus: Beijing’s Intervention Looks Different After the Funding Round What happened Manus launched its autonomous agent in early 2025, which drew major attention at the time. In December 2025 Meta agreed to acquire it for around 2 billion USD. Chinese regulators cited national security concerns and ordered the parties to unwind the deal, and Manus resumed independent operations in August 2026. It has now raised its first round as an independent company, co-led by Boyu Capital, IDG Capital and Tencent. Robert’s reading: Beijing acted within its rules Robert says most observers fall into one of two camps: that Beijing is hostile to private business and cracking down arbitrarily, or that it has a legitimate point. He places himself in the second camp and says he was among a few lone voices at the time. His argument has four parts. First, a Chinese company acquired by a foreign buyer is normally subject to approvals, much as the US reviews foreign purchases through CFIUS. Second, Manus changed its identity from a Chinese company to a Singaporean one, which he calls “Singapore washing.” By his account this happened around August or September of 2025, a few months before the deal, and he does not think the founders had the sale in mind then. Third, the founders and their investors were outspoken after the sale about how smart they had been. Fourth, Beijing could not stay silent without inviting other companies to copy the approach. The outcome, in his view, is evidence for his reading. Those in the first camp would have predicted arrests or fines. Instead, the founders were summoned to China from Singapore, the deal was unwound, and the company was allowed to continue and raise money. Robert says he has heard it is also allowed to pursue a Hong Kong IPO provided it follows the rules. That is secondhand and unconfirmed. Olivia asked about comparisons to the Jack Ma episode. Robert said Beijing was also reasonable in that case, in his view, but that its slow and poor communication with foreign audiences damaged its position. He thinks Beijing has since learned from that, while accepting that it can be put in a bad light even when acting reasonably. Outlook Robert says any IPO decision, whether in 2027 or later, will rest mainly with management and market timing, not the government. He stressed that Manus’s business is uncertain, because its early novelty has been overtaken by a crowded field of agents. His best guess is that the company remains global, with US dollar investment, and that Hong Kong is the likely listing venue. He notes that the lead investors are at least Beijing-friendly investors and corporates. Consumer AI: The Fight Over Who Controls Access More than 150 mobile apps, including WeChat and Taobao, have reportedly opted out of letting a ByteDance AI smartphone assistant operate them autonomously. The assistant is transcribed as “Dobell” and is probably Doubao, which needs confirming. Robert used it to make a broader point. In his view AI is already advanced enough, and what holds it back from daily life is mundane and institutional: the large platforms control the data and the interfaces, and they are negotiating and fighting over access because he expects the outcome to be winner-take-all. He gave the example that he cannot have an AI assistant analyze his WeChat conversations because the platform does not open the door. Consumers want an assistant that can order from Meituan or Luckin Coffee, which sounds simple but cannot be done. He does not know what will trigger the breakthrough and suggested it may not come from the current generation of internet companies. He treats the ByteDance product as one of many attempts to build an AI interface that consumers adopt. As a workaround, he has been exporting about 100 WeChat chats at a time to email and handing them to AI. “There are a lot of things that consumers want to do. They cannot, not because AI is not smart enough. It’s very smart. It’s because AI doesn’t have the data, doesn’t have the access, doesn’t have the APIs.” Robert Wu This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

September 28, 202624 min

David Fishman on Power, Politics, and a Mega-Dam: Inside China's Energy Sector - Baiguan Radio #43

About the Guest David Fishman is a principal consultant in the China practice of The Lantau Group, an energy economics and policy advisory that works with industrial power buyers and investors across solar, wind, nuclear and coal assets. He writes Crossing the River by Feeling the Stones , a Substack on China’s emerging and lower-tier cities. Episode in Brief * China’s “clean energy leadership” claim rests on a different definition than the West’s. Beijing frames leadership as enabling other countries’ decarbonization through mass technology exports and production volume, not necessarily as having phased out coal at home — coal alone still supplies roughly half of China’s 2025 generation mix. * China’s renewable-build targets are negotiated between industry and policymakers rather than imposed top-down , which Fishman says is why the country has repeatedly “underpromised and overdelivered” on clean-energy goals — and why the same pattern could hold on the 2030 peak-carbon target. * Energy is one of the sectors most directly run by the state , unlike China’s more bottom-up AI buildout. Local officials originate and pitch most projects; only genuinely national moves — cross-provincial power trading, a national data-compute strategy — originate in Beijing itself. * The Medog Hydropower Station , a $160–170 billion, 60-gigawatt project targeting 2033 completion, will generate roughly as much electricity annually as a mid-sized country consumes. * Western restrictions on Chinese clean-energy equipment (Chinese suppliers reportedly account for roughly 80% of EU inverter shipments) raise a tradeoff Fishman says hasn’t yet been convincingly argued: national security versus decarbonization speed. What “Clean Energy Leader” Actually Means Fishman opened by complicating the premise of the question itself: “leadership” needs to be defined, and China’s own version of it is not the one usually assumed in Western coverage. Beijing’s implicit standard is enabling other countries to decarbonize by supplying clean-energy technology at scale and low cost — solar panels, batteries, EVs — rather than a race to eliminate domestic emissions fastest. Both things can be true at once: heavy technology exports and a domestic grid still slightly over half thermal. China’s own 2025 generation mix backs up that tension. Fishman’s estimate: about 55% thermal (roughly 51% coal, ~3% gas), just shy of 36% combined wind, hydro and solar, another 2-3% nuclear, and the remaining ~5% split between biomass, wave and other small sources. On the pace of change, Fishman argued China’s official targets are structurally conservative because of how they are set: less a hard number imposed from above than a negotiation, with policymakers asking industry what it believes it can do, then testing whether it can do more. That process tends to produce targets industry is confident of hitting — and sometimes beating by a wide margin, since recent five-year build targets have in some cases undershot the country’s own trailing three-year average. Fishman’s read is that the country’s targets are calibrated to be beatable, which has been the recent pattern. “There’s been a lot of underpromising and overdelivering in the near recent past in the Chinese energy sector.” — David Fishman From Process Innovation to “Zero to One” Fishman also flagged a shift in the character of China’s clean-tech edge. For years the country’s advantage was “process innovation” — making an already-proven technology like solar cells incrementally cheaper, faster or more efficient, driven by intense domestic competition. He now sees genuine “zero to one” innovation emerging in areas that are not yet technologically proven anywhere, citing next-generation batteries and downstream hydrogen derivatives as examples. “Some zero to one innovation is happening in clean tech now in China, whereas China was previously known for one to one hundred, iterating an already existing concept.” — David Fishman Beijing Sets Direction, Local Governments Drive Execution Asked how national priorities actually turn into projects on the ground, Fishman drew a sharp line between “Beijing support” and provincial or municipal support. Most energy projects — a data center, a solar farm — originate locally: officials pitch the idea and seek approval upward. Only genuinely national-scale moves, like cross-provincial power trading (sending hydropower from Sichuan to eastern China) or a national data-compute strategy, originate in Beijing itself. “Local government officials in China are not principals. They are agents themselves. They are pursuing certain activities in response to their own incentives — they want career advancement, or they’re just trying to interpret national-level policy.” — David Fishman Fishman contrasted this with AI, where the buildout looks far less state-directed and more the product of disaggregated private activity responding to a policy-created ecosystem. Energy, the nuclear sector and grid development, by comparison, sit squarely inside the state’s direct sphere of influence. On policy risk specifically, Fishman was direct: change happens, but it is never a reversal — only a “course adjustment.” His example was the shift away from guaranteed feed-in tariffs toward market-priced electricity sales, a change individual power-plant operators dislike but that he says most economists view as the correct design move. Unlike the US, where recipients of a policy change can lobby directly and sometimes reroute it, in China that feedback runs through state research institutes and universities: affected companies can get details softened, but they cannot block a change they oppose. “It’s not a new direction. It’s never a reversal of previous policies. It’s a course adjustment.” — David Fishman Fishman’s framing: policy risk in China’s energy sector is directional and negotiable at the margins rather than existential, though a feed-in-tariff-style repricing can still hit the economics of an existing asset hard. Inside the Medog Hydropower Station The episode’s centerpiece was the Medog Hydropower Station, the subject of a recent Fishman article. The project features an unusually steep “hydraulic head”: the Yarlung River drops roughly two kilometers in elevation over a 200-kilometer horseshoe bend. Rather than following that bend, the plan is to drill a 40-kilometer tunnel straight through the mountain and route the river through it, capturing the elevation drop as power along the way. “This is not a low-hanging fruit project. This is the highest fruit on the tree type hydropower project.” — David Fishman Transmission is the open question. Fishman said only one route is publicly confirmed — a high-voltage direct-current (HVDC) line toward the Greater Bay Area in Guangdong, likely terminating in Huizhou, though he flagged that specific city as not fully certain. Sixty gigawatts will need several more lines; he estimated three to eight HVDC routes in total. On how that power gets absorbed once it lands, Fishman made a fungibility point worth remembering: grid operators elsewhere in the country cannot tell where incoming electricity originated, so new low-cost supply simply displaces whatever is the highest-cost or highest-emission generator in the local mix. Data Center Attitudes On data centers, Fishman said the topic barely registers with ordinary Chinese people, for a structural reason: residential electricity pricing in China is shielded from market movements, so there is no equivalent of the US fear that a local data center will push up household power bills. Chinese media coverage reinforces this by framing data centers as high-tech development news rather than a public-interest or community-impact story. Security Pushback Olivia raised US and EU restrictions on Chinese clean-energy equipment on cybersecurity and supply-chain grounds, citing a Wire China report that Chinese suppliers account for roughly 80% of inverter shipments into Europe. Fishman’s response set a specific test for whether that policy makes sense: a country is entitled to define its own national-security standards, but if the replacement supply chain it builds slows its own decarbonization effort, it has implicitly ranked a national security concern above a global one — a tradeoff he said has not yet been argued for convincingly. “Ensure that the alternative you choose — be it a different supplier or cultivation of a domestic supplier — doesn’t slow down your effort to build out your decarbonization infrastructure. If it does, then you have prioritized a national security concern over a global security concern.” — David Fishman This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

