This edition is brought to you by Pelanor, the AI-powered FinOps startup letting companies make sense of their cloud spend.
Founded by alumni of Israel’s elite cyber intelligence unit, Pelanor untangles the chaos behind nine-figure AWS and Azure bills. Most companies have no idea how their compute spend ties into business outcomes. Pelanor solves this by building a dynamic graph of your cloud environment—tracking which microservices talk to which databases and how AI workloads are actually being used. Even non-technical team members can ask complex questions in plain English and get straight answers:
“What’s driving our OpenAI bill?”
“Which services are talking to unused databases?”
“Where can we save?”
Reach out to founder Matan Mates on LinkedIn or email him directly at matan@pelanor.io.
Oskar Galeev is a PhD researcher at Johns Hopkins SAIS working on AI history and the politics of the US-China tech race. Previously, he was a Yenching Scholar at Peking University and a Winter Fellow at the Centre for the Governance of AI.
Girish Sastry is an independent AI policy researcher specializing in technical aspects of AI governance. Before this, he spent 4 years at OpenAI where he worked on research related to AI misuse, compute governance, and capability evaluations.
Modern computing export restrictions have deep historical roots that extend far beyond recent headlines. Today’s AI chip denials represent just the latest chapter in a decades-old American strategy of technological containment — one that began long before the Biden administration’s AI diffusion framework or the Trump-era Huawei sanctions. This approach of strategically limiting adversaries’ computing capabilities traces back to the earliest days of the Cold War, when computational power first emerged as a geopolitical asset.
Parade of Eastern Bloc computers in 1989
The Coordinating Committee for Multilateral Export Controls (CoCom), established in 1949, was America’s immediate response to a Soviet Union newly armed with nuclear capabilities. This American-led multilateral alliance, led by the United States, established a comprehensive technology embargo system. CoCom controlled the export of strategic goods and technologies — particularly computing equipment — that could enhance Soviet military and economic power. More than just a regulatory body, it represented a coordinated Western effort to maintain technological superiority throughout the Cold War. For 45 years, CoCom carefully managed what computing technologies could cross the Iron Curtain. It also unintentionally taught the Soviets to excel at smuggling and reverse-engineering computers.
Chinese and American think tanks alike have drawn parallels between CoCom and the modern Sino-American semiconductor competition. Guided by historical memory, Chinese policy conversations tend to focus on ChinCom, the specialized control system for the PRC. ChinCom had different goals than CoCom — as one CIA memo explained in 1952, “The problem of security controls respecting the China area is significantly different from that respecting the rest of the Soviet bloc”. While CoCom focused on long-term strategic competition with another superpower, ChinCom implied a much stricter punitive embargo as a direct reaction to “Chinese aggression in Korea.” The USA’s current view of China is similar to the perception of the USSR in the 1950s, but back then, the young PRC was not viewed as a geopolitical competitor or a party in the tech Cold War.
CoCom is the single longest case study on the impact of high-tech export controls in geopolitical competition — and for all intents and purposes, it worked. So what lessons can be learned from the history of the CoCom? And how are they likely to guide both the US and Chinese approaches to limiting each others’ compute capabilities?
The first and most important parallel is the difficulty of enforcement. We often forget just how much the Cold War policy community complained about CoCom simply “not working.” Even though it was a multilateral regime, like today’s US semiconductor controls, it was not based on any treaty or binding agreement. And out of 17 member states of CoCom, only the US imposed re-export controls.
Sample of smuggled mainframes, industrial control computers, and supercomputers (in bold) during the CoCom era:
Sample of smuggled mainframes, industrial control computers, and supercomputers (in bold) during the CoCom era.
Throughout its history, CoCom’s effectiveness was reduced by overt non-compliance, differences between individual member nations, the overall secretive regime, and the financial bottom line of tech exporters. The Eastern Bloc was a giant developing market, and tech companies didn’t want to lose access. The export lists themselves often did not make any strategic sense — in the early years, CoCom even prohibited exports of items like typewriters (for an overview of control lists, check the collection by Sam Weiss Evans). But when it came to truly strategic technologies, control evasions were simply overlooked in most cases. Despite the Bruchhausen Semiconductor Smuggling in 1977-1980 and VAX Supercomputer Diversion of 1983, which directly boosted Soviet missile and aerospace design, only one control evasion case led to a strong policy response from the US. That was the Toshiba-Kongsberg case, the main geopolitical tech scandal of the Cold War.
Republican members of Congress destroying Toshiba tech with a sledgehammer in 1987
In the early 1980s, the Soviet KGB received computer numerical controls (CNCs) clearly restricted under CoCom from the Japanese Toshiba Machine and Itochu Corporation as well as the Norwegian state-owned Kongsberg Vaapenfabrik Company. The suppliers were even updating and fine-tuning software on the Soviet facilities between 1982 and 1984. For export license purposes, the Norwegian Trade Ministry listed the items as spare parts for a civilian facility, while Japan’s MITI (Ministry of International Trade and Industry) registered the machines as older models not included in CoCom lists. The result was twofold — Soviet submarines got reduced acoustic signatures, increasing their stealth against American anti-submarine warfare capabilities, while the White House went on a punitive campaign, imposing sanctions on the Norwegian supplier and fully banning imports of Toshiba products. These repercussions made the Toshiba-Kongsberg case unique. The harsh consequences were partly motivated by the rising narrative of tech competition with Japan. It was not only the USSR that the American security establishment was worried about, but also about winning the competition against the Japanese tech sector. But the shamelessness of this case also motivated consequences — no effort was made to send the equipment through third countries, like everyone else did.
Despite extensive multilateral coordination under CoCom, enforcement remained its Achilles heel — a challenge that persists in today’s semiconductor controls. As the Heritage Foundation lamented in 1983: «Terrible Fact. To be sure, Washington would not have to control the re-export of U.S. items from its allies if the allies actually were effectively controlling the re-exports. The problem is that they are not».
On the Soviet side, a critical structural problem of technology competition lay not in acquisition but in efficient diffusion and allocation of restricted computing resources — that is, what happened after restricted tech made it through the blockade. Soviet archives reveal a dysfunctional internal competition that severely limited the effectiveness of their technology transfer efforts. Various intelligence departments, ministries, and industrial enterprises routinely competed for the same technological products, often outbidding each other and creating artificial scarcity for domestic users. The same IBM computer would be simultaneously pursued by a truck manufacturing plant, military production facilities, the state tourism operator Intourist, and even the Soviet Olympic Committee. This fragmentation extended to collection channels themselves, with Soviet industrial ministries frequently requesting identical Western computers through multiple intelligence agencies. Such uncoordinated efforts not only wasted resources, but also critically impaired the USSR’s ability to strategically deploy compute.
This pattern of inefficient resource allocation has modern parallels, such as the inefficient stockpiling of GPUs by Chinese companies and local governments, as covered by ChinaTalk. Chinese policy conversations are increasingly focused on this, arguing that the US-led export control regime should be addressed through “Construction of a Unified National Market” 全国统一大市场建设, a policy aiming to coordinate provincial governments to gain leverage over foreign firms and eliminate local protectionism and administrative monopolies. While there are structural similarities to the supply-side restrictions of the CoCom era, China’s effort to streamline resource allocation means those same control strategies might not yield the same results today.
PRC≠USSR
China’s economic leverage creates a formidable counterweight to future export control efforts. Beijing possesses retaliatory capabilities along the semiconductor supply chain in a way the Soviets never did, especially through critical resources like rare earth minerals. More importantly, China actually has an export market. The Soviet Union’s technological autarky meant it never developed computing giants capable of competing globally. Archival evidence shows that Soviet-made computers rarely crossed even Eastern Bloc borders, let alone captured a share of Western markets. And when transistors first revolutionized telecommunications in the 1950s, CoCom had already been established, reinforcing America’s first-mover advantage. Today, the United States faces the much more complex challenge of building a coalition mid-race.
The second critical difference between the political era of CoCom and that of the 2020s lies in access to human capital. Throughout its technological competition with the United States, the USSR was severely constrained by its limited access to international talent, particularly the tacit knowledge transfer from American computer engineers. While exceptions like Joel Barr and Alfred Sarant enabled rare technological breakthroughs, such cases were anomalies rather than the norm. The Soviet Union could not practically implement anything like the Thousand Talents Program (千人计划). By contrast, Chinese recruitment efforts have successfully targeted specialists from companies like ASML and TSMC alongside top graduates from universities worldwide.
The current competition for global STEM talent contrasts sharply with the CoCom era, when the United States served as the unchallenged center of gravity for international technical expertise. In a world where knowledge transfer often proves more valuable than hardware access alone, human resources can play a substantial role in circumventing export restrictions. The US Foreign Direct Product Rule effectively restricts American talent, but any realistic export control framework must also incorporate talent retention.
There may be inherent limitations to a unilateral enforcement of the export control regime. Despite its structural challenges, CoCom at least regularly coordinated the leading technological and manufacturing powers in restricting access to critical technologies for the United States’ strategic adversary — an alignment that does not exist today. Both CSIS and Carnegie suggested that unilateral controls on frontier technologies are ineffective, a point made many times before, including by Eric Hirschhorn, the former head of BIS, who compared it to “damming half the river.”
Tracking and verification systems are a prerequisite to effective enforcement.
Where CoCom frequently failed was its inability to track controlled technologies once they left manufacturer facilities, creating enforcement gaps that were systematically exploited through transshipment, diversion, and falsified end-user declarations. Erich Grunewald and Michael Aird proposed a chip registry idea, noting that “a key problem for AI chip export enforcement is that BIS does not know where exported AI chips are.” Without visibility into the movement and end-use of restricted technologies, even the most comprehensive control frameworks will ultimately collapse under their own enforcement limitations. Implementing something like the chip registry would significantly increase the odds of technology denial achieving the desired effect.
CoCom operated under nearly ideal institutional conditions, and still could not be enforced perfectly.
CoCom was poised for success, operating under an ideologically bifurcated international system with established multilateral coordination structures and decades of institutional development. Despite these favorable conditions, CoCom still struggled. Today’s landscape offers none of these advantages to the US — the world today has incomparably more interconnected trade networks, fragmented alliance structures with competing economic interests, and a technologically sophisticated competitor deeply embedded in semiconductor supply chains. If CoCom’s results were mixed even under optimal containment conditions, expectations for current export control effectiveness should probably be tempered.
Is the glass half-full or half-empty?
CoCom suggests that export control regimes have always faced practical challenges. Perhaps the most significant challenge is reliable enforcement. To the extent that CoCom was successful, it was through the cooperation of other countries in a more multilateral regime. Today, deteriorating alliance cohesion and tariff wars could undermine the verification and enforcement mechanisms necessary for effective controls. As the intelligence leaks and scandals of the Cold War era show, crucial partners like South Korea and the Netherlands did not always have incentives to comply with the US-led tech regime. Today, these partners simultaneously host critical semiconductor infrastructure while also maintaining substantial economic ties with China. In fact, despite export restrictions, TSMC may have already manufactured millions of controlled high-end AI chips for Huawei.