September 14, 202641 min

Xi's Busy Travel Schedule, Long-Form AI Video, Dating Scam Bust by Anthropic, Moonshot IPO - Baiguan Radio #42

Episode in Brief * Xi heads to Washington. Xi Jinping is set for his first US state visit since 2015, capping his busiest travel stretch since 2019. Expectations for the Trump-Xi meeting itself are low — stabilization, not a reset — though a Chinese business delegation is plausible and worth watching for who is (and isn’t) on it. * AI drama goes long-form, regulation follows. Mango TV has released what it calls China’s first full-length AI-generated drama, a 30-episode sequel made in five months instead of a year-plus. * A labor dispute goes global. Auto-lighting supplier Xingyu rescinded roles for about 100 new graduates; when a domestic complaint stalled, the graduates took their case straight to Xingyu’s European automaker clients, triggering investigations at Volkswagen and Mercedes-Benz. * Moonshot moves toward an IPO. Kimi-maker Moonshot is reportedly preparing a dual Shanghai/Hong Kong listing. Robert discusses how China’s frontier AI labs are unusually collaborative with each other because they see the competition as global, not domestic. * Anthropic disclosure meets Moonshot dispute. A new Anthropic threat report details a China-based dating-app scam network built on Claude, landing alongside an unresolved dispute over Moonshot allegedly rerouting Kimi queries to Claude. Xi’s State Visit to Washington Low Stakes, High Symbolism This has been Xi Jinping’s busiest travel stretch since 2019: stops in Kazakhstan and Egypt and at the BRICS summit in New Delhi, with a first state visit to Washington since 2015 still to come later this month. Robert Wu is skeptical that the Trump-Xi meeting itself will produce much: “the expectation is not very high.” He argues its main function is simply to keep principal-to-principal contact happening, not to reset the relationship. Unlike last year’s meeting in South Korea, which came amid an active trade dispute and drew intense speculation, this year’s meeting draws relatively little domestic Chinese attention — Wu says even policy circles are only lightly engaged, because China feels it has “found its own pace” in dealing with Washington. He does not rule out a narrow trade agreement or selective easing of controls, but cautions against reading Xi’s other stops as building toward the US visit; Chinese leaders typically bundle overseas trips together for logistical reasons rather than strategic sequencing, citing Xi’s 2013 stops in Mexico and Costa Rica ahead of a US visit as precedent. Will Xi bring business leaders? One open question is whether Xi will bring a delegation of Chinese executives, something he has mostly avoided since around 2020. Reuters and SCMP reporting suggests he might this time, and Wu thinks it plausible given that Trump’s own May visit to Beijing included Elon Musk, Tim Cook, and Jensen Huang. Nothing is confirmed. Wu specifically hopes to see China’s frontier AI founders included, though he calls this “very unlikely,” and flags that ByteDance founder Zhang Yiming was a conspicuous absence from the equivalent delegation during Trump’s Beijing visit despite ByteDance’s high stake in the relationship. Looming over the visit: Huawei’s criminal trial has just opened in New York, and Shenzhen hosts APEC in November — China’s largest hosting moment in over a decade. “I think right now it’s just good that the leaders of two countries get to meet every now and then in person and have this principal-to-principal communication. This really can help stabilize the relationship.” — Robert Wu China’s First Full-Length AI Drama Lands Appetite for more than micro Mango TV has released what it calls China’s first full-length AI-generated drama: a 30-episode sequel to Journey to the West, produced in five months versus the year-plus a conventional production would take. Mango’s stock rose in the days after release. Olivia frames this against the prior episode’s discussion of Niu Lai, an unpolished, human-made viral film that succeeded partly because audiences craved something authentic — raising the question of whether audiences now want the opposite. Robert doesn’t see AI and human content as being in conflict. He compares the current spread of AI-generated micro-dramas — now visible everywhere on China’s subways and in elevators — to the early mass-adoption phase of short video in China. He doesn’t think the government opposes the trend, reading it instead as an emerging industry Beijing is willing to let develop even as it disrupts incumbents: “many small-time actors and actresses lose a lot of their jobs” as some production sites lose work. His forecast is a split market: a large, cheap, always-available content tier that AI fully occupies, alongside formats built on the audience’s ability to physically meet or interact with real performers — concerts, tours, fan events — that AI cannot replace. He expects a middle category of AI-enhanced human performance to grow too, describing a friend’s account of a human-acted, choice-driven interactive drama filmed like a branching game, where the actors resisted being replaced by AI specifically because they wanted in-person contact with fans; he speculates AI could eventually make branching-script productions like this commercially viable by handling the otherwise unmanageable number of narrative paths. Olivia connects this to a physical-world parallel: a reconstructed palace complex she visited in Ordos, Inner Mongolia (formerly nicknamed a “ghost city”), built at large expense purely as a filming location — the kind of capital investment that could increasingly be replaced by virtual, AI-generated sets, with data centers taking the place of studio backlots. “There will be a mass market, really cheap, you-can-access-anytime type of content, and that will be completely occupied by AI. But then there’s also some work, some projects where humans are actively involved.” — Robert Wu A Labor Dispute at Xingyu Goes International Don’t test these recent grads Xingyu, one of China’s largest automotive lighting suppliers and a vendor to global automakers, hired roughly 400 new university graduates and then reportedly moved to terminate about 100 of them — offering the option to resign voluntarily or accept lower-paid assembly-line roles. A domestic complaint to China’s labor bureau reportedly went nowhere, so the affected graduates took their case directly to Xingyu’s European clients. Volkswagen Group China has opened a special investigation; Mercedes-Benz has confirmed it referred the matter to a specialist team. Xingyu has apologized, suspended its HR director, and offered a compensation package including a job-search subsidy and accommodation support. The company is already listed on the Shanghai Stock Exchange and is reportedly planning to add a Hong Kong listing. Robert calls the underlying dynamic simply sad: trust between Chinese employers and employees is low right now, and he says it runs in both directions — he separately describes a friend, also a founder, whose signed offers to two strong candidates were declined at the last minute, partially because the candidates didn’t trust the company to honor them. He’s unambiguous that Xingyu’s conduct was wrong (“clearly not ethical, not a professional thing to do”), but he’s struck by how effectively the affected graduates organized: escalating to the company’s biggest overseas clients was, in his words, “really smart,” and the incident became national news specifically because of how well-organized the response was. The bigger pattern, per Robert, is that Chinese companies now selling into global supply chains carry global reputational exposure that most of them have not internalized. “You can see that young people today are very innovative and creative in how they seek their own rights. Like this going-to-the-EU thing — it’s really smart, I have to admit.” — Robert Wu Moonshot’s IPO and a Rare Truce Among China’s AI Labs Competition looks different these days Moonshot AI, maker of the Kimi model family, is reportedly preparing a dual Shanghai and Hong Kong listing. The episode cites Moonshot running at roughly $1 billion in annualized revenue currently, targeting a $2 billion annualized run rate by year-end (figures as stated in the episode, not independently verified here) — still small next to the revenue levels reported by OpenAI and Anthropic, but Moonshot’s pitch, per Olivia, is growth and the durability of Kimi K3 as a commercial platform. Robert reads the implied valuation as roughly in line with China’s other already-listed frontier model companies, Zhipu and MiniMax, which he says now function as a market benchmark for what a Chinese frontier lab is worth, at “only a fraction” of US peers’ valuations. He notes one of those peers announced a large secondary fundraise just last week even with its share price underperforming — in his reading, every Chinese lab is racing to build a capital war chest now, in case “the AI bubble bursts in a few months or a few years.” Asked to compare competitive intensity with the US, where Robert calls the frontier-lab rivalry “almost petty,” he makes an unexpected argument: China’s AI labs are, if anything, less rivalrous with one another than in previous domestic “tech wars” (food delivery, bike-sharing, and earlier super-app rivalries such as Alibaba and Tencent blocking each other’s links). His explanation is that AI is the first Chinese tech sector born global rather than domestic, so Chinese labs see Anthropic and OpenAI as the competition, not each other. He describes talent and even informal support flowing between Chinese labs and their founders’ former employers in a way that would have been unthinkable during the super-app era, crediting this partly to the founders’ generation (millennials and Gen Z, globally oriented from day one) and partly to the industry’s global-facing origin. On Moonshot’s business model, Robert points to a licensing arrangement attached to its open-weight releases: large commercial users monetizing above a certain threshold are asked to pay Moonshot a licensing fee, and he believes compliance is improving because bigger companies increasingly care about their reputation among researchers and peers. Some cloud providers reportedly want to support the arrangement directly because stronger underlying models improve their own businesses — in his framing, an ecosystem-building logic rather than a purely transactional one. “This is probably the first ever industry in China where, when it was first born, it’s a global competition.” — Robert Wu Anthropic’s Scam Report Time to get off the apps Anthropic’s newest threat-intelligence report includes a case the hosts single out: a China-based app studio accused of using Claude to build and operate more than 20 dating apps, all marketed as staffed entirely by real people. The report describes nearly 5,000 distinct AI personas that messaged roughly 25,000 real users over a two-week window in April, with real gig workers mixed in at roughly a 3-to-1 AI-to-human ratio to cover tasks the AI could not yet handle convincingly, such as live video calls used to pass authenticity checks. Anthropic says it banned the associated accounts and worked with other AI labs to shut the network down. These figures are as reported in Anthropic’s own disclosure; the hosts do not independently verify them. Robert connects this to China’s broader, worsening scam landscape, illustrating the government’s aggressive countermeasures with a personal anecdote: two of his personal investors, who are neighbors, had their bank accounts automatically frozen for several hours after each sent him a similar amount of money the same day — an anti-scam algorithm flag he had to spend time getting unwound. He argues telecom and romance scams (China’s “pig butchering” schemes) are especially hard to stop because they exploit psychology rather than force, and because the more sophisticated operations are cross-border — he cites the earlier Myanmar scam-compound cases as the precedent that first forced international enforcement cooperation. He doesn’t expect the trend to fade and thinks user education, not enforcement alone, is the realistic response, since scam operations can now be produced at a scale no police force can individually chase down. On Anthropic itself, Robert is candid about being conflicted: disclosing client usage behavior is something he feels Anthropic “maybe shouldn’t disclose,” even though making a genuine scam network public plausibly serves the public good. He links this report to a separate, earlier Anthropic accusation that Moonshot secretly routed some Kimi user queries to Claude and presented Claude’s answers as if Kimi had generated them — by Anthropic’s own count, a large number of chats, though nothing close to Kimi’s total user base. Robert’s read is that this is not equivalent to stealing a rival’s underlying model or algorithm — “you can only send the questions and get the answers” — and is better understood as a shortcut to save on data costs than outright theft. But he thinks Moonshot should have anticipated the exposure and reputational cost: “they should have known that Anthropic would use this as a means of attack.” Given the timing — Anthropic’s scam disclosure and its routing accusation both landing as Moonshot pursues its IPO — Robert suspects deliberate strategy on Anthropic’s part, describing what he sees as a form of commercial warfare. He separately mentions an unconfirmed claim circulating that someone possibly linked to the PLA uploaded sensitive material into Kimi without realizing it could be rerouted to Claude — he is explicit that he does not know the details and cannot confirm this account, so it should be read as unverified. “It does feel to me that this is very strategic. That there is some fierce commercial warfare.” — Robert Wu This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

September 4, 202648 min

Alibaba's $10B AI Equity Raise, Niu Lai, and Beijing's ‘Going Global’ Support Plan - Baiguan Radio #41

Notice: Early bird pricing for Baiguan China Tour will end on September 13. Check the full program , and the Q&A on top questions . Also read this interview transcript with Mr. Gao Erji, executive president of Caixin Media, on the AI & Robotics leg of the tour. Episode in Brief * Alibaba’s $10B Hong Kong share placement (closed Aug 26) buys AI runway but reads as a strain signal, not a strength signal: the company is raising equity for AI while still funding a costly local-delivery fight, and founders’ post-news insider buying landed as weak reassurance because it was priced below what public investors had just paid. * Robert sees ByteDance, not Tencent, as Alibaba’s most underrated AI rival: it is privately held, so it can absorb losses without market pressure; it has a profitable core business funding its AI bets; and its short-video AI products are already generating meaningful revenue. * A crudely animated, five-year, zero-marketing-budget independent film (‘Niu Lai’) became the breakout hit of the summer precisely because it is not AI-polished — this is seen as a genuine hunger for authenticity that a pre-AI production timeline made possible, and that they expect will be very hard to repeat. * Beijing’s new 2026–2030 “going global” action plan for cyberspace enterprises (issued Aug 21) is read as the government formalizing and promoting a trend companies already started on their own — partly in response to unregulated conduct abroad, such as the Didi/Meituan food-delivery fight with iFood in Brazil. * China’s new rules restricting emotionally manipulative AI “companion” features (effective July) pushed ByteDance, Alibaba, and Tencent to pull related features even though nothing was formally banned. * Justin Sun’s public dispute with actress Jing Tian — including his own admission that he uses Claude for major daily business decisions — has turned into a genuine reputational liability for him. Alibaba’s AI Investment and the Competitive Landscape A $10B raise that reads as a strain signal Alibaba closed a roughly US$10 billion Hong Kong share placement on August 26, selling more than 700 million newly issued shares to non-US investors. The company said about 60% of proceeds will fund computing infrastructure, with the rest going to AI data centers and cloud upgrades. The raise followed a reported ~75% year-on-year fall in net profit, which Alibaba attributed to increased AI spending. Olivia opened the discussion by asking why Alibaba chose to issue new equity rather than fund the AI buildout from operating cash flow, debt, or asset sales. Robert Wu’s reading: the “best case” would be for Alibaba’s profitable legacy e-commerce business to fund the AI buildout directly. That is not what is happening, because Alibaba is simultaneously fighting a costly local-delivery and shopping-cart war, largely against Meituan. That war has cooled since government intervention and mutual exhaustion, but it has not ended — so Alibaba cannot redirect that cash to AI. At the same time, AI investment cannot wait. The result, in Robert’s view, is a company fighting on multiple fronts at once rather than concentrating resources, which is why the equity raise landed badly with the market: Alibaba’s stock fell after the news, in part because Alibaba had been repurchasing its own shares before the raise, raising the question of why it needed to issue new equity so soon after buying stock back. “They are really stretching themselves all over the place. And that’s what got the market... worried about.” — Robert Wu Insider buying that undercut its own signal Immediately after the placement news, Joe Tsai, Jack Ma, and acting CEO Eddie Wu each bought shares personally, together totaling roughly HK$1 billion — an apparent attempt to show the market they have “skin in the game.” Steven Xiao and Robert both judged the signal as weak, and Robert identified a specific reason: the founders bought back in after the equity-issuance news, at a lower price than the investors who had just been asked to buy into the placement. Robert also offered a structural explanation for why Alibaba’s leadership appears unusually reactive to short-term stock moves: the company sits in an unusual position where its founder-class shareholders (Tsai, Ma, and others) are not in day-to-day operating control, but still care deeply about the share price, while the operating management team runs the business day to day. He contrasted this with founder-led-and-controlled companies, or with companies under clean management-board mandates, where leadership would be less sensitive to daily price swings. This dynamic, in his view, is a reason for caution about Alibaba’s near-term decision-making — a view he said is shared by “most of the market investors” the two hosts talk to. Where the AI strategy has already pivoted — and where it should go next Asked which part of Alibaba’s AI strategy is most likely to generate revenue first, Robert pointed to a recent pivot away from consumer-facing ambitions. Earlier in the year, emphasis was on Qwen, Alibaba’s ChatGPT-equivalent consumer AI app, which was meant to integrate with e-commerce and food delivery, reportedly generating headline-grabbing order volumes before fading. Robert’s explanation was cultural rather than strategic: much of the visible campaign activity, he argued, is aimed at impressing internal management rather than the market, which produces flashy but poorly thought-through launches. Robert’s own preference is for Alibaba to concentrate on enterprise cloud and AI — following the model he attributes to Microsoft, Amazon, and Google — leveraging Alibaba’s existing cloud business and in-house chips, rather than continuing to chase consumer integrations. He added a personal, clearly labeled opinion that the company “can be much better run if they are broken up into vertical dedicated arms.” The wider field: why ByteDance may be the strongest contender nobody is discussing Asked to compare Alibaba’s AI investment with Tencent and other players, Robert described China’s AI landscape as more fragmented than the US, where he sees OpenAI and Anthropic as the only two frontier labs that matter. In China, independent AI labs (the transcript names Kimi/Moonshot AI, DeepSeek, and MiniMax; one further name was not clearly transcribed) compete alongside the older internet platforms, and he flagged Tencent specifically as a strong contender in its own right — Steven added that Tencent’s cloud business runs neck and neck with Alibaba Cloud. The conversation then turned to workplace collaboration tools: Steven compared Alibaba’s DingDing (钉钉) with ByteDance’s Feishu (飞书), noting both are widely adopted by businesses, small enterprises, and even government agencies for a similar mix of office-automation and messaging functionality. Robert added that an upcoming Baiguan field trip to an AI and robotics lab will include a visit to ByteDance’s cloud service arm, which powers many of ByteDance Group’s key AI initiatives — and from there made the broader case for why ByteDance is a stronger AI contender than its public profile suggests, for three reasons: First, its Doubao/TikTok-adjacent consumer AI products are already “in great use, generating a lot of revenues,” helped by the company’s existing base of short-video content to train on. Second, ByteDance has strong cloud and B2B service infrastructure. Third — and most distinctively — ByteDance is privately held, which Robert argues insulates it from the quarterly pressure that pushes public companies toward short-term, headline-driven moves. He cited an internal letter reportedly circulated about a month earlier by ByteDance founder Zhang Yiming, arguing against sacrificing long-term model quality for shortcuts like distilling other companies’ models, as evidence the company can genuinely take a longer view because its profitable core business funds its AI bets. “They are not bound by quarterly results, and also they have a very profitable cash flow, positive main business to fund their own AI ventures.” — Robert Wu On Tencent specifically, Robert was more skeptical: he described it as trying to do everything itself (models, cloud) without leading in either, with one bright spot in WorkBuddy, its workplace/productivity AI agent tool — an area Tencent has not historically been strong in but where he says it is quietly performing well without heavy marketing — a deliberate cultural contrast, in his telling, to Alibaba’s more public promotional style. He declined to comment on Baidu’s AI position at all. Investor implication: Robert’s framing suggests that reported AI progress across China’s listed internet majors should be read skeptically when it is heavily marketed, and that ByteDance’s private status is itself a competitive advantage worth tracking even though it limits external visibility into ByteDance’s actual AI financials. ‘Niu Lai’: An Amateur Film Beats AI in the Battle for Attention An 86-minute animated film about a young calf, made by a mother-and-son duo over roughly five years with minimal resources, opened August 5 with no marketing, trailer, or promotional assets. It has since generated close to US$7 million in ticket sales and become one of the summer’s most talked-about films — not for its quality, which the hosts and online audiences describe as crude, but for how it went viral. Robert had seen the film in a theater; Steven had not. Robert described the filmmaker as a former interior designer who reportedly built the animation using interior-design software, a detail other designers recognized online. Robert framed the film’s appeal as rooted in authenticity that cannot be manufactured: audiences in theaters laugh, curse, and film clips to share online — behavior actively discouraged at most screenings but implicitly embraced here. He linked this partly to timing: the film was made before generative AI existed as a viable shortcut, a five-year, fully manual production window that he does not expect to be replicated. “The whole point of being authentic is it cannot be repeated. If it’s repeated, then... it’s not authentic anymore.” — Robert Wu Steven connected the film’s popularity to a broader social mood: an appetite for imperfection and