What does this mean for US AI policy? First, policies that improve verification systems and bolster multilateral institution building would be very effective. Verification and compliance measures should address not only chip smuggling but also other potential circumvention methods such as the use and operation of data centers in countries like Malaysia, remote access to large amounts of compute through cloud services, use of TSMC manufacturing, and other avenues to skirt US export controls.
Second, as policymakers navigate the current “chip war,” they should recognize that export controls represent just one element of a comprehensive technology strategy — one that must be balanced against both economic interdependence and the reality that innovation often flourishes in response to constraints. The most sustainable technological advantage will likely come not from restriction alone, but from accelerating domestic innovation while selectively managing the most critical chokepoints in the AI supply chain.
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Estimates based on RAND Corporation, National Security and Export Controls (1974), Warren E.
Rhoades, III, COCOM, Technology Transfer and Its Impact on National Security, Monterey, California, Naval Postgraduate School (1989), and H. Wienert & J. Slater, Transfert de technologie entre l’Est et l’Ouest: les aspects commerciaux et économiques, OCDE (1986).
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This edition is brought to you by Pelanor, the AI-powered FinOps startup letting companies make sense of their cloud spend.
Founded by alumni of Israel’s elite cyber intelligence unit, Pelanor untangles the chaos behind nine-figure AWS and Azure bills. Most companies have no idea how their compute spend ties into business outcomes. That’s because the people managing infrastructure and the people using it rarely talk, let alone share ownership.
Pelanor solves this by building a dynamic graph of your cloud environment—tracking which microservices talk to which databases and how AI workloads are actually being used. Even non-technical team members can ask complex questions in plain English and get straight answers:
“What’s driving our OpenAI bill?”
“Which services are talking to unused databases?”
“Where can we save?”
Reach out to founder Matan Mates on LinkedIn or email him directly at matan@pelanor.io.
As Meta aggressively consolidated the US market for augmented reality glasses, it scared off what could have been a competitive AR ecosystem in the West. Only now with Google’s recent AR announcements at I/O is a second serious player back in the game. In the words of Leap Motion and Midjourney founder David Holz:
“VR and AR really needed 12 companies basically making products… [I]n two generations of 12 companies, we would have been way closer to something that was really compelling for everyone. But instead, we got one product, maybe two.”
In China, however, there has been no such consolidation, and a “Hundred Lens War” (百镜大战) has instead produced a vibrant AR ecosystem where small startups, rather than tech giants, lead. But does it matter that there are no American analogues to China’s “Five Little Dragons” of augmented reality (AR眼镜五小龙)?
Skepticism toward AR glasses is understandable (especially after the highly publicized failure of Google Glass), but the premature consolidation of the US market could have dramatic consequences one day. Real-time translation via a wearable product could be game-changing in linguistically diverse places like India; some consumers could be compelled by the prospect of using AR glasses as a real-time conversation guide; and maybe hyper-immersive Wii sports will prove to be even more fun than the low-tech version we enjoy today. The point is, we can’t really sit here in 2025 and say with certainty that AR glasses won’t have any compelling use cases.
If manufacturers eventually overcome technical challenges and get the public on board, AR glasses could generate tons of real-world audio and video data valuable for training AI, much like humanoid robots. This route to profitability could help buoy AR investment, even if the public isn’t sold on AR products yet. That could also partly explain why Xi tried on some AR glasses during his recent tour of Shanghai’s AI ecosystem.
Xi Jinping tests some Meizu AR glasses at the Mosu innovation space 模速空间 in Shanghai, April 29th, 2025. Source.
Today’s article will explore China’s market for AR glasses and introduce China’s Five Little AR Dragons. It will also include my personal review of a Chinese-made AR headset that I was able to try in Taipei.
Terminology and the State of the Art
Augmented reality (AR) is distinct from virtual reality (VR) — AR headsets are designed to overlay digital features onto the user’s interaction with the real world, and can theoretically be worn for extended periods. VR products are designed for shorter periods of fully immersive use (Apple’s Vision Pro, for example, does both VR and passthrough AR). The umbrella term for both AR and VR is extended reality, or XR for short.
Chinese XR glasses manufacturers rely on microdisplays, primarily micro-LED and micro-OLED displays. While traditional OLED displays use a backplane made of glass, the pixels of micro-OLED displays are etched directly onto a silicon wafer (hence their alternative name, OLED on Silicon, or OLEDoS). Thanks to supply chains created for the Apple Vision Pro, the cost of producing these displays has dropped rapidly in China since 2023. In March, Chinese LEDoS manufacturer JBD cinched a deal with Meta to become the exclusive supplier of LEDoS displays for Meta’s Orion prototype.
Another key component is the waveguide. A waveguide is a transparent optical component that guides light from the display to the user’s eyes while allowing them to see the real world. The waveguide makes it possible to overlay digital content onto physical environments. As is the case with microdisplays, China’s leading suppliers of waveguides are based in Shanghai.
What can these glasses do today? Traditionally, the industry has emphasized entertainment features (e.g., gaming, streaming movies and music, and shooting photos and videos) while touting the potential future benefits in education, medical care, and delivery logistics.
But after Meta announced new AI features for their Ray-Ban smart glasses in April 2024, China’s AR companies have been eager to capitalize on the “AI+AR” hype. Accordingto Li Hongwei 李宏伟, CEO of the AR dragon RayNeo:
“Smartphones do not have the display features or capabilities of spatial perception interaction that AR glasses have. AI+AR glasses encompass three categories: mobile phone applications, AI smart assistants, and virtual reality integration. The latter two are opportunities for disruptive innovation. For this reason, more than half of the successful companies in the future AR market may not be traditional giants, but emerging companies.”
Still, lessthan 20% of designs in the Chinese smart glasses market had AI functions by the end of 2024. AI integration is difficult in part due to dependence on external computing power — suitable processors are simply way too big and energy-hungry to fit into the frames of the glasses. That’s why AR glasses often rely on split compute to preserve battery life — tasks like translation are offloaded to the user’s cellphone, and then the result is transferred to the glasses through WiFi to save power. This also means that AR companies benefit substantially from locking down partnerships with phone companies that control the ecosystem.
China's VR/AR industry reportedly raised 2.948 billion RMB (~US$340 million) across 30 investment and financing events from January to November 2024. While tech giants like Huawei and Xiaomi have been dabbling in AR, innovation has primarily been driven by the so-called “Five Little Dragons” of the AR industry: XREAL (优奈柯恩), RayNeo (雷鸟创新), Rokid (灵伴科技), INMO (影目科技), and the Xi-endorsed Meizu (星纪魅族).
Specs for the most expensive model of AR glasses offered by each of the five dragons.
Thanks to fierce domestic competition, most models of AR glasses currently available in China are in the price range of 2,000-4,000 RMB (~US$275-$550). By comparison, Meta’s Ray Ban glasses, which don’t include displays in the lenses, start at US$299, and their full-service Orion prototypes cost US$10,000 per unit to produce.
We’ll briefly highlight each company’s quirks below.
Market share of major manufacturers in China's AR market (by shipment volume), 2023. Source.
XREAL 优奈柯恩
XREAL was founded in Hangzhou by Xu Chi 徐驰, but the company has recentlyrelocated its headquarters to Shanghai. While other AR startups primarily use Snapdragon processors made by Qualcomm, XREAL uniquely uses self-developed chips. XREAL’s X1 processors can reportedly achieve a latency of 3 milliseconds (compared to 12 milliseconds for the Apple Vision Pro). Xu explains:
“The X1 chip equipped in the XREAL One not only successfully resolves technical challenges like 3DoF spatial anchoring and ultra-low latency, but also fundamentally overcomes the longstanding issue of inconsistent cross-device experiences for AR glasses. In the past, to provide a consistent experience across different operating systems, we had to develop separate software for Windows, macOS, Android, and iOS platforms. Yet even then, it was difficult to fully ensure uniformity in the user experience. With XREAL One, however, we’ve finally found a more elegant solution. By integrating computing power directly into the glasses themselves, we’ve fundamentally changed the game — delivering a truly meaningful “AR for all” experience.”
Xu also noted that 65% of XREAL’s smart glasses components are developed and manufactured in-house, and the company is aiming for 100% hardware independence within the next two years. But this hardware-focused approach has tradeoffs — XREAL’s products don’t currently come equipped with out-of-the-box AI features, although the company claims that LLM integration will be included in a future software update. Here’s Xu’s justification for not engaging with the AI+AR hype:
“AR glasses are always centered around user experience. We won’t blindly build AI glasses just for the sake of having AI. Instead, we start from the user experience and work backwards to identify what kinds of technical innovation are necessary.
In the R&D process, we have to wisely understand the limits of current technology — knowing what’s realistically achievable and what isn’t, at least for now. Blindly chasing breakthroughs can lead to disastrous outcomes.
Although XREAL is a relatively small company, our strength lies in the smart use of limited resources. We’re very clear about where to allocate funds to keep our product logic sharp and focused.”
Consumer reviews of the XREAL glasses have been quite positive despite the lack of AR+AI branding. One reviewer from Hong Kong wrote in April of 2025:
These are the best AR smart glasses, perfect for entertainment whether you're out and about or relaxing at home (such as in a small apartment or lying in bed). Once connected to a compatible device via USB-C, users can watch their favorite shows, movies, or games on a large virtual screen, like having a private cinema.
The glasses feature a Full HD 120Hz OLED display with a brightness of up to 600 nits, delivering vivid images and excellent contrast for viewing dark scenes. The image quality is further enhanced by electrochromic dimming lenses, allowing users to adjust the lens brightness with a switch. At the clearest setting, the lenses let users easily see their surroundings, while at the darkest setting, they effectively block out external light, providing an almost perfect viewing experience.
In addition, the glasses boast impressive speakers, with sound quality tuned by Bose, offering rich audio across highs, mids, and lows. While using separate headphones can still enhance the audio experience, this is the first pair of smart glasses where users feel that headphones are an optional accessory rather than a necessity.
XREAL has also prioritized business partnerships under Xu, betting that the experience will translate to market share once AR technology is mature enough to garner widespread consumer interest. XREAL has inked deals with BMW, T-Mobile, AT&T, Bose, and Google.
The XREAL One Pro, priced at US$599, is XREAL’s newest and most advanced AR product. Source.