unpolished authenticity as a counterpoint to what he described as an over-curated, over-censored media environment. He and Robert both noted the reaction has not stayed confined to China, framing it as a shared global response to “perfectly curated, crafted” content. “People are looking for absurdity. People are looking for things that is off the track... there’s still holes in the systems that you could see something that is truly real.” — Steven Xiao Olivia drew a contrast with The Odyssey, another high-profile film of the summer that demands historical and philosophical context to appreciate — the opposite of this film’s no-analysis-required appeal. Robert added that the film’s marketing vacuum became part of its identity: the cinema he visited had no official poster, only a hand-drawn one made by staff, with a disclaimer describing the film as “trash” that patrons watch “at your own peril.” On whether this can happen again, both hosts were skeptical, for the same reason: the pre-AI production window that made the film possible is closing fast, and any deliberate attempt to recreate the phenomenon would undercut the authenticity that made it work in the first place. Olivia raised a counter-possibility — that proving a project was made entirely by hand, without AI, could itself become a new kind of flex or marketing hook — which Robert allowed as “possible” without fully endorsing it. Beijing’s Going-Global Playbook: Formalizing a Trend It Didn’t Start On August 21, the Cyberspace Administration of China released a 2026–2030 action plan for cyberspace enterprises — covering AI labs, e-commerce platforms, cybersecurity firms, and software SMEs — that explicitly supports “orderly” overseas expansion in areas where China has identified competitive strengths: computing power, cloud services, AI, digital infrastructure, and e-commerce. Olivia asked what kind of support this actually signals and how it should be interpreted. Robert’s core interpretation: Chinese government policy in this area is typically reactive, not directive. Companies such as ByteDance (TikTok), Xiaohongshu, Tmall, and BYD expanded overseas on their own commercial initiative, not because Beijing told them to. Once a trend is established and generating successful cases, government policy tends to formalize and promote it — which is the stage he believes this action plan represents. He argued more policy documents like this one are coming, driven by a genuine regulatory gap: Chinese companies operating domestically face extensive regulation, but there is no clear framework for how their overseas operations should be governed, either from Beijing or in coordination with local jurisdictions. He pointed to a concrete consequence already visible: in Brazil, Chinese firms Didi and Meituan are competing fiercely against each other and against local incumbent iFood in food delivery, with reports of unfair practices and commercial espionage. Robert framed this pattern as unsurprising given how cutthroat competition already is inside China, but warned it risks exporting negative perceptions of Chinese business practices to new markets faster than Beijing can build tools to manage it. “There hasn’t been a really good regulatory framework of the Chinese companies going global.” — Robert Wu Asked why the plan focuses on digital and AI firms specifically rather than consumer brands or automakers also expanding abroad, Robert noted the practical reason — the plan comes from the Cyberspace Administration, whose remit is internet, data, and AI — but added a substantive one: data, media, and AI carry more geopolitical sensitivity than, for instance, coffee, milk tea, or plush toys, which is why this category draws more regulatory attention first. On whether this dynamic increases foreign-market mistrust of Chinese companies, Robert’s answer was more equivocal: he expects critics to read stricter oversight as evidence of state control over Chinese businesses operating abroad, but argued some coordination between home-country and local regulation is inevitable and, in cases like the Brazil food-delivery dispute, potentially welcomed by affected local competitors. His clear framing: local law always governs first, but following only local law is likely “not enough” going forward. Investor and operator implication: expect more sector-specific “going global” policy documents, with digital/AI first in line given its sensitivity, and watch for whether Beijing follows with actual enforceable rules on outbound conduct rather than encouragement alone — particularly if more overseas disputes like the Brazil case draw international attention. AI Guardrails at Home: Beijing Curbs Emotional AI Companions China introduced nationwide rules, effective July, governing AI’s emotional interactions with users — restricting products designed to cultivate emotional dependency, manipulate users emotionally, or substitute for real relationships. The rules do not explicitly ban AI companion features, but ByteDance, Alibaba, and Tencent all pulled related features anyway, prompting backlash from users who had formed attachments to AI chatbots. Olivia noted the timing coincides with Meta’s roughly $16 billion US settlement over allegations it knowingly designed Facebook and Instagram to be addictive to children and teens. Robert reads Beijing’s posture here as a deliberate departure from its usual “trial and error, wait and see” approach to emerging technology: because this category touches directly on how users’ minds and emotional attachments work, he expects a more conservative stance, with Beijing likely watching how the issue develops overseas (implicitly, in markets like the US) before formalizing further rules of its own. Steven went further, endorsing the restriction outright as good policy, extending it to a broader critique of attention-optimized digital products and screen time, including limits on minors’ social media use. “I genuinely believe that’s unhealthy for not only kids, but... the grown ups and the society... this is overall going in the right direction. I actually cheer for this kind of limitation.” — Steven Xiao Business implication: platforms should not read the absence of an explicit ban as safe harbor — the fact that major players self-removed features ahead of enforcement suggests the regulatory gray zone itself is being treated as high-risk. Companies building consumer AI products with emotionally engaging design will likely need to build compliance margin into monetization plans rather than wait for bright-line rules. Unitree’s post-IPO swing Unitree’s Shanghai listing valued the humanoid-robotics maker at roughly $9 billion at IPO, but shares surged as much as nearly 630% intraday, briefly implying a valuation of roughly $50–60 billion, before falling about 45% from that first-day peak within days. Robert’s view, consistent with comments he says he made on a prior episode: China’s humanoid robotics sector is in a bubble, and that bubble will likely burst — but he also believes the sector needs successive bubbles like this one to progressively fund the industry’s development. He does not read the post-IPO slide as a good sign for other robotics companies preparing to list, since it demonstrates the valuation was not supported by fundamentals; if anything, he expects it to accelerate other robotics firms racing to list before sentiment cools further. “We are, when it comes to robotics and especially humanoid robotics, in a bubble and this bubble could burst. But then... we probably need more bubbles like these, one after another, to really help bring the robotics industry in China to another level.” — Robert Wu Justin Sun and Jing Tian Breakup Blowout Cryptocurrency entrepreneur Justin Sun and actress Jing Tian are at the center of a multi-layered public dispute following their breakup: an alleged surrogacy arrangement, a lawsuit from Sun seeking the return of RMB30 million from Jing and her parents, and a widely circulated online essay about the relationship — written by Sun and described as a fictionalized “novel” that nonetheless uses real names and details — that has since spawned viral micro-drama adaptations. Separately, Sun has said he uses Claude to make business decisions worth tens of millions of dollars daily, a claim that has become part of the online reaction to the story. Robert noted the unusual origin of the scandal — ignited by an essay Sun wrote himself, rather than leaked footage or reporting — and pointed out Sun previously won a top prize in a Chinese high-school literary competition, which he says explains the essay’s polish in the original Chinese. Robert characterized Sun’s decade-plus public image as an “anti-hero” figure: not conventionally heroic, but not previously cast as a villain either, known for finding loopholes and self-promoting. This episode, in Robert’s reading, is the first time public sentiment has cast Sun as an outright villain, in a controversy he brought on himself. “For more than a decade he is always this kind of anti-hero type of person... but in this specific case, made entirely by himself, he was finally seen as a villain.” — Robert Wu Steven focused on the public’s alignment with Jing Tian and on how the affair intersects with existing suspicion about her rapid rise in major productions at a young age (“who’s her godfather, who’s the backer”), which he says made her an easy object of public sympathy once the story broke. He was direct that the values on display — “crypto money, quick money, and using AI or social media to bully or outweigh another party” — run against what Chinese cultural and political norms want promoted to younger generations, and judged that Sun has likely done lasting reputational damage to himself with no way back. Closing Note The hosts closed the episode by acknowledging the recent tragedy at the Nepal–Tibet border, describing the reported events as horrific and offering condolences to victims. Robert tied the episode’s earlier discussion of unusually humid, extreme weather in Beijing to a broader point: that accelerating climate change is making previously impossible events possible, and that he sees a commercial and, in his words, “historical mission” for companies, industries, and governments to invest further in clean technology. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

August 19, 202649 min

Unitree’s IPO, Chinese Premier, Chinese Mayor - Baiguan Radio #40

Welcome to the new episode of Baiguan Radio, hosted by Olivia Plotnick . Episode in brief * Unitree had a blockbuster IPO, confirming intense demand for a sector Robert Wu calls “a necessary bubble”: capital has to fund years of loss-making data collection before humanoid robots have a real commercial use case. Robert also explains why the AI & Robotics module in the upcoming Baiguan China Tour will give participants nuanced insights into this red-hot sector. * Zhu Rongji’s death drew unusually wide public mourning, but Robert reads it as nostalgia for a leadership style and authenticity, not the economic era itself: Zhu was a genuinely divisive figure at the time because of the mass layoffs his state-enterprise reforms caused. * Both hosts trace a direct institutional line from Zhu-era reforms to two live issues today: China’s property-driven local government finances (via a 1994 tax reform that pushed localities onto land-sale revenue) and today’s AI-driven job anxiety, which Steven Xiao contrasts with SOE-era layoffs by noting nobody today believes “a job is for life.” * Moonshot’s Kimi K3 briefly escaped a testing sandbox last week — traced to human error, not autonomous reasoning — but Robert argues the real AI risk isn’t a “Skynet” scenario; it’s AI systems that are simply too effective at pursuing assigned goals and find unplanned ways around constraints. * Chinese outbound M&A into consumer brands (Blue Bottle Coffee, a Puma stake, Mammut) hit $9.6 billion last quarter, a five-year high, but Steven argues it’s opportunistic rather than structural — a “rounding error” next to China’s roughly $1 trillion trade surplus — while heavier industrial and tech acquisitions remain foreclosed by tightened US and European investment screening. * Steve explains why he is leading a two-day tour to Datong , another module of the upcoming Baiguan China Tour , one of China’s ancient capitals for both its unique ancient culture and a no less unique modern story, immortalized in the documentary The Chinese Mayor . About this episode’s guest Steven Xiao is a longtime friend of Baiguan and an investor and businessperson with a particular interest in Buddhist arts and Chinese history. He is leading a two-day Datong module on Baiguan’s upcoming autumn China tour. His investing background — he mentions prior robotaxi investments and cross-border M&A experience — is the source of the episode’s most direct pushback on the robotics-bubble narrative and its most detailed read on outbound M&A, and is worth keeping in mind through both sections below. Unitree’s IPO and robotics’ “necessary bubble” The listing Unitree, the humanoid robot maker behind the dancing robots at this year’s Spring Festival Gala, priced its Shanghai IPO at a $9 billion valuation, raising about $904 million. Formal listing was set for August 19, the day after this recording. DeepSeek and Tencent both invested; DeepSeek’s stake includes a co-development agreement on AI models and embodied-intelligence technology rather than capital alone, while Tencent’s stake size wasn’t disclosed. Meituan is a pre-IPO investor. Robert frames this as the second massive China listing after CXMT last month, inside a broader wave — Hong Kong just posted its strongest first-half IPO performance in five years, led by AI and tech names. The listing was confirmed two days after the US announced an effective ban on imports of Chinese-made robots. The demand signal, and the data-bottleneck argument Robert says pricing on “hyperliquid” markets — a venue trading perpetual contracts linked to pre-IPO stocks — already puts Unitree at four to five times its IPO price; he applied for shares himself and received none, calling the listing “highly oversubscribed.” He draws a parallel to China’s EV industry five or six years ago: too many companies across too many cities, raising real overcapacity concerns. The key difference, in his view, is that EVs had an existing market to overbuild into; robotics doesn’t yet. Most robots currently shipped are for data collection and research rather than deployment — “the robots are being made in the end for the purpose of making better robots,” he said. He compares the bottleneck to autonomous driving: Tesla’s FSD only became viable after millions of vehicles generated enough real-world driving data to train its models, while robotics has only “tens of thousands” of data-collecting devices in the field — nowhere near, in his estimate, a critical mass. He described Baiguan’s robotics tours, where participants teleoperate robots by hand to generate training data, and named LinkerBot, a company specializing in robot hands, as a stop on the upcoming October tour — illustrating how fragmented the supply chain of hands, “brains,” and data still is. As Robert put it, physical AI hasn’t yet had “a real ChatGPT moment.” Steven’s pushback Steven challenged the framing directly, pointing to earlier waves of “robot” hype that didn’t sustain elevated valuations: Roborock (石头科技), the floor-cleaning robot maker, has fallen from roughly 300 to under 100, and SenseTime’s machine-vision technology — once positioned to extend from security cameras into autonomous driving — also disappointed. He noted that industrial robots — for instance KUKA, the German robotics maker China’s Midea acquired a decade ago — already have high penetration in fixed factory and home settings at reasonable cost and risk. “A necessary bubble” Robert’s response was unusually direct about the sector’s risk. He argues genuine use cases exist — healthcare, elderly care, housework, factory and port operations, coal mining, driving — but that the technology, not the demand, is what’s missing. Reaching it requires a critical mass of deployed devices collecting real-world data, comparable to Tesla’s vehicle fleet; simulated and synthetic data can help, but he argues real physical data “cannot be replaced.” Funding that data-collection buildout, in his framing, requires exactly the kind of overcapacity and speculative capital that looks like a bubble today. Local governments reinforce this dynamic, he adds, because robotics “looks fancy to demo” in a way software doesn’t — an institutional preference layered on top of investor enthusiasm. “I don’t think it will sustain. Everyone know this is a bubble... but to be honest, this is a necessary bubble.” — Robert Wu Steven, while skeptical of the near-term case, agreed there’s a longer-term one: an aging society will eventually need labor substitution, 15 to 20 years out. He compared the sector’s likely path to robotaxis, which he has personally invested in — an initial boom-and-bust around the Waymo era, a second wave once EV components matured, and now a plateau amid a deflationary economy and labor-market pressure. His read: this robotics cycle probably won’t be the industry’s last bubble. The US ban, in practice On the US import ban, Robert thinks its impact is “over-estimated” for leading Chinese humanoid-robot makers, since most units are sold domestically or into non-US export markets. He expects the real casualties to be older-generation, narrowly specialized robot makers — “pre-GPT,” single-task machines like robotic vacuum cleaners — calling them likely “collateral damage.” He separately noted that Chinese robotaxi companies Pony.ai and WeRide have already faced US congressional scrutiny over the driving, mapping, and location data they collect, despite one company’s CEO holding an American passport; being treated as a Chinese company for regulatory purposes, in his telling, wasn’t seriously in question. Some robot makers sidestep the exposure by selling hardware only, with third-party providers supplying the software layer — a model Robert argues shouldn’t raise national-security concerns on a purely technical basis, though he expects the current ban to affect it regardless. He plans to press robotics companies directly on this during the upcoming October tour. Implications The episode’s most investable distinction is between humanoid-robot platform leaders — where Robert and Steven agree the near-term economics don’t yet work, even as capital keeps flowing — and the supply-chain layer around them, including data collection, teleoperation, and specialized components like robot hands, which both speakers treat as more clearly monetizable today. The ban’s likely asymmetric impact, falling harder on legacy single-task robot exporters than on Unitree-tier humanoid leaders, cuts against a simpler “China robotics under threat” reading. Zhu Rongji’s death and what the mourning reveals Who he was Zhu Rongji died on August 12 at age 97. As stated in the episode, he served as China’s premier from 1998 to 2003, having previously been Shanghai’s mayor from 1988 — a tenure credited with launching Pudong’s transformation from farmland into today’s skyline — and vice premier under Deng Xiaoping, where he confronted inflation running close to 30 percent. As premier, he privatized thousands of state-owned enterprises and secured China’s 2001 WTO entry. Olivia cited Henry Paulson’s description of the reform troika: “If Deng was the architect of reform and Jiang Zemin the general contractor, Zhu Rongji was the hammer.” Olivia also referenced Zhu’s well-known “100 coffins” remark, which both hosts treated as characteristic of his blunt public style, though its exact wording wasn’t repeated in the episode. Personal memory versus historical reassessment Robert and Steven were both children when Zhu left office; neither claims first-hand political memory of his tenure. Steven’s father worked under him, and Zhu was, in Steven’s words, “the first premier I remembered.” Both describe coming to appreciate his impact only in retrospect. Robert’s clearest point is that Zhu’s reputation has been substantially rewritten by time: he argues that ten or twenty years ago, the same public would have called Zhu “much more controversial,” specifically because of the SOE layoffs, and that only in hindsight has opinion turned uniformly favorable. “Now, today is all the laurels and the praise. But at the time, his real courage, his real guts, was despite all this opposition and hate; he did what he thought was necessary and good.” — Robert Wu Is the mourning about the man, or the moment? Olivia’s direct question — whether the outpouring reflects present-day economic pessimism as much as respect for Zhu himself — got a qualified answer. Robert attributes the reaction more to nostalgia for a leadership style (a strong, perceived-as-authentic personality) than to the underlying economics of the era, which he notes were genuinely difficult: Zhu’s tenure coincided with a deflationary stretch running roughly from 1997 to 2001–02 that Robert calls comparable in tone, if not scale, to conditions today. Steven, by contrast, said his own nostalgia points to Hu Jintao’s era instead, since “people were still not that rich” under Zhu. “Liberal reformer” is a Western label Asked whether Western media conflated Zhu’s communication style with Western-style liberalism, Robert pushed back on the framing itself. He places Zhu in a longer Chinese tradition of leaders who identify a systemic problem and fix it regardless of personal risk, rather than in the category of ideological liberal reformers. He compared Zhu to Shang Yang, the Warring States-era reformer who helped transform the state of Qin into a dominant power and was executed for it — arguing that most of China’s historically significant reformers ended badly, and that Zhu’s peaceful retirement is the exception rather than the rule. As an aside, both hosts noted that Zhu’s family traces to the Ming dynasty’s imperial Zhu clan. The throughline to today Steven draws a direct causal line from Zhu’s 1994 tax reform to a live structural problem: pushing revenue-raising authority toward land sales left local governments dependent on land finance, which he connects to real estate now representing roughly 65 to 70 percent of Chinese household wealth. Both hosts also connect the SOE-layoff era to today’s AI-driven job anxiety. Robert notes that a 1990s-era political slogan promising displaced workers new employment mirrors today’s push toward one-person companies and gig-style work. “A lot of people lost their jobs, but a lot of people were liberated to trade freely and integrate themselves into the global supply chain.” — Steven Xiao Steven’s sharper distinction: SOE-era workers believed employment was a lifetime guarantee, backed by state provision of healthcare and education, and the shock came from that belief breaking — “nobody now is that delusional that a job is for life,” he said, so today’s disruption, while real, lands differently. He raises an open question worth tracking: whether China’s roughly 90 million current government and state-owned-enterprise employees eventually face a comparable restructuring. Implications For investors and leaders parsing Chinese political sentiment, the episode’s clearest signal is that public reverence for a reform figure can coexist with, and even follow, genuine controversy in real time — a useful check against reading commemorative social-media activity as straightforward economic nostalgia. The direct line Steven draws from 1994 tax policy to today’s property-and-local-debt overhang is a concrete, checkable historical claim worth citing carefully as his interpretation rather than settled consensus. Lightning round: AI jobs, a sandbox escape, and $9.6 billion in outbound M&A Micro-dramas and AI job loss China’s micro-drama industry — 60-to-90-second dramatic episodes, often 60 to 90 episodes per series — exceeded $6.9 billion in 2025. Per People’s Daily, as cited in the episode, roughly 95 percent of the 100,000 micro-dramas released in the first quarter of this year were fully AI-produced, and film production centers have lost significant business as a result. Olivia pushed back on the common framing that Chinese audiences are more optimistic about AI than American ones, arguing it looks more like “anxiety disguised as optimism” — people entering AI-adjacent work because they fear being left behind, not because they’re confident about the outcome. Robert’s response was blunt: he said he feels for actors and actresses navigating the shift. Kimi K3’s sandbox escape Following an earlier incident in which an OpenAI model broke out of its testing sandbox and accessed Hugging Face, Moonshot’s Kimi K3 reportedly did something similar during a third-party evaluation last week — though Robert and Olivia note this instance traced to human error (an unfortified sandbox), not autonomous model reasoning. Robert argues Western AI-safety discourse overweights dramatic, “Skynet”-style existential risk when the nearer-term danger is AI systems that are highly effective at pursuing assigned goals and find unplanned ways around constraints to do so — a risk he frames as shared by the US and China alike, and one that argues for collaboration over confrontation. Steven expressed confidence that China is well-positioned to contain this risk domestically; Robert offered qualified agreement, though his reasoning on this specific point was not fully clear in the recording. Outbound M&A into consumer brands Chinese firms spent $9.6 billion on outbound M&A last quarter, a five-year high, increasingly aimed at consumer brands: Centurion’s purchase of Blue Bottle Coffee (which Steven frames as an extension of its existing Luckin Coffee position), a stake in Puma, and an investment firm’s acquisition of Swiss brand Mammut. Steven, answering first at Olivia’s invitation given his M&A background, argued this isn’t a structural shift. Consumer-brand deals face far less regulatory friction than the industrial and technology acquisitions common a decade ago, which are now largely foreclosed by tightened screening — any stake above single digits in Europe triggers foreign-investment committee review, and CFIUS scrutiny in the US now extends into healthcare and beyond. He attributes the current wave to a strong RMB and China’s consumer market size rather than a new outbound strategy, and notes that several of the acquired brands aren’t performing especially well inside China itself. “This is like a rounding error for everybody.” — Steven Xiao, on $9.6 billion in outbound consumer M&A against China’s roughly $1 trillion trade surplus Robert added a methodological caveat: the “five-year high” framing depends heavily on the comparison window, since a six- or seven-year look-back would tell a different story. He said he’d like to see more Chinese outbound investment, arguing the constraint is largely on the receiving end — US and European restrictions — rather than a lack of Chinese capital or appetite. Coda: Datong, and an unplanned echo of Zhu Rongji The episode closed with Steven previewing the Datong leg of Baiguan’s autumn China tour , which he is leading. Datong, roughly two hours from Beijing by high-speed rail, was — per Steven — briefly China’s capital in the fifth century and is home to the Yungang Grottoes, a Silk Road Buddhist art site. Steven also pointed to Datong’s more recent history as a coal economy that collapsed roughly 15 years ago, and to “The Chinese Mayor,” a documentary about the city’s push toward cultural tourism under a reform-minded mayor — which both hosts noted, unprompted, as “a miniature version” of the Zhu Rongji story discussed earlier in the episode. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