RayNeo 雷鸟创新
RayNeo is a subsidiary of TCL, an electronics manufacturing giant that is partially state-owned. The company’s Mandarin name translates literally to “Thunderbird Innovations,” and they are notable for marketing AR products aggressively outside of China. CEO Li Hongwei 李宏伟 explains in an interview from January 2024:
“We wanted to establish a foothold in overseas markets first, so we started by working on distribution channels. For example, we launched on Amazon, and in November last year, we achieved strong results by ranking first on both the new arrivals chart and the bestsellers list in the smart glasses category.
Right now, we’re also selling our products in some boutique stores across Europe… and the sales performance there has been fairly good as well.”
RayNeo recently announced a partnership with the International Olympic Committee, so we’ll probably see promotional videos for Los Angeles 2028 shot from the perspective of athletes.
The company also partnered with Alibaba Cloud to develop a multimodal AI model specifically for AR glasses — now, the average response time for AI queries on RayNeo glasses is reportedly 1.3 seconds.
Finally, RayNeo was the first company in the Chinese market to sell AR glasses for less than 2,000 RMB. Here’s how they keep costs low, according to Li:
“If Meta’s Orion is the Vision Pro of AR glasses, then the RayNeo X3 Pro is more like the “Vision.” …It does not use the most cutting-edge technology in all technical indicators like Orion…. For example, in the selection of optical waveguides, although RayNeo has a silicon carbide wafer version internally, our commercial products do not use this material. Instead… we use photolithography machines and chip etching processes to make waveguides on glass, so as to better balance costs and product experience. As the company's strategy, RayNeo will not choose to pile up all the industry's most advanced technologies in listed products for the sake of showing off its skills, but will develop cutting-edge technologies and products internally, and eventually launch leading, pragmatic, and mass-producible products to the market.”
Rokid was founded in Hangzhou in 2014 by Zhu Mingming 祝铭明, who left his job at Alibaba to start the company. In 2024, Rokid received nearly 500 million RMB and 100 million RMB across two rounds of financing. Their AI-equipped glasses use Alibaba’s Qwen models for real-time translation.
Among the AR dragons, a uniquely large portion of Rokid’s investors are SOEs. Here’s Zhu’s explanation from an April 2025 interview:
We have significant influence on the B2B side — the cultural and museum market alone is worth around a hundred million yuan annually. Our ecosystem partners bring in tens of millions, and each year, several million people visit museums. Rokid is the only player in this sector. …
B2B operations serve as a bridge for interacting with the government. Even in local governments with no overlapping business opportunities, there are always departments for cultural tourism and museums.
Rokid partnered with the PLA to build custom AR glasses for use on China’s space station. Their website also highlights B2B partnerships with oil, gas, and mining operations. But for now, Rokid’s consumer products receive mixed reviews.
I was able to try the Rokid Max AR glasses at the Guanghua Digital Plaza in Taipei. I watched a clip from Avengers: Endgame with the glasses, and the image quality was quite nice. You can correct for nearsightedness without customized lenses if your prescription is between 0.00D and -6.00D. I expected my eyes to feel strange switching between far-away objects and the close-up digital projection (as is reported by manyreviewers), but I didn’t notice any such feeling during short-term use.
Unfortunately, they are very ugly and sit weirdly far and high up on your face. They’re also not wireless (unless you buy a wireless adapter, which adds latency), and the Rokid Max glasses I tried don’t support AI features like translation (Rokid’s AI-equipped glasses are a separate product line).
I will not be putting a picture of myself in anti-clout goggles on the internet, but here’s what they look like on someone else. The Rokid Max retails for US$359. Source.
My impression is that, for now, the most tangible use case for these glasses is avoiding neck strain.
INMO 影目科技
INMO’s Chinese name could be translated as “Image Eye Technologies.” As a newer entrant into the Chinese AR market, their strategy has focused on affordable consumer AR with basic features, advertising use cases like cycling directions, translation, and taking notes in meetings. The company marketed their INMO GO glasses as “the first consumer-grade AR glasses with deep AI integration,” highlighting translation capabilities in 11 languages, smart notifications, and AI assistant features supported by ChatGPT. Here’s INMO founder and CEO Yang Longsheng 杨龙昇 on hisvision for popularizing AR glasses:
“We hope that AI glasses can be like a personal assistant in the future, helping me order takeout, order a cup of coffee, etc. at any time. …
In the past, social interaction was generally between real people, but based on the emergence of AI and the improvement of technologies such as virtual humans, I believe that in the near future, perhaps within four or five years, people will be able to socialize with these virtual intelligent entities.
I can create a virtual image of my dreams, infuse it with the personality I want, and then interact with it in this entire virtual-real world. …
[AI companies] also need to find some landing points for these intelligent entities. Glasses are undoubtedly the best form at present, which also encourages them to try more content on glasses.”
INMO’s content partners include Baidu (China’s Google analogue), TanTan (a dating app), and game developers NetEase and 37Games. Chinese reviewers seem to appreciate the INMO software ecosystem — one user wrote,
“The INMO AIR 3 uses the IMOS 3.0 operating system, an OS specifically designed for AI+AR terminals. The AIR 3 can project the equivalent of a 150-inch giant screen. With the help of a 3DoF smart ring, the AIR 3 supports screen-space hovering functionality. IMOS 3.0 provides more efficient applications and a more immersive experience through intelligent interaction and spatial display capabilities. IMOS 3.0 not only supports native AR applications but is also compatible with most Android apps on the market, offering a relatively rich content ecosystem.”
INMO also recently announced a partnership with China Mobile to integrate their AR products with China Mobile’s Jiutian LLM ecosystem.
The INMO GO AR glasses, available for US$379. Source.
Meizu 星纪魅族
Meizu is owned by Geely, a conglomerate that primarily manufactures automobiles and holds a controlling stake in Volvo. Meizu’s primary business ventures are smartphone manufacturing and developing the FlyMe Auto operating system used by many Geely-owned car brands. As such, Meizu’s AR glasses are compatible with FlyMe-equipped vehicles.
At the 2025 Shanghai Global Investment Promotion Conference, Meizu founder Li Shufu 李书福gave a highly-publicized speech while wearing a pair of Meizu glasses, which acted as a teleprompter.
The company has developed its own FlyMe LLM, but Meizu glasses also support integration with third-party AI models, including DeepSeek, Qwen, and ByteDance’s Doubao. In early 2024, the company signed a partnership with Malaysia's Juwei Group to expand sales of Meizu glasses in Southeast Asian markets.
The Meizu StarV View AR glasses, which could be the model Xi tried during his AI tour, retail for 2,799 RMB (~US$388). Source.
Looking Forward
China’s “Hundred Lens War” is a live experiment in hardware innovation under pressure. While consumer interest remains tepid, China’s Five Little Dragons are constantly launching new products in search of the ideal combination of design choices — wired vs wireless, with lens displays vs without, AI vs traditional translation, and many more. If AR glasses eventually succeed in locking down compelling use cases, it’s likely just as likely their decisive breakthroughs will come from not from Silicon Valley but Shanghai.
Thanks to Mike G. and Benjamin Reinhardt for offering feedback on previous drafts of this article.
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Can studying Mao Zedong help explain Donald Trump?
To find out, ChinaTalk interviewed the legendary sinologist Orville Schell, who visited China during the Cultural Revolution and is currently at the Asia Society.
We discuss…
Mao Zedong’s psychology and political style,
Similarities and differences between Mao and Trump,
How Mao-era traumas reverberate in modern China, including how the Cultural Revolution has influenced the Xi family,
How Zhou Enlai and Deng Xiaoping survived the Cultural Revolution, and which of their tactics could be useful in modern America,
What civil society can do to defend democracy over the next four years.
Co-hosting is Alexander Boyd, associate editor at China Books Review and former ChinaTalk intern.
Alexander Boyd: Orville, you wrote the most prominent essay on Trump’s Cultural Revolution, comparing Donald Trump’s behavior in office and personal style to Mao Zedong. To start, what is Maoism, and how would you describe Mao Zedong?
Orville Schell: Mao Zedong, of course, was the great progenitor of the Chinese Communist Revolution. He was a Marxist-Leninist, and he liked control as any autocrat would. However, one of the hallmarks of Mao Zedong was also an abiding interest in throwing things off balance as a way to gain even greater power.
In this regard, he became a great fan of Sun Wukong. This golden-haired monkey was one of the heroes of the classic Chinese novel, Journey to the West, which tells the story of Buddhist scriptures being brought from India to China. One of the most prominent features of this monkey king was his love of disorder. His sort of watchword was “dànào-tiāngōng” (大鬧天宮), to make great disorder under heaven. Mao Zedong actually ended one of his poems with that line, and he always loved this novel, Journey to the West.
When the Cultural Revolution arrived, I think this was a real consummate expression of Mao’s affection for chaos. He did feel that not only did Chinese society need to be upturned, but the whole political structure of China needed to be upturned. Everything in effect needed to be “fānshēn" (翻身), as he said, “turned over.” He adopted many expressions similar to the Monkey King that expressed his love of contradiction and disorder. Class struggle, of course, which became the hallmark of the Cultural Revolution, was a form of deep and disturbing disorder.
Alexander Boyd: Where did Mao’s need for constant chaos and rebellion come from? In your Project Syndicate essay, you posit that it came from his troubled relationship with his father. Can you describe the parallels to the case of Donald Trump, who had a famously domineering father himself?
Orville Schell: The one place where we really get chapter and verse on Mao’s relationship to his father growing up in Hunan at the end of the 19th century was in Red Star over China by Edgar Snow. Mao told Snow that he had a very adversarial relationship with his father. He even said he hated his father, that his father was a tyrant, and they were constantly battling. On a number of occasions, Mao Zedong actually ran away from his home.
A Mao family photo from 1919. From left to right: younger brother Mao Zetan 毛澤覃, father Mao Yichang 毛贻昌, cousin Mao Fusheng 毛福生, and Mao Zedong. Source.
He did have a very sort of Buddhist-inclined, loving mother who made a lot of difference. But the relationship with his father clearly set off the notion of the world as an adversarial place. He tells Snow that he learned only by standing up to his father could he survive, and then his father would come to heel in some sense and not just overwhelm him with his sort of tyrannical paternal role.
That sort of characterizes Mao, and in fact Trump too, as we learn from his niece (the daughter of his older brother), who is a psychologist. Trump had a father who was very preemptive, very tyrannical and very judgmental.
Wallowing off into the bog of psychobabble here, any human being who reads literature knows that a father’s relationship to his son and vice versa is a profoundly influential relationship. As a young man grows up, that relationship forms him.
Alexander Boyd: We know that Mao loved to speak in allegory. He often would speak about one thing but mean another. How much can we believe his stories to Edgar Snow? And is it just a metaphor for American paternalism?
Orville Schell: I think at the period when Edgar Snow was doing these interviews with Mao was in the 1930s. We hadn’t started all the rectification movements and Mao had not been in power with all his mass campaigns. He had just arrived in Shaanxi province. I think that we get a pretty unalloyed representation of his early years. I don’t see there’d be any reason for him to be setting traps or deceiving Snow.