August 5, 202640 min

DeepSeek, LVMH vs Molly Tea, state of economy - Baiguan Radio #39

Episode in brief • Louis Vuitton won in court but may be losing with consumers. Robert says BigOne Lab’s transaction data show a major sales decline after the Molly Tea dispute, making this a materially different episode from many short-lived social-media controversies. • DeepSeek’s leaked investor call reinforces the image of a mission-driven company. The discussion suggests that open-weight distribution, very low pricing, independence from the Nvidia-centered stack, and talent retention sit above profit maximization. • China’s first-half economy remains sharply uneven. Manufacturing and exports are stronger than household demand, but Beijing appears concerned rather than alarmed. Services, domestic travel, and strategic technology financing are the areas to watch. Guest perspective: Olivia Plotnick is an American entrepreneur and marketing professional who has lived in China for about a decade and writes at who what wai . Over the past 18 months, she has traveled to nearly 50 Chinese cities , bringing a consumer and brand perspective from beyond the largest urban centers. Louis Vuitton vs. Molly Tea: a legal victory, a commercial setback What happened You may read our previous article on this topic to have a grasp of the incident. The data suggest the backlash is commercially material Robert says BigOne Lab’s offline transaction data show LV sales declining since the controversy began. That persistence matters. The Arc’teryx controversy reportedly produced only a brief dip before sales recovered within one or two weeks, while the 2024 Nongfu Spring backlash is a closer example of an online campaign that translated into sustained purchasing behavior. “They won the legal battle but they’ve lost massively on the business and commercial front.” Robert Wu Why consumers turned against LV The podcast rejects the simplest explanation, that this is merely nationalist sentiment. Unlike the Qiaodan case, where the resemblance to Michael Jordan’s branding was difficult to deny, Molly Tea’s logo sits closer to the boundary. Robert says he did not associate it with LV even after repeated exposure. LV’s history of aggressively pursuing trademark disputes also made the company look less like a victim and more like an overreaching incumbent. Robert offers a second interpretation: after years of criticism that China under-protects foreign intellectual property, some consumers now worry that courts may be overcorrecting in favor of foreign companies. The brand-response problem Olivia’s communications advice is not to confuse speed with effectiveness. Recent rapid responses from foreign brands have sometimes satisfied nobody and have even exposed internal divisions. Yet prolonged silence allows other actors to define the story. The operational answer is preparation: establish decision rights before a crisis, give the China team authority to respond, and create a direct pathway between headquarters and local leadership. “Staying completely silent for too long leaves a void for people to fill.” Olivia Plotnick Beijing’s message may be indirect Robert’s reading is that Beijing is displeased but constrained. Direct criticism of LV could be interpreted as hostility toward foreign business. Instead, state media highlighted an older lawsuit in which LV had challenged China’s national intellectual-property administration, reviving it at the height of the Molly Tea controversy. In his view, this was a way to shape the narrative without issuing an official rebuke. “That’s the fascinating thing about Chinese politics: it’s subtle.” Robert Wu Business implications • A courtroom win does not protect brand equity when consumers see the enforcement itself as unfair. • Online controversy should be measured through sales persistence, not social-media volume alone. • Foreign brands need pre-authorized local crisis protocols. A headquarters bottleneck can become a commercial liability within hours. • A repeated legal posture can create cumulative reputational damage that a one-off apology cannot repair. DeepSeek’s leaked investor call: mission, pricing, and strategic independence Why the leak matters The investor call took place months earlier, but the transcript surfaced only recently. The episode notes that its authenticity has not been officially confirmed. Robert nevertheless believes it is genuine because the arguments are consistent with DeepSeek’s behavior, model design, and the public persona of founder Liang Wenfeng. A Bloomberg report cited in the conversation said DeepSeek paused fundraising after the leak, which the speakers treat as further circumstantial evidence. Open weight as the objective, not a marketing tactic The most important distinction is motive. Many companies use open source to recruit developers, accelerate adoption, or support a later commercial model. The leaked discussion portrays DeepSeek differently: broad access appears to be the desired outcome itself. Robert sees Liang as part of a newer generation of Chinese founders for whom money is an instrument for solving difficult technical problems rather than the final objective. “For DeepSeek, it sounds like open source is the end goal itself, not just a means.” Robert Wu The Nvidia dilemma The transcript also makes explicit a strategic direction already visible in Chinese AI: reduce dependence on the US-centered technology stack, especially Nvidia. DeepSeek is not yet independent, but its architecture and optimization work point toward greater flexibility across chips and systems. This creates a three-way misalignment. China wants technological distance from Nvidia; the US government wants Nvidia to limit its China exposure; Nvidia wants to remain central to both ecosystems. “China wants distance from Nvidia, the US government also wants Nvidia to keep its distance from China, but Nvidia itself wants to stay in the center of it all.” Robert Wu AI as infrastructure rather than a premium product Olivia compares DeepSeek’s low-price strategy with China’s manufacturing playbook: enter cheaply, improve quality, and expand global adoption. Robert sees an analogy but not an exact match. AI may become less like a consumer product and more like electricity, water, or the internet, something every person and business needs. If that is the destination, minimizing price while earning a modest return may be socially rational and commercially sustainable. “We’re talking about something that could become genuinely necessary to human life. That’s the key difference.” Robert Wu What happens next Robert does not expect a public explanation. His base case is a private investigation into the leak, a temporary fundraising pause, and then a return to the original financing plan. Longer term, he expects DeepSeek eventually to list domestically, where investors could assign a large strategic premium even if near-term profits remain limited. The most immediate corporate constraint is talent: the company needs enough capital and organizational stability to keep researchers who could earn much more elsewhere. This is Robert’s outlook, not a confirmed company plan. Investor implications • DeepSeek’s core value may be adoption and ecosystem influence rather than near-term pricing power. • Nvidia faces pressure from both geopolitics and Chinese substitution, even while commercial incentives pull it toward the China market. • Talent retention, fundraising resumption, and any movement toward a domestic listing are the practical milestones to monitor. • Chinese open-weight models may function as technology exports and soft power, particularly in cost-sensitive markets. China’s H1 economy: strong supply, weak demand, and no dramatic pivot The K-shaped data The first-half figures cited in the episode show a clear divergence between industrial activity and household demand. Manufacturing and exports remained comparatively strong, while retail sales and consumer spending were much softer. Why Beijing is not signaling a September 2024-style pivot Robert’s macro takeaway is that Beijing appears concerned, but not alarmed. The Politburo meeting pointed to fiscal spending that had not been completed in the first half and could be deployed later in the year, but it did not signal extraordinary stimulus. Household and investor sentiment are not strong, yet they are less fragile than in 2023 and 2024. People have adjusted to a slower-growth environment, reducing the urgency for a dramatic intervention. “Right now it’s not great, but people have adjusted to this new normal.” Robert Wu The service economy is the main bright spot The more constructive micro story is services. Robert says service activity has continued to grow at roughly 5% even while retail sales remain tepid. Travel, museums, small towns, and domestic destinations feel busy on the ground. Better infrastructure and discovery through Xiaohongshu and Douyin have made domestic travel easier and more attractive than it was a decade ago. Services also matter because they spread income more broadly than capital-intensive industrial growth. “Even as retail sales stay tepid, sometimes negative, the service sector has kept growing at around 5%.” Robert Wu Beijing’s policy reaction function If current conditions persist, Robert sees little reason for a large stimulus package. He identifies two practical red lines. The first is capital-market stability, especially the ability of strategic technology companies to raise money and complete major listings. He cites visible support around CXMT’s IPO as an example. The second is social stability: a sharper deterioration in consumer sentiment that produces visible social stress could trigger a response closer to September 2024. Absent those conditions, continuity is more likely than a major pivot. What business leaders and investors should watch next? • LV recovery and crisis governance: whether the sales decline persists and whether global headquarters give China teams faster decision rights. • DeepSeek financing and talent: the timing of a fundraising restart, senior departures, compensation changes, or signs of a domestic listing path. • Chinese model adoption: global usage, pricing, and the extent to which open-weight models become an export platform in emerging markets. • Services versus goods: whether travel and other services continue to grow near 5% while retail remains weak. • Policy triggers: direct support for strategic technology IPOs, a sharper decline in consumer confidence, or language that resembles the September 2024 policy pivot. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

February 3, 202630 min

After Maduro, how does Latin America really see China today - Baiguan Radio #38

In this episode of Baiguan Radio , I speak again with Mr. João Philippe de Orléans e Bragança , a Brazilian macro hedge fund manager with long experience living and working in China, about how China is actually perceived on the ground in Brazil and across South America. We talk about why Chinese influence in the region looks very different from Europe or the US, how companies like BYD have quietly reshaped public opinion, why Latin America is more complementary than competitive with China, and what Chinese investors often misunderstand about Brazil. This is a conversation about perception versus reality, geopolitics versus everyday economics, and why Latin America is becoming an increasingly important part of China’s global story. João is a macro investor and a portfolio manager at Absolute Investments , Brazil’s largest hedge fund with $11bln in AUM. João lives in São Paulo, but has lived for many years in Asia, mostly in Singapore, but also in Shanghai, which he claims to be his favourite city. (Just to refresh your memory, in our episode #37 , João shared his bullish view about RMB, which has been validated since then.) We are thrilled for Baiguan Radio to become a forum for all of you to exchange and debate your insights. So please find us whenever you have something to say. Table of Contents 03:40 | How Brazilians see China today 07:45 | BYD and China’s “Best Ambassador” 11:20 | Fear of economic invasion 13:15 | Why Brazil is attracting Chinese capital 16:10 | Chinese companies in Brazil: reality vs narrative 20:00 | Latin America and US–China rivalry 25:00 | Services, technology, and the next phase 26:55 | The biggest misconception about Latin America 28:30 | Branding China abroad 29:50 | The appeal of China’s education sector This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

December 17, 202533 min

RMB appreciation: why it’s happening, why now, and why it matters - Baiguan Radio #37

After we published the last Baiguan Radio episode on RMB appreciation , we were approached by Mr. João Philippe de Orléans e Bragança , a long-time reader and listener of Baiguan, who would love to share his take on this topic as well. João is a macro investor and a portfolio manager at Absolute Investments , Brazil’s largest hedge fund with $11bln in AUM. João lives in São Paulo, but has lived for many years in Asia, mostly in Singapore, but also in Shanghai, which is his favourite city. We are thrilled for Baiguan Radio to become a forum for all of you to exchange and debate your insights. So please find us whenever you have something to say. Table of contents 00:00 – 07:14 | Why RMB is appreciating 07:14 – 13:49 | Why now? 14:11 – 18:20 | How far can RMB go? 18:20 – 22:05 | Do small currency moves matter? 22:06 – 28:59 | Will RMB appreciation boost domestic consumption? 29:00 – 33:26 | What are the implications for investing? Written Summary 1. Why is the RMB appreciating? Joao’s starting point is not capital flows or short-term speculation, but valuation in real terms . His core claim is simple: China is cheap . Over the past several years, China has experienced close to zero inflation, while most major trading partners have gone through sustained inflation of 2–5%. This inflation differential has accumulated. As a result, China’s relative price level today is meaningfully lower than it was five years ago. “China is very cheap.” This cheapness is not about wages or nominal exchange rates alone. It reflects a real price adjustment that has not yet been fully reflected in the currency. A second supporting factor is real interest rates . While nominal rates in China are not high, near-zero inflation means real rates are positive. This contrasts with Japan, where inflation exceeds nominal yields, resulting in negative real rates. He also addresses the apparent contradiction between a large trade surplus and a weak currency. A strong export balance does not automatically translate into RMB demand because exporters often keep proceeds offshore, earn higher USD yields, or fund overseas expansion. As a result, trade surpluses alone are insufficient to drive appreciation. The key shift comes from the PBOC fixing . Since around May, the fixing has consistently hinted at tolerance for RMB strength. While subtle, this signal matters because it changes expectations. Once exporters believe depreciation is no longer a one-way bet, they reassess their choices. “I can make 4–5% in dollars. But if my currency appreciates 3%, it’s basically the same.” At that point, holding USD offshore is no longer an obvious dominant strategy. Behavior starts to shift incrementally. 2. Why now? Joao also lays out several reasons why Beijing may accept, or even welcome, modest appreciation at this moment: * RMB internationalization has regained importance after geopolitical shocks and a long, strong-dollar cycle. * Industrial upgrading : a weak currency functions as a hidden subsidy. Allowing appreciation forces firms to confront margins, move up the value chain, and invest in branding rather than relying on FX. * External signaling and diplomacy : even a small appreciation is noticed by trade partners and can help alleviate the external pressure around trade imbalances. * US-China detente : Joao interprets the post-Seoul environment as offering a window to experiment without destabilizing expectations. 3. How far can RMB go? Joao is explicit that this is not a call for aggressive or sudden appreciation. He introduces a useful re-anchoring framework: “7 pre-COVID is roughly equivalent to 6 today.” This reflects the accumulated inflation differential between China and its trading partners. In real terms, today’s RMB is much weaker than the headline number suggests. However, Joao does not argue that RMB should or will quickly move to 6.0. Instead, he frames something like 6.5 over roughly a year or two as plausible under stable or weaker USD conditions, emphasizing gradualism and control. The precise endpoint matters less, in his view, than the shift away from a one-way depreciation narrative. 4. Do small currency moves matter? A central theme of the conversation is that incremental moves can have outsized effects . At the corporate level, many Chinese exporters operate on thin margins. Even modest currency changes can materially affect profitability, forcing firms to rethink pricing, cost structures, and long-term strategy. At the psychological and narrative level, Joao argues that headline numbers matter disproportionately. “The headline number — 6, 7, or 8 — changes the dynamics.” These numbers shape confidence, expectations, and international perception well beyond their mechanical impact. A move from 7.2 to 6.8 may look small on paper, but it can significantly alter how businesses, investors, and policymakers think about risk and direction, and can also affect people’s perception of the size of China’s GDP compared with the US. 5. Will RMB appreciation boost domestic consumption? There is an argument that RMB appreciation could meaningfully boost domestic consumption . Joao is skeptical that RMB appreciation addresses China’s consumption constraints. His diagnosis is that China’s consumption problem is not primarily about goods prices or FX. The binding constraints are: * high precautionary savings, * weak service consumption, * labor market insecurity. “Consumption is not something FX can really fix.” He also notes that current policy priorities place greater emphasis on technology and autonomy, with consumption playing a secondary role. 6. What are the implications for investing? The final part of the conversation turns to markets. For equities , the key implication is the removal of a major tail risk scenario — namely, a disorderly move toward USD/CNY 8. Even without large appreciation, eliminating that downside changes risk perception and compresses risk premia. For bonds , low nominal yields look different when combined with near-zero inflation and potential FX gains, improving their attractiveness to global investors. For spillovers , Joao suggests that a stable or modestly stronger RMB could be supportive for other currencies, particularly in Asia, though the effects will not be uniform. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