Throughout his life, Mao easily took umbrage at things when he felt sat upon or disrespected. Another famous example, of course, is when he finally went to Beijing in the late 1920s and he became a senior intern of some sort at the Library in Beijing University. He used to feel incredibly disdained by Chinese intellectuals who’d come in and sneer at his hickey Hunan accent.
If you‘ve ever heard Mao Zedong speak or seen a film in which he speaks, he’s almost unintelligible to Mandarin speakers. Like most Chinese people of his generation, including Deng Xiaoping and Chiang Kai Shek, he preferred to speak his local dialect.
This laid the track for Mao’s antipathy towards intellectuals, just like Trump hates intellectuals and universities. He thinks they’re arrogant, they’re elitist, they look down on people like him and down on working people, et cetera. Mao felt very much that no matter what he did in his formative years, he was disdained and disrespected by the intellectual class.
Of course, in that sense, I think he is a metaphor for sort of the whole ‘kultur’ of China in a sense that it is aggrieved, it’s been humiliated, it has been looked down on, kicked around, exploited, you name it.
Alexander Boyd: Another similarity between Trump and Mao is that both men had a lot of wives, often tumultuous ends to those relationships with women, and a propensity to start new relationships before the last one ended.
Yet another parallel is Mao’s exposure to Hunan secret societies, specifically Gēlǎohuì (哥老會), the Red Gang, and his time as an organizer at Anyuan. This mimics Trump’s early mob ties, especially in the New York of John Gotti and then Rudy Giuliani, who was a big mob fighter back in his day.
Their styles of governance are also similar — Mao made frequent trips outside of Beijing, and he loved to launch campaigns while on the move, much like Trump’s Mar-a-Lago golf club trips.
Are these comparisons substantial, or is it just the case that when you have so much information about two people, you can always draw connections between them?
Orville Schell: It’s true that both Mao and Trump had a lot of wives and a lot of ladies. What that suggests is that they need to have that kind of affirmation and signs that they can beguile people and win people over, which speaks to me of a fundamental lack of self-confidence. Both of them derived a certain measure of prowess from their ability to attract beautiful women.
Trump still talks about women as objects and as adornments. Mao clearly was the same. There were other leaders in China who were not. Chiang Kai-shek had a lot of ladies (and ladies of the night as well in his youth), but after he got married, he was quite faithful. I don’t quite know what to make of Zhou Enlai, but he had one wife. Whether he was gay or not, it’s a question people do care about.
Mao was somewhat special, and he arrogated that special right to poach on women himself. But when revolution came home to roost after 1949, it was not something he found acceptable in ordinary people or even in his acolytes. He was very puritan. But he was not just like Trump. Trump purports to be a Christian and yet doesn’t abide in any meaningful way by the notion of loyalty implicit in marriage.
Jordan Schneider: Shall we discuss the deep state example?
Alexander Boyd: Trump famously vowed to drain the swamp and railed against a deep state that he perceives as having both frustrated his attempts to exercise power in his first term and prevented him from regaining office in 2020. Now he’s engaged in a campaign of revenge against all those purported deep state agents.
Many people, and you chief among them, have made that comparison to the Cultural Revolution where a frustrated and suspicious Mao unleashed these animal forces within China to take down a party in a state leadership that he felt was shackling his own ambitions to remake China. Is that an accurate comparison in your mind?
Orville Schell: One of the hallmarks of Mao’s revolution was a sense that somehow the party (which he himself had helped build) and the state (which was the handmaiden of the party) were ultimately the refuge of rivals.
He had a great antipathy against bureaucratism. This also speaks of his love of disorder as a creative force. When he started the Cultural Revolution, one of the first things he did was to issue a wall poster that said “bombard the headquarters” (pào dǎ sīlìngbù, 炮打司令部). What he meant by that was that he felt the party had become ossified. It had become the refuge of bureaucrats who were living high on the hog but didn‘t want to make revolution anymore and found class warfare too disruptive.
He felt that it was time to destroy it. How did he do that? He gave permission to young people, idealistic young people, to attack. Almost all of the leaders who were potential adversaries of Mao either died or were purged. Xi Jinping’s father was one of them, a vice premier who had a very bitter purging.
In that regard, Mao Zedong took, I think, great satisfaction in overturning even his close revolutionary comrades. Here Trump is not too dissimilar. He seems to be invigorated by the idea of destroying institutions that he views as refuges of people who might be against him and of firing people he’s hired, turning against people who he perceives as potential rivals. He demands complete fealty and loyalty or you’re in trouble.
Here too, I think there’s a kind of a similarity in the way the two relate to other leaders and to institutions of government, the deep state. It’s the equivalent for Trump of what the party and the state that he himself helped build were in China. He saw them as slowing down his revolution, as harboring his adversaries and as being overly bureaucratic, what he called “sugar-coated bullets of the bourgeoisie” (资产阶级的糖衣炮弹). In other words, they’d given up their revolutionary vigor in favor of staid bureaucratic forms of government.
Alexander Boyd: So if there’s an attack on the bureaucracy, does that make Elon Musk and DOGE a new Kuai Dafu 蒯大富 and the Red Guards?
Orville Schell: Musk is older. Kuai Dafu was one of the earliest Red Guard leaders at Tsinghua University when Mao issued his order to bombard the headquarters.
Elon Musk should know better, but I think he too has a kind of innate impulse that chaos is a creative element. It’s one step away from the Silicon Valley mantra, “failure is positive.” But I think he does share with Trump this idea that somehow you need to clean out the Augean stables of the government. I don’t know why Musk might feel disrespected or disdained when he’s been so successful and the richest man in the world.
Here, too, I think we have to remember that these leaders are human beings. They’re not just rational creatures who look at the national interest of the country or read reports to make rational decisions. Some leaders are completely crazy. We know from Euripides and Shakespeare that leaders are completely crazy and they do astounding things.
You can read Stephen Greenblatt’s book,Tyrant: Shakespeare on Politics, which is about six great plays that Shakespeare wrote about tyrannical leaders. There’s nothing new here. It’s just that policy people and I think many academics are loath to recognize that we’re also dealing with something very human here, namely, leaders with deep and tragic flaws, which in Euripides are hubris, arrogance, and overreach.
When Croesus — we‘ve derived the expression “rich as Croesus” — went to the oracle of Delphi, he governed the state of Lydia, about whether he should go to war. He got the diction back from the oracle that if he went to war, he’d lose his kingdom. What did he do? He went to war and lost his kingdom.
There’s a little of that going on here. I think we need to factor the human dimension into the equation of understanding big leaders like Putin, Orban, Xi Jinping and others. Look back at their formative years.
Here, I highly recommend a wonderful new book that’s coming out by Joseph Torigan on Xi Jinping’s father, Xi Zhongxun 习仲勋. You see what nightmarish experience Xi Jinping went through as the son of a man who was twice purged during Xi Jinping’s teenage years, and was purged the second time as a counter-historical, counter-revolutionary. And what travails Xi Jinping as a young man went through to have a father who was in the five black categories.
This is a little bit beyond the mandate of so-called China socialist. But I do think that here’s where literature, drama, some of these other representations of leadership help us understand what’s going on.
A Xi family portrait taken in 1958. From left to right: Xi Jinping, younger brother Xi Yuanping 习远平, and father Xi Zhongxun. Source.
Alexander Boyd: Let’s stay on Xi Jinping here for a second and Xi Zhongxun as well. What is Xi Jinping’s view on the Cultural Revolution today? Obviously it’s opaque, but I agree Torigan’s book is incredible and I read his section on Xi Jinping’s Cultural Revolution.
Orville Schell: I think it’s unfair to say that Xi Jinping is like Trump. Xi Jinping does not like disorder. He does not want to create great disorder under heaven, unlike Mao. The part of Mao he does bond with and did grow up with and appreciate is the Leninist part — the organized state, organized party control, autocracy. But he has no fascination for the part which we’ve been talking about.
This is why I suggested if Xi Jinping wants to come to some better understanding of who Trump is, ironically he has a homegrown example in Mao Zedong. He lived through it. He knows what people like that can do to a society and to even the global order. I think maybe he has thought this way. I don’t know, but I think he uniquely, unlike many Americans who’ve never been through this kind of disturbance, shouldn’t be so surprised by Trump.
Why do we think as Americans, when Italy had Mussolini and Germany had Hitler and Russia had Stalin and Spain had Franco, Salazar in Portugal and on and on, why do we think that we are somehow immune from these kinds of aberrant, overreaching, arrogant, and finally incredibly destructive leaders?
Jordan Schneider: China from 1949-1967 was a very different place with a very different governance system than America circa 2016 or 2025. Shall we discuss some of the differences here?
Alexander Boyd: Well, I think the first place that we should start is rise to power. Trump, you know, for better or for worse, won two elections, and Mao won power through civil war and various other means. Orville, what would you say is the biggest difference between Trump and Mao?
Orville Schell: Trump is more like Hitler, who came to power by being elected Chancellor of the Reichstag, whereas, as you point out, Mao Zedong came to power through insurgency and civil war.
Obviously, you can‘t completely compare these people, but I think in trying to understand the leaders of the present, it does behoove us to look back at leaders in the past who also created disorder, one kind or another — a world war, economic crisis, a revolution, whatever. That might help us understand a little bit what it is they’re offended by. What do they want? What would propitiate them? How do you deal with them? Can you deal with them?
I don‘t mean to compare Xi Jinping with Trump. But only to say that China’s historical experience of having undergone probably the most tectonic, catastrophic, and destructive revolution in history might help Xi understand what animates a leader like Trump and how best to deal with it.
Jordan Schneider: How best to deal with Mao is kind of not something people really figured out. Can you talk about what the antibodies were over the course of his reign, and highlight some examples of successful and unsuccessful pushback against his craziest ideas?
Orville Schell: Well, of course, the best, the biggest antibody of all to Mao was death. Many autocrats are very disruptive. Hitler died in his bunker, Stalin died, and wildly began to change. I don’t know what the antidote to Mao at that period would be, but I will say this, that if we look at our own country, there is a hint of similarity among the way people come to heel when big leader culture gets rolling.
The Republican Party is completely supine now. We do have the Democratic Party still raging against the storm. But one of the lessons I think that is quite striking about the Chinese communist revolutionary period was the way in which everybody finally was neutered. Those few who did speak out, and there were some, had very bitter ends. All know what happened. This is another hallmark of powerful and effective autocratic leaders is that they manage by one way or another — and one way is disorder — to intimidate people, frighten people into submission and silence.
Alexander Boyd: I think in a lot of histories of the 1970s though, everyone points to 1971 and Lin Biao’s death.