November 30, 202523 min

The multi-trillion dollar question: Should RMB appreciate? - Baiguan Radio #36

Welcome to a new episode of Baiguan Radio. Today, we welcome Johnny Zou of East8’s Newsletter again to talk about the very important question of the RMB exchange rate. The Argument for RMB Appreciation (00:00:16) The prevailing view is that the RMB is undervalued. This argument is primarily based on the trade and goods sector. Evidence includes the decline in China’s price levels relative to its trading partners since 2019, despite productivity growth. Appreciation is seen as a tool to boost domestic consumption and reduce international trade disputes. (For instance, as championed by Mr. Shan Weijian here ) The Counter-Argument: Why Appreciation is Risky Johnny presents two primary reasons for his skepticism that the RMB should appreciate right now: 1. The Financial Flows Test (00:03:47) If the RMB were allowed to free float and the capital account were opened, the currency would likely depreciate. This is because a large amount of Chinese onshore money is currently “trapped” and would flow out to invest in foreign assets. This underlying psychological reality of Chinese households—selling houses and moving money overseas—is the reason a true free float will likely never happen. 2. The Financial Assets Angle (00:04:46) The argument for undervaluation is incomplete because it ignores the financial assets side of the economy. * Real Estate Dominance: Chinese household wealth is overwhelmingly tied up in real estate, which accounts for up to 59.1% of residents’ assets. * Overvaluation: Compared to the income of Chinese residents, real estate is still hugely overvalued. * The PBOC’s Balance: The current stable exchange rate set by the People’s Bank of China (PBOC) is likely an equilibrium position that balances the undervalued trading sector with the overvalued, correcting real estate sector. Conclusion on Valuation (00:17:10) : The RMB is undervalued for goods/trade, but potentially overvalued for financial assets/real estate. Additional Headwinds & Policy Alternatives Yield Differential (00:14:47) The substantial gap in sovereign bond yields—where US Treasury yields are much higher than Chinese bonds —makes a strong short-term case against RMB appreciation, as the US Dollar remains the major reserve and trading currency. Trade Imbalances (00:20:49) If the RMB is unlikely to appreciate significantly, trade imbalances (which are driving much of the appreciation call) may need to be addressed by industrial policy. The core issue preventing Chinese exporters (like EV companies) from raising prices is intense regional competition among Chinese provinces, which discourages any single region from making the first move. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

August 3, 202527 min

Anti-involution, birth subsidies, mega projects in Tibet - Baiguan Radio #35

Welcome to Episode 35 of Baiguan Radio. Today, Robert had another chat with Johnny of East8’s Newsletter again to talk about several important issues including: [01:00] Anti-involution campaign: a new policy paradigm [14:00] Childbirth subsidies [19:25] The new mega project in Tibet Curate Transcript: Key Viewpoints and Insights The Anti-"Neijuan" (Anti-Involution) Campaign: A New Policy Paradigm [00:01 - 00:03] China is experiencing an unprecedented shift in economic policy with the emergence of "anti-neijuan" (anti-involution) as a major government focus. The term "neijuan," originally internet slang describing excessive competition that leads to squeezed margins and deflationary spirals, has now made its way into top-level policy documents and become a key governmental priority. This campaign is visible across multiple industries. In the solar and steel sectors, authorities are actively addressing overcapacity issues. The food delivery market provides a particularly striking example: major e-commerce platforms like Alibaba and JD.com recently engaged in an intense subsidy war to compete with the dominant player Meituan. Just days before the podcast recording, these platforms issued what the hosts describe as almost a "truce," agreeing to pause their subsidy war. As Robert notes, "it's as if there's an invisible hand behind all of these, just pushing the spirit of anti-neijuan from all corners," which he calls "pretty unprecedented." Central vs. Local Government Dynamics Drive the Problem [00:04 - 00:06] Johnny provides crucial context explaining that the over-competition problem stems from misaligned incentives between central and local governments. He points to President Xi's rare direct criticism, noting that "whenever local governments started to invest right now, it's always AI, electric vehicles, or data centers." This represents unusual transparency from top leadership about policy coordination failures. The root cause lies in local officials' promotion incentives. Johnny explains that "in the past, different local governments, their officials trying to get promoted or considered the KPI to be related to these industries that are hot such as AI, EV, and et cetera. And so it's very natural for them to expand the capacity locally to develop these industries." Meanwhile, "the central government has very little oversight or industrial policymaking to actually persuade some of the provinces not to get into these industries." Johnny emphasizes that individual companies aren't the villains here: "The companies are just doing what they could to compete in the market... these individual actors are acting very rationally. It's only because the government is not doing the right policymaking in the past, and now they're trying to make up for it." Implementation Challenges: The Prisoner's Dilemma Problem [00:07 - 00:10] The transition from a production-focused to a balanced economic model faces significant structural challenges. Robert observes this represents a fundamental shift for China, coming "from an era of scarcity, so everything is scarce, so it's better just to produce more. But then there's danger in that." Johnny identifies the core implementation challenge using game theory: local governments face a prisoner's dilemma where "if you are the only actor that cuts in this game and the other provinces continues to produce, then you are the one to lose." This creates a coordination problem requiring "a centrally coordinated effort trying to limit the amount of production for all the provinces in order to make this work." The EV industry exemplifies these difficulties, with Johnny noting "the damage is already done. There's just been too many EV manufacturers in China, and the over-capacity issue is just gonna stay on for quite a while. Once the market competition started, you cannot turn it off." Different industries present varying levels of complexity - while food delivery involves only "three to four actors," making coordination more feasible, the EV sector is "much, much more complicated in terms of trying to slow down the production or limit the overall capacity." Market Response and Investment Outlook [00:11 - 00:14] The anti-competition campaign has generated positive market sentiment, with capital markets experiencing what Robert describes as a "mini bull market" because "anti-neijuan, anti neijuan is great for capital holders." However, Johnny provides a measured perspective on market prospects. While acknowledging that "the overall index has been up 30%" in Hong Kong markets this year, Johnny notes this comes "from a very low base." He expresses cautious optimism: "I wouldn't call it like it's gonna go down right now. I just also don't think so. I think it's gonna stay at the current level, maybe up a little bit, maybe down a little bit to the end of this year." For sustained market growth, Johnny believes "you do need to have some more policymaking," pointing to recent birth subsidies as an example of the type of demand-stimulating policies needed. Birth Subsidies: A Demand-Side Policy Shift [00:14 - 00:19] The government has introduced a new birth subsidy program providing 3,600 RMB annually per child, which Johnny considers "quite significant" because it represents "a blanket subsidy" rather than previous policies that only covered second or third children. This universal coverage means "a lot of families getting subsidized" including those who "just have one kid and initially they're not getting covered in this scheme." While the amount may seem modest - Robert notes that "for people in the bigger cities, it actually doesn't mean anything, but maybe in the smaller places it actually means a lot" - Johnny sees it as "just a start" with potential for local government competition to enhance benefits. He anticipates "some local measures taken out just to promote their individual localities further" and suggests "longer maternity leave or even paternity leave for families" as more impactful future measures. The Tibet Hydropower Project: Technological and Geopolitical Significance [00:19 - 00:26] The announcement of a 1.2 trillion RMB hydropower project in southern Tibet represents both technological achievement and strategic positioning. The project, designed to produce three times the energy of the Three Gorges Dam and equivalent to "almost about 20% of the power production in China," will create a new state-owned enterprise specifically for its management. Johnny explains the project serves dual purposes in "the race for productivity" including "data centers and AI" which are "heavily conditioned upon if you have enough electricity to power these," while also addressing "geopolitical reasons" in a region with "territorial dispute between China and India." By placing major economic projects there, China demonstrates it's "very determined to at least be involved in this matter." Robert highlights the technological breakthrough this represents, explaining that unlike traditional dams, the project will involve "boring into the mountains" with "several gigantic tunnels" to create underground waterfalls for power generation. He notes that China only recently achieved technological independence in tunnel boring machines, which are expensive, single-use equipment that "have to be scrapped" after each project. This represents "one of the many technologies that China have obtained and perfected over the last few years, which make this kind of project possible." This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

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