Jordan Schneider: Why don’t we do the Great Leap Forward and response to that? Because Mao had to do with self-criticism, right? This was a real brushback moment for him where after killing eight figures of his own citizens, there did end up being some pushback from the top that forced him down a policy path he wasn’t really excited to take.
Orville Schell: After the Great Leap Forward, many leaders like Deng Xiaoping and Zhou Enlai and Peng Dehuai felt it was too excessive. Forty million people dead, starvation, agriculture in ruins. They did for a brief period of time prevail. What was Mao’s answer?
Mao’s answer was the Socialist Education Campaign, which is a prelude to the Cultural Revolution, which ended up labeling people like Peng Dehuai at the Lushan conference, put out of business very quickly, ended up in jail. The president of China, Liu Shaoqi, Deng Xiaoping, were sent down. In other words, almost all the leaders, veteran revolutionaries that had accompanied Mao in the Long March in the Yan’an period, ended up in the doghouse or dead.
That was China’s experience. That made it very difficult for any voices of dissent to find any purchase. I remember being there myself during the end of the Cultural Revolution and just thinking, well, this is the way it is. There were no voices. They wouldn’t even talk to you as a foreigner. Nobody had permission even to interact in a normal human way with anybody foreign or an outsider because they were afraid. Mao had brought complete submission down onto society.
That didn‘t mean he suffocated all of the impulses that had built up over previous decades — they remained latent and dormant and they arose again when Mao died.
Alexander Boyd: Basically the biggest argument against Trump’s effort to remake America in his image, to bring manufacturing onshore, is that Mao, with more power at his disposal, more party at his disposal, a whole society cowed, actually failed. Even more recent scholarship, like Odd Arne Westad and Chen Jian’s new book The Great Transformation: China’s Road from Revolution to Reform argues that opening and reform really began in the 1970s. If Trump is Mao in this comparison, is the Trumpist effort, you know, this great “cultural revolution” in America, is it doomed to fail right from the beginning?
Orville Schell: Well, I think we could be doomed to something even worse. Mao failed in the Great Leap Forward. Then in order to regain and maintain power, he brought on the Great Proletarian Cultural Revolution. It’s hard to know. We can’t predict history and we don’t know whether American democracy will survive.
What we want to say is that we know this archetype of leader and whether it’s a communist, a Leninist, a so-called democrat, Nazi, fascist, whatever. That’s why I wrote some of these essays, to just remind people that there are examples throughout history and literature of these kinds of people. We need to better understand because now it’s America’s turn to have one.
Jordan Schneider: I think another one of the big differences that Tanner Greer pointed out on a show earlier where I tried to compare Trump to Hitler was the ideological commitment level that Trump has versus someone like a Mao or a Hitler who deeply believed in his bones in class struggle or Lebensraum or international Jewish conspiracy. Yes, Trump’s got some views on trade policy, but he lifted them after the bond market changed. It’s the sort of the level of focus which he can bring or has shown, the level of focus that he’s shown he can bring to policy stuff versus some of the other sort of totalitarians that you reference who maybe have some personality traits in common, but also kind of have a real agenda behind them. Whereas our current president, not so much.
Orville Schell: I agree with that, Jordan. Mao had a very highly evolved ideological agenda and analysis of how the world worked, where history was going, knowing what the dynamics would be. They did hew to that in various ways, sometimes rather opportunistically or in a utilitarian fashion. That’s communism.
But fascism is a very different animal. If you read Robert Paxton’s book on fascism, you begin to understand people like Mussolini. He had no ideology. He was sort of inventing himself as he went along. I think that’s one of the big differences between Trump and Mao. Mao was a very intelligent man and actually a good writer, good poet. He thought.
I don’t think Trump thinks — he acts almost like an animal. He feels this today and he acts, he responds. He certainly has no ideology or no sort of political commitments to principles that guide him in what he does. It’s more what he feels like doing. He feels someone doesn’t like him. He feels threatened. Whatever. It’s almost animal-like in his responses, which are completely irrational.
Alexander Boyd: This is actually not so much a continuation of this question, but it’s a different tack. I’m curious about Mao’s foreign policy and Trump’s foreign policy. A curious similarity is that Mao stated, “I like rightists.” He met with Richard Nixon. He found them easy to deal with in general, perhaps because he understood the ideological motivations of, or he perceived himself to understand the ideological motivations of capitalist right-wing politicians.
Then, Trump himself meeting today in the Oval Office with Carney, the Prime Minister of Canada, and earlier saying something like “I like the left” in reference to him not wanting Pierre Poilievre to win in Canada. Why do you think that Mao liked rightists or claimed to like rightists? What sort of insights does that give us into Trump’s foreign policy?
Orville Schell: In many ways, Mao could be a rightist, but I don’t think he liked anyone who opposed him. He viewed the right as opposing him and as opposing his ability to control thinking and ideas. This is why you get the whole idea of sīxiǎng gǎizào (思想改造), thought reform, that there’s a correct way to think and Mao helps limit that, describe that, lay the boundaries for that out. If you don’t want to think that way, then you’re a rightist or maybe even a leftist and then you deserve to be defenestrated.
I think Mao says he likes rightists because he thinks they’re practical and he can deal with them. It’s a bit of a capo-to-capo business. You can deal with a thug, even if you call him a rightist, but I don’t think he had any affection for rightists or leftists. These are categories of convenience into which he put people when he needed to get them off the stage.
Jordan Schneider: Yeah, I feel like the capo-to-capo thing is it’s less him liking Mark Carney, which I just truly do not believe, and more the ease and excitement where he gets talking to big, powerful, authoritarian leaders, as opposed to democratically elected ones.
Orville Schell: I think that, Jordan, if I may say, when Nixon and Kissinger went to China in ’72 and ’71 to set it up, I think there was a certain thrill for Zhou Enlai and Mao to have these people come hat in hand to Beijing to talk to them. Because remember that even though they were opposed to imperialism, colonialism, capitalism, America, et cetera, there is, I think, in my experience, at least amongst Chinese leaders representing their country, a deep and abiding wish to be respected.
They speak about that all the time, mutual respect and understanding, as if to say, “Can’t you just respect us as a dictatorship? Show us some respect. We’ve got a good economy, we’ve done a lot of amazing things,” which is true. Again, autocrats, one of the things that really riles them is that they’re cast out, they’re disdained, not considered proper company for liberal democratic states.
When China is the aggrieved, humiliated, kicked-around sick man of Asia, they want nothing more than to be respected. That is a complete contradiction because if you don’t act respectably, it’s very hard to be respected. Yet that is something they deeply crave, even though they would never acknowledge it.
Jordan Schneider: Yeah, I think it kind of works the other way as well, where you just see how big Trump’s smile was in his 2017 visit to China.
Orville Schell: I’ve been on several presidential trips, like for instance, with Clinton, which was completely different, very informal and open and cheerful. But Trump’s trip, it was all about pomp, circumstance, awe, ceremony and ritual. Both leaders were trying to impress each other and Xi Jinping wanted to impress Trump. You remember he took him to the Forbidden City and they had a banquet and all the rest of it.
But there were no moments of bonhomie, of personal smiling and back-slapping and saying, “Hey, we’ll work this out.” No, it was all about sort of who is the bigger dog with the most impressive marching band and most impressive Great Hall of the People. I think that’s very characteristic of both Trump and Xi. Trump wants to have a parade, just like Xi gets to have parades with a lot of tanks and missiles going by.
There’s an element of similarity, I think, of both deeply insecure men fundamentally, and nothing like a good parade to puff up insecure leaders’ egos.
Jordan Schneider: Can you talk about the sort of red versus expert dilemma, which we’re seeing play out with Laura Loomer in this administration?
Orville Schell: Remember that during the Cultural Revolution there were many, many struggles going on. One of them was the struggle between being Red and an expert. Experts, of course, were people who knew how to do something. They were the intellectuals, they were the scientists, the technicians, people who ran institutions and could be accused of bureaucracy.
The Reds were the people who wholeheartedly embraced Mao Zedong and were dedicated to overthrowing institutions of the experts. In that period, not only was expertise disdained and diminished in standing as a societal avocation, it was a hallmark of those first people being insubordinate. It was a different kind of loyalty — not to Mao, not to Maoism and Marxism-Leninism, but to rationalism, to scientific experiment, or these other things that had a kind of a logic that defied complete and total loyalty to the Great Helmsman, whatever he represented at the time.
Whether the party was intact or not during the Cultural Revolution, it was not loyalty to Mao and the revolution versus loyalty to whatever other thing you might be — a scientist, a businessman loyal to profit, and policymakers who are loyal to trying to figure out the national interest. That was a huge divide.
We see that now with Trump. What he wants is not people who know something in the FDA or the FAA. He wants people who are loyal. So you got Laura Loomer, like Kang Sheng or Chen Boda or someone running around firing people and putting people in prison for Mao.
Jordan Schneider: What was the upside for Mao of getting rid of the experts?
Orville Schell: Liu Binyan, the great writer of the 1980s, wrote a book called A Higher Kind of Loyalty. This was an analysis of people who felt a loyalty, whether it was through religion, technology, science, intellect, or just ideals, to something other than the revolution and the leader.
What Mao rejected and recoiled from was professionals who were experts, who said, “No, this revolution does not make sense economically, scientifically or in any other way. It’s mayhem.” That put them immediately on the enemies list. That’s why intellectuals, and they categorized them into many different categories, were pilloried because they couldn’t be totally loyal as religious people were, because religious people owe a different loyalty to their God and to their principles and to their morality, not to the leader.
Mao couldn’t stand that, so he waged war against those people. We see sort of, I think, hints of that happening now in America where people like Fauci in the first administration of Trump were not respected at all. He was a very good scientist, very devoted public servant. We see attacks on vaccines, Robert F. Kennedy Jr., science has proven measles vaccines work. We see a lot of things like this looming up again where what’s important is not logic, but it’s loyalty to the leader.
Alexander Boyd: But Mao also resented his need for these bureaucrats, for these technical experts. And chief among them was his own Confucius, Zhou Enlai. Even though he was fighting against these empiricists and scientists, cultural leaders and everything during the Cultural Revolution, probably the number one empiricist of all was right next to him. Although at the same time many Chinese spoke about him like we spoke about John Kelly in the first term. “Oh, he’ll be able to restrain Mao’s worst instincts.” How do you read Zhou Enlai?
Orville Schell: Zhou Enlai was a restraining influence. He was also a complete factotum. When you see what he was put through, like in the rectification campaign in 1942 where he sat before the Politburo for five days, wrote self-criticism, self-immolations, humiliating, pusillanimous kind. He paid a bitter price as a human being to keep in Mao’s good-enough graces. Still, Mao endlessly tormented him and humiliated him — very smart man. And he took it. Why? That’s an interesting question.
Did he think he was doing good like Matt Pottinger in the first administration of Trump, that if he just kept his head down and tried to do a good job, he could restrain the leader? But there was also probably a lust for power, an urge towards power which kept him there. He once got that needle in his arm, it was very hard to get out or he’d end up like his friend Liu Shaoqi — imprisoned or dead.
These kinds of leaders demand not one-time propitiation declarations of fealty and loyalty, but continuous. The leader keeps ramping up the ask. If the lieutenant wants to stay in their graces, they have to keep becoming more and more genuflective. We see an awful lot of people left the first administration of Trump and now he’s already lost all the people he’s lost. I mean, Rubio, everybody. He’s taken over positions of Waltz and others who drop like flies because it’s very difficult to satisfy the demands of autocrats who require 200% loyalty.
Alexander Boyd: Is part of this the “Coalitions of the Weak” thesis put out by Victor Shih about how Mao would often rehabilitate disgraced cadres? You saw that with Deng Xiaoping, you saw that with Zhou Enlai, he’d constantly send people down, bring them back, criticize them, humiliate them, purge them, restore them, and it ended up necessitating their loyalty. They created psychological dependence, but also political dependence.
Especially with Victor Shih, he’s talking about the Fourth Front Army in the Long March, I believe Zhang Guotao. Is that a similar coalition with Trump and Mao? And how did Mao’s coalition of the weak work? And is that an effective governance tool? We might be skeptical of it, but Rubio, who has no basis left in the GOP, has basically been entirely kneecapped, was humiliated in his run — he’s Zhou Enlai exactly. But he could also be our Deng Xiaoping.
Orville Schell: If you want some good reading, go back and read Deng Xiaoping’s self-criticism during the Cultural Revolution. He just abased himself and said over and over again, “I didn’t know Chairman Mao. I didn’t appreciate the brilliance of Chairman Mao.” Even he went through the ultimate humiliation but survived intact.
I was in Washington and went on the whole trip when Deng arrived in 1979 to normalize relationships. And you did get the sense of somebody who had his own sense of gravity about him, wasn’t a deeply insecure person just craving slavish loyalty. Deng Xiaoping was different. I would say Zhao Ziyang 赵紫阳 and Hu Yaobang 胡耀邦 were also different. When you look through the different leaders, you want to get back and judge their character. Yes, times were different, but Deng Xiaoping was special because he had seniority. He did get cashiered twice, but he never lost his fundamental sense of himself, which I think many other people did.
Alexander Boyd: Let’s be optimistic here and say there’ll be a post-Trump GOP. How did those Chinese survivors like Deng Xiaoping, Zhao Ziyang, etc. make it through Mao’s Cultural Revolution? And what could that tell you for an aspiring politician today hoping to make it through Trump 2.0 and still have a political career?
Orville Schell: Xi Jinping made it through and he’s done alright. There’s no simple answer. In the good old days when you also had imperial autocracies in the form of emperors, if you ran afoul of the government, you could run up into the mountains and become a Buddhist monk or a Taoist priest, and mind your own business. But that wasn’t possible under Mao.
We’ll see about what happens in America. I suspect we won’t get to such a state in America, but who knows? The question is, during autocracy, authoritarian rule, what should good people do? If you stick your head up, it gets chopped off. You can run abroad, you’re just in waiting. There’s not much you can do. It is a good question, and I’m not sure I know the answer to it. Keep saying what we need to say as we are here today. In China, that was not possible under Mao. It was not possible under Mao ever since the early 1940s when he began lowering the boom, wanting to create a new man and a new era, bringing on thought reform, rectification, and all the rest of it.
Jordan Schneider: Let’s stay on this dilemma of the officials who know that they are living in crazy times but still want to help the people. What’s the right way to kind of look at what Deng and Zhou and others did in the Mao period?
Orville Schell: They’re always dancing on a razor’s edge. You know, it's not a, a dance I would care to know how to get out of. Fair enough. Some of these people — and Zhou Enlai had a measure of this, I wager — you want to do good by the people but the cost of staying in the game is very high.
The people in the Trump administration, in the first go around, there were a few, some quit and they did in some significant measure keep their integrity intact. And they did do some good restraining things. I think this administration is much harder. He’s bringing in the — Elon Musk is like a leader of Red Guards and the Proud Boys are Red Guards equivalent.
It’s a very difficult human dilemma to know if you want to be in government and you are drawn to political power, how do you do it now? Can you do it? Or should you just become a Buddhist monk or a Taoist priest and just go up on your mountain and wait? I don’t know the answer to that. Us who are writers? Who have not been in political power, don’t want to be in political power. We’re not drawn to that flame. So we do what we do.
Jordan Schneider: Comparing America 2025 to anytime in Mao’s reign, the downsides of recording a podcast like this are much lower.
Orville Schell: For now Jordan, but people have long memories and there are archives and there are a lot of people. The way Xi Jinping’s father fell the second time was over a book about a big leader in northwest Shaanxi province, Liu Zhidan 刘志丹, that he allowed to be published. Mao said, “Well, you’re trying to put too much emphasis on him as the hero, not me.” Anyway, it’s a long, complicated story, but simply to say that sometimes small things done in past, to autocratic regimes like China, are grounds for you being pilloried in the future.
Jordan Schneider: We’ll get into that arc with Joseph later this summer. I’m still feeling okay about our freedom to podcast.
Orville Schell: I’m glad you’re doing it. My virtue is that I’m a little older. I don’t need to be so worried about my future.
Alexander Boyd:Michael Berry talks about this in his writing about Fang Fang — the term míng zhé bǎo shēn (明哲保身) means, “Don’t speak out in order to preserve yourself.” I personally think that in the United States, we have a great privilege to be able to speak out, and we should exercise that privilege.
Orville Schell: We still do. The government in sort of in the shape it’s in, it puts all the more burden on the institutions of civil society. Universities, think tanks, libraries, and community organizations do not owe fealty to the central government, but owe fealty to what they do. Media would be another very important example — cultural organizations, orchestras, operas, whatnot.
Alexander Boyd: Trump has shown an immense fascination with the Kennedy Center in D.C., which is where I’m based. I think it was Cats that was his favorite.
Bach and Bloodlines
Alexander Boyd: Let’s talk, Orville, about bloodline theory. What was bloodline theory during the Cultural Revolution? Why did it matter? Mao himself wasn’t an endorser of bloodline theory, but it did have a lot of influence.
Trump always talks about genes. “It’s all in the genes.” Quite recently, he weighed in on the NFL draft about a quarterback who’s sliding, Shedeur Sanders, and saying, “He has phenomenal genes. They should have picked him because his dad was such a good player.” Is bloodline theory another parallel with the Cultural Revolution ?
Orville Schell: During the Cultural Revolution, the notion of bloodlines worked like this: if your father was a hero, so you were good to go. But on the other hand, if your father was someone of questionable background, then you bore that stigma. You were placed in that class category because families were categorized based on their class background.
As you all remember, Mao had this notion that certain classes had rights and were revolutionary, while certain classes — like the bourgeoisie and landlords — didn’t have rights. The bloodline concept was very pernicious because it meant that if your father was labeled as a counter-revolutionary, a rightist, a capitalist roader, or a bourgeois element, the children inherited that stigma through blood.
That’s why it’s fascinating to delve into familial relationships in any Chinese family. Xi Jinping is the most important case here because he’s now the leader. But I should also mention that in my experience — and this may be better explored in literature than in nonfiction — there’s a cascading effect. All the harm, damage, and attacks that occurred throughout the fifties, sixties, and seventies in China have endured across generations in the Chinese families I know, going from grandfather to father to son to grandson. They persist like microplastics in the ocean — they’re forever chemicals in a way.
We’ve paid no attention to this phenomenon. The way these experiences deranged families, destroyed people’s ability to respect and love their parents, caused betrayals of friendships, and led to the savage attacks that people inflicted on one another — Red Guards attacking their teachers — all of this continues to reverberate.
This trauma isn’t something you get over the next day, and it lives on in ways that are very difficult to analyze. There’s no data, and China doesn’t have a vigorous psychoanalytic tradition to help people understand what influences may have been passed down to them through their experiences with parents who suffered.
The Cultural Revolution was deep, and its consequences are enduring. That’s why, when Deng Xiaoping came to power and waved his wand to rehabilitate people, saying it was a new era, I felt incredibly skeptical. I believed there was a whole residue of impact deeply embedded within society and human beings.
There had been so much damage — not just Mao and the party treating people badly, but people being forced to treat their spouses badly, their children badly, their relatives, friends, and colleagues. This is something that endures.
Alexander Boyd: This endures in China to this day, you argue. When was your most recent trip back to China, and how do you see it enduring today?
Orville Schell: My most recent trip was just as the COVID pandemic hit. All you have to do is talk to your friends. I have a friend who went to Harvard, had a very difficult time with her parents, grew up in China, and she set up a group for Chinese women similar to her to discuss this. I found that incredibly interesting.
Some of the things that they stumbled upon as they were trying to analyze the relationships they have with their parents — how are they influenced by the relationship their parents had to their parents and to society, and power. Very few people have wandered into this field.
Robert J. Lifton, a wonderfully brilliant psychoanalyst who wrote Thought Reform and the Psychology of Totalism in the 50s and then Revolutionary Immortality about Mao’s quest to make himself immortal so that his legacy would live on. There have been very few people — Lucien Pye, Richard Solomon — who’ve actually looked into the human element. That’s why I wrote a novel, because I felt I couldn’t touch it as a nonfiction writer. I didn’t get to the question of the role of religion, music, culture, love, family. All of these things are abiding human concerns.
Alexander Boyd: You titled that novel after a Lu Xun 魯迅 essay. How come?
Orville Schell: I love that essay, My Old Home (故鄉). It’s a very wistful essay about returning home after things changed. My novel was about a classical musician and what happened to him when he returned back to China in the 50s as a lover of Bach.
If I may say so, there is no human being whom I think is more antithetical to Chairman Mao than Johann Sebastian Bach. In fact, I want to write a play called “My Dinner with Johann,” where they have a conversation. Because Bach was all about religion. Mao Zedong was all about the external. Something’s wrong? It’s out there, not in here.
Yes, Confucianism did have a notion of self-cultivation, but it’s not like Christianity.
Jordan Schneider: Well, we have to end with the ChatGPT imagined conversation between Bach and Mao.
Orville Schell: There was a show Henry Kissinger went to, and Robin Williams started wandering down the aisle afterwards. He passed Kissinger, and he was saying things to people as he went. He said, “Oh, Henry, love all your wars.” I could imagine Bach starting off by saying to Mao, “Love all your revolutions.”
Jordan Schneider: This is how we’re going to start. Rewrite with Bach saying sarcastically to Mao, “Love all your revolutions. ” Alex, you’re Bach. Let’s go.
Alexander Boyd: Love all of your revolutions, Chairman. Tossing the world upside down seems to be your favorite key signature.
Jordan Schneider: Upside down is where history finds its balance, Herr Bach. The masses must turn the old order on its head to set it upright.
Orville Schell: Now you’re talking like a robot, like a propaganda minister. I think Mao would say, “Tell me, Johann, what’s all this about Jesus? Why are you so obsessed with Jesus?” That would get Bach rolling. You remember when Clinton was in China, where he went into the Great Hall of the People for the press conference. At one point, Jiang Zemin, completely sui generis, said to Clinton, “Mr. President, I have a question. Why are so many Americans so interested in the Dalai Lama and Tibetan Buddhism?” He was speaking in Chinese. Of course, Clinton went on a tear. But I thought that was a sort of interesting question to ask. You can’t imagine Xi Jinping asking such a question.
Alexander Boyd: What did Clinton say?
Orville Schell: Clinton said something like, “Chairman Jiang, I think if you had a chance to meet the Dalai Lama, you’d really like him.” Jiang, who’d been off script and bantering in a very nice human way with Clinton, grabbed the podium and, as I recollect, he said, “With your permission, Mr. President, shall we close this section?”
Jordan Schneider: Let’s talk about Rise and Fall of the Third Reich for a second. What stuck out to you about that book?
Orville Schell: I’m very curious where we are on this sort of scenario — how Germany headed off into fascism and the Third Reich. It’s pretty frightening when you look back at the various steps, at what happened and who didn’t say anything, who just shut up.
There’s a wonderful diary of Victor Klemperer, who was the cousin of a famous conductor. He kept a daily record of what happened. He was Jewish, his wife was Catholic, and he lived in Potsdam. They keep saying, “Surely something will happen, surely someone will come, and that can’t be it. Surely the Allies will come in.” Of course, they didn’t. We ended up with Hitler being elected Vice Chancellor, then we’re off to the races.
I’m very interested in how things slide into this state where you end up with an autocracy. Remember that Germany was the highest form of European civilization, and yet you ended up with Hitler.
Alexander Boyd: I’m also reading Hitler-specific these days. I’m reading Ian Kershaw’s two-part, two-volume biography of Hitler. I just finishedHubrisand now I’m onto Nemesis.
Jordan Schneider: Orville, do you know Ian Kershaw? I’ve been trying to find his email address.
Orville Schell: I don’t know him but he would be great to get on and just walk him through the steps. There are some wonderful, wonderful books about that period that we need to know more about. Because you see how a slow erosion step by step, step by step with a kind of charismatic crackpot leader leading the charge and how it happens and how people just don’t rise to the occasion to stop it. They think, “Oh the courts will do it, oh something will do it,” but sometimes they don’t.
This is why I think comparing Trump to Xi is interesting and worthwhile doing. Although some of your more rigorous scholars may think there’s no data, no theoretical constructs, but for me it’s the heart of the matter. It has a lot to do with how people grow up. Autocratic leaders write themselves as very large — democratic leaders don’t have that opportunity as much. When you’re in big leader culture land, whether Putin, Kim Jong Un, Xi Jinping, Orban, whoever, it really matters who they are and where they came from and what their sort of operating system is, who installed it and when.
You can say fairly safely, although there are a lot of amazingly wonderful people in China — I have to say, and I married one — but the Cultural Revolution created massive amounts of personal, psychological, intellectual damage. It wasn’t just people got killed, people got in jail for a little while, and then Deng waved his wand and it was all over. That’s not how historical trauma works.
That’s why I find Torigan’s book so interesting. To his credit, he doesn’t do what I’ve just done, which is draw conclusions or try to draw gratuitous conclusions. He just tells the story. It’s a monumental job of research. You can draw your own conclusions, and that’s what I intend to do in Foreign Affairs.
Alexander Boyd: Any hints on those conclusions that are coming out soon?
Orville Schell: I want to make some surmises about what growing up in the Cultural Revolution meant to the formation of Xi Jinping, his form of governance today.
Alexander Boyd: According to the book, Xi Zhongxun, upon hearing of the Cultural Revolution, actually asked for his soul to be lit afire by it, which I found to be incredible research, obviously, on Torigan’s part to get this. Does that indicate that Xi Zhongxun, for whom the Party always came first, was unable fundamentally to connect with Mao because the Cultural Revolution was ongoing? He was already purged, but he yearned desperately for this. It’s kind of like a priest who doesn’t hear God’s voice calling. Is that a correct analysis?
Orville Schell: The Party — and Zhou Enlai suffered from this too — they all did. Some of them did have a sense that something was deeply awry. But there was no other show in town except the Party and the Revolution. They were veteran revolutionaries.
Xi Zhongxun, no matter what they did to him, and what they did to him was pretty horrendous, though not the worst, he never lost his belief in the Revolution and the Party. That’s what he imbued his son with. Yes, bad things happen. We can’t have chaos again. But the party is fundamentally right. The revolution cannot be questioned.
It’s a classic case of where people have no other place to turn except run off into the hills if you can. And we see this in our own government now. People desperately wanting to be in the limelight, in power, in government. And they have all kinds of rationalizations. Rubio, my God, he used to think Trump was a buffoon. Now he’s sold his soul. Read Doctor Faustus.
Jordan Schneider: My favorite line with Rubio is there’s an old New Yorker profile of him where he reads The Last Lion, the Churchill biography. And he said he read it twice and that he saw himself as Churchill, like warning about the Nazis. The analogy was Iran getting the bomb or something. But to go from that to where we are today is something.
Orville Schell: Power is an incredible intoxicant. Once you get that needle in your arm, that’s your currency and that’s your realm. It’s very hard to imagine what else you’re going to do with yourself. That’s why as a writer, I’ve always said, “No, not going there.” I’m just going to stay a lowly scribe. I don’t even particularly yearn to go to China now because I know if I did yearn to go, that would circumscribe me, it would make me feel I couldn’t say certain things because I’d know there’d be consequences.
I told you this, Jordan. In 1991, I did a year-long project with 60 Minutes on forced labor and the Laogai system. It aired. It was incredible. We got into prison camps. I kept a diary of it, and I edited it and sent it to The New Yorker. They edited it and were about to go into print and I looked at it and said, “I can’t publish this.” I was a younger man, I had a Chinese wife, and I had parents-in-law in China. I threw it in a box.
I pulled it out two years ago and thought, “My God, the question of forced labor in Xinjiang is more relevant than ever.” I took it out. That will be the end of me in terms of grace from the Chinese Communist Party. But that’s okay. I’d rather that than I can’t write and say what I think. I think I was right to put it in a box then. But that’s not a healthy tendency for any society. You remember chōutì wénxué (抽屉文学), “drawer literature,” things that people could only write and put in a drawer.
Orville Schell: Perry Link is sort of the avatar of the Chinese version of that. I recommend his book on Liu Xiaobo, and he’s just written another book,The Anaconda in the Chandelier. I think that’s a really important question.
You know, intellectuals are poor, weak creatures, and those who stand up — readBlood Letters. Alex, will you send Jordan the Elaine Pagels program we did on the comparison of Jesus and Lin Zhao? We had them both on stage talking about the role that faith plays in adversity and revolution. We started off with Bach, a beautiful aria. I wanted Bach as the avatar of being in the mix. You’ll enjoy this, Jordan.
Jordan Schneider: All right, well, we’ll put it in the show notes as well.
Orville Schell: It’s hard to explain to people, but if you watch it, you’ll understand.
Alexander Boyd: On Orville’s note on publishing and not publishing, we just published an excerpt from Perry Link’s forthcoming book, The Anaconda in the Chandelier.
Jordan Schneider: All right, thanks so much for being a part of ChinaTalk, Orville.
Orville Schell: As always, it’s a great pleasure. You have a great program, Jordan.
of the substack did an excellent job writing up the key dynamics of the deal. I’ll be running excerpts from his post with some comments of mine interspersed.
Our government, having withdrawn the new diffusion rules, has now announced an agreement to sell massive numbers of highly advanced AI chips to UAE and Saudi Arabia (KSA). This post analyzes that deal and that decision.
It is possible, given sufficiently strong agreement details (which are not yet public and may not be finalized) and private unvoiced considerations, that this deal contains sufficient safeguards and justifications that, absent ability to fix other American policy failures, this decision is superior to the available alternatives. Perhaps these are good deals, with sufficiently strong security arrangements that will actually stick.
Perhaps UAE and KSA are more important markets and general partners than we realize, and the rest of the world really is unable to deploy capital and electrical power the way they can and there is nothing we can do to change this, and perhaps they have other points of strategic importance, so we have to deal with them. Perhaps they are reliable American allies going forward who wouldn’t use this as leverage, for reasons I do not understand. There are potential worlds where this makes sense.
The fact remains that the case being made for this deal, in public, actively makes the situation seem worse. David Sacks in particular is doubling down and extending the rhetoric I pushed back against last week, when I targeted Obvious Nonsense in AI diffusion discourse. Even within the White House, the China hawks are questioning this deal, and Sacks responded by claiming to not even understand their objections and to all but accuse such people of being traitorous decels wearing trench coats.
I stand by my statements last week that even if accept the premise that all we need care about are ‘America wins the AI race’ and how we must ‘beat China,’ our government’s policies, on diffusion and elsewhere, seem determined to lose an AI race against China.
The Central Points From Last Week
The point of the diffusion rules is to keep the AI chips secure and out of Chinese hands, both in terms of physical security and use of their compute via remote access. It is possible that the agreements we are making with UAE and KSA will replace and improve upon the functionality, in those countries in particular, of the diffusion rules.
It’s not about a particular set of rules. It is about the effect of those rules. Give me a better way to get the same effect, and I’m happy to take it. When I say ‘something similar’ below, I mean in the sense of sufficient safeguards against the diversion of either the physical AI chips or the compute from the AI chips. Access to those chips is what matters most. Whereas market share in selling AI chips is not something I am inclined to worry about except in my role as Nvidia shareholder.
I do not consider them reliable allies going forward, and there are various reasons that even the best version of these agreements would make me deeply uncomfortable, but it is possible to reach an agreement that physically locates many data centers in the Middle East and lets them reap the financial benefits of their investments and have compute available for local use, but does not in the most meaningful senses ‘hand them’ the compute in question. As in, no I do not trust them, but we could find a way that we do not have to, if they were fully open to whatever it took to make that happen.
I also would highlight the implicit claim I made here, that the pool of American advanced AI chips is essentially fixed, and that we have sufficient funding available in Big Tech to buy all of them indefinitely. If that is not true, then the UAE/KSA money matters a lot more. Then there is the similar question of whether we were going to actually run out of available electrical power with no way to get around that. A lot of the question comes down to: What would have counterfactually happened to those chips? Would we have been unable to deploy them?
[Jordan: See ChinaTalk’s recent coverageof an excellent IFP report that explored what a policy agenda to rapidly increase the energy available for AI deployment would look like]
With that in mind, here are the central points I highlighted last week:
America is ahead of China in AI.
Diffusion rules serve to protect America’s technological lead where it matters.
UAE, Qatar and Saudi Arabia are not reliable American allies, nor are they important markets for our technology. We should not be handing them large shares of the world’s most valuable resource, compute.
The exact diffusion rule is gone but something similar must take its place, to do otherwise would be how America ‘loses the AI race.’
Not having any meaningful regulations at all on AI, or ‘building machines that are smarter and more capable than humans,’ is not a good idea, nor would it mean America would ‘lose the AI race.’
AI is currently virtually unregulated as a distinct entity, so ‘repeal 10 regulations for every one you add’ is to not regulate at all building machines that are soon likely to be smarter and more capable than humans, or anything else either.
‘Winning the AI race’ is about racing to superintelligence. It is not about who gets to build the GPU. The reason to ‘win’ the ‘race’ is not market share in selling big tech solutions. It is especially not about who gets to sell others the AI chips.
If we care about American dominance in global markets, including tech markets, stop talking about how what we need to do is not regulate AI, and start talking about the things that will actually help us, or at least stop doing the things that actively hurt us and could actually make us lose.
Diffusion Controls Have Proven Vital
Diffusion controls on AI chips we’ve enforced on China so far have had a huge impact. DeepSeek put out a highly impressive AI model, but by their own statements they were severely handicapped by lack of compute. Chinese adoption of AI is also greatly held back by lack of inference compute.
China is competing in spite of this severe disadvantage. It is vital that we hold their feet to the fire on this. China has an acute chip shortage, because it physically cannot make more AI chips, so any chips it would ship to a place like UAE or KSA would each be one less chip available in China.
Whenever you see arguments from David Sacks and others against AI diffusion rules, ask the question:
Is an argument for a different set of export controls and a different chip regime that still protects against China getting large quantities of advanced AI chips?
As in, that what matters is our market share of AI chips, not who uses them?
This is not a strawman, for example Ben Thompson argues exactly this very explicitly and repeatedly. Ben Thompson’s recent interview with Jensen Huang, CEO of Nvidia, made it clear both of them have this exact position. That to maintain America’s edge in AI, we need to sell our AI chips to whoever wants them, including China, because ‘China will not be held back’ as if having a lot more chips wouldn’t have helped them. And essentially saying that all Nvidia chips everywhere support the ‘American tech stack’ rather than China rather obviously turning around and using them for their own tech. He explicitly is yelling we need to ‘compete in China’ or else.
Complete Obvious Nonsense talking of his own book, which one must remind oneself is indeed his job, what were you really expecting him to say? Well, what he is saying is that the way we ‘lose the AI race’ is someone builds a CUDA alternative or steals Nvidia market share. That his market is what matters. It’s full text. Not remotely a strawman.
I would disagree with arguments of form #2 in the strongest possible terms. If it’s arguments of form #1, we can talk about it.
Lennart Heim: To put the new 5GW AI campus in Abu Dhabi (UAE) into perspective. It would support up to 2.5 million NVIDIA B200s.
That's bigger than all other major AI infrastructure announcements we've seen so far.
In exchange for access to our chips, we get what are claimed to be strong protections against chip diversion, and promises of what I understand to be a total of $200 billion in investments by the UAE. That dollar figure is counting things like aluminum, petroleum, airplanes, Qualcomm and so on. It is unclear how much of that is new.
The part of the deal that matters is that a majority of the UAE investment in data centers has to happen here in America.
I notice that I am skeptical that all the huge numbers cited in the various investment ‘deals’ we keep making will end up as actual on-the-ground investments. As in:
Walter Bloomberg: UAE PRESIDENT SAYS UAE TO INVEST $1.4T IN U.S OVER NEXT 10 YEARS
At best there presumably is some creative accounting and political symbolism involved in such statements. Current UAE foreign-direct-investment stock in the USA is only $38 billion, their combined wealth funds only have $1.9 trillion total. We can at best treat $1.4 trillion as an aspiration, an upper bound scenario. If we get the $200 billion we should consider that a win, although if the deal is effectively ‘all your investments broadly are in the West and not in China’ then that would indeed be a substantial amount of funds.
Nor is this an isolated incident. The Administration is constantly harping huge numbers, claiming to have brought in $14 trillion in new investment, including $4 trillion from the recent trip to Arabia, or roughly half of America’s GDP.
Jason Furman (top economic advisor, Obama White House): That’s nuts and baseless. I doubt the press releases even add up to that. But, regardless, press releases are a terrible way to determine the investment or the impact of his policies on it.
Justin Wolfers: Trump has claimed a $1.2 trillion investment deal from Qatar. Qatar’s annual GDP is a bit less than $250 billion per year. So he’s claiming an investment that would require every dollar every Qatari earned over the next five years.
Not that the numbers ultimately matter all that much. What does matter is: How will we ensure the chips don’t fall literally or functionally into Chinese hands?
It comes down to the security provisions and who is going to effectively have access to and run all this compute. I don’t see here any laying out of the supposed tough security provisions.
Without going into details, if the agreements on both physical and digital security are indeed implemented in a way that is sufficiently tough and robust, if we are the ones who both physically and digitally control and monitor things on a level at least as high as domestically, and can actually have confidence none of this will get diverted, then that goes a long way.
We don’t yet have enough of that information to say.
The public explanations for the deal, and the public statements about what safety precautions are considered necessary, do not bring comfort.
I very much do not like comments like this, made in response to the Bloomberg piece above.
David Sacks (US AI Czar): If the concern [about the deal] is about diversion of advanced semiconductors to China, that’s an important policy objective but one that is easily addressed with a security agreement and a “trust but verify” approach. Modern AI supercomputers are 8 feet tall and weigh two tons; these are not like diamonds smuggled in a briefcase. To verify that chips are where they’re supposed to be, an auditor can just visit the data center and count server racks.
Semianalysis: As such, physical inspections are key to ensuring the GPUs are where they are supposed to be. The White House is aware of the risks and is prepared to ensure the chips are where they are supposed to be. As Bloomberg reported (quotes David Sacks’s statement above).
I’m sorry, what? You can ‘just visit the data center and count server racks’?
It terrifies me to see so many people arguing for the deal explicitly saying that this is a good statement, rather than a terrifying statement that we are hoping no one involved in the actual work believes to be true.
[Jordan:In 2022 I did a show with Kevin Wolf, the former head of BIS, who mentioned off-hand that there were literally only two people Commerce had in China to do site inspections. Since then BIS’ budget has barely budged and faced DOGE cuts in the early days of this administration. There is not the capacity to do datacenter inspections in a serious way today.]
Jordan Schneider: Let's start with the last thing first. This 60-day unverified list: is there a potential that the impact of this could actually be a lot bigger than what we currently see, if some of these big names on the unverified entity list end up graduating to full entity-list status?
Kevin Wolf: It's really up to the Chinese government. If they allow access, give the information that the Commerce Department is seeking, and allow the two people in China that do inspections and site visits to do their jobs…
Jordan Schneider: Whoa, wait, two? There are, like, 30 firms on there!
Kevin Wolf: Yeah, I know, but no other country has any, and the Commerce Department is the only export control organization on the planet with its own enforcement agents who are subject matter experts in export controls.
I think diversion via remote access is far more likely than physical diversion, and this response does not address the remote access issue at all, but even simply treating this as a physical diversion issue, o3, is the quoted statement accurate?
o3 (full one shot, full response quoted, in response to literally quoting Sacks without attribution and asking ‘is this accurate?’):
Short version: Mostly wrong. Chips are tiny and high-value, so diversion is hard to stop with “count the racks.” Physical audits help but they are far from sufficient.
Why “just count server racks” fails
High value-to-weight ratio. At ~$30 k per H100, a single 20 kg carry-on full of GPUs is > $1 m. That’s an attractive target. Racks are heavy; the payload isn’t.
Modularity. GPUs slide out in minutes. An auditor sees the enclosure; they cannot tell if the trays were swapped yesterday or will be tomorrow. Dummy blanks cost <$10.
Front companies & trans-shipping. Chips often leave the compliant data-center before any inspection window. Paperwork shows them installed; reality changes after the auditor flies home.
Remote lease risk. Even if the hardware stays in the U.S., Chinese entities can simply rent time on it. Export-control rules treat “deemed exports” (remote access by restricted users) as violations.
Limited audit frequency & competence. Meaningful verification requires random, intrusive, technically savvy inspections plus cryptographic attestation of firmware. Counting racks is neither.
Bottom-line probability estimate
My best estimate: ≤ 30 % that “security agreement + occasional rack counting” alone keeps advanced GPUs out of China for > 3 years. ≥ 70 % that significant leakage continues absent tighter controls (HW tracking, cryptographic attestation, and supply-chain tagging).
So the quoted claim is misleading: rack-level audits are helpful but nowhere near “easily addresses” the diversion problem.
When I asked how many chips would likely be diverted from a G42 data center if this was the security regime, o3’s 90% confidence interval was 5%-50%. Note that the G42 data center is 20% of the total compute here, so if we generously assume no physical diversion risk in the other 80%, that’s 1%-10% of all compute we deploy in the UAE.
Is that acceptable? The optimal amount of chip diversion is not zero. But I think this level of diversion would be a big deal, and the bigger concern is remote access.
I want to presume, for overdetermined reasons, that Sacks’s statement was written without due consideration or it does not reflect his actual views, and we would not actually make this level of dumb mistake where they could literally just swap the chips out for dummy chips. I presume we are planning to use vastly superior and more effective precautions against chip diversion and also have a plan for robust monitoring of compute use to prevent remote access diversion.
But how can we trust an administration to take such issues seriously, if their AI Czar is not taking this even a little bit seriously? This is not a one time incident. Similar statements keep coming. That’s why I spent a whole post responding to them.
David Sacks is also quoted extensively directly in the Bloomberg piece, and is repeatedly very dismissive of worried about diversion of chips or of compute, saying it is a fake argument and an easy problem to solve, and he talks about these as if they were reliable American allies in ways I do not believe are accurate.
Sacks also continues to appear to view winning AI to be largely about selling AI chips. As in, if G42, an Abu Dhabi-based AI firm, is using American AI chips, then it essentially ‘counts as American’ for purposes of ‘winning,’ or similar. I don’t think that is how this works, or that this is a good use of a million H100s. Bloomberg reports 80% of chips headed to the UAE would go to US companies, 20% to G42.
I very much want us to think about the actual physical consequences of various actions, not what those actions symbolize or look like. I do think, despite everything else, it is a very good sign that David Sacks is ‘urging people to read the fine print.’ This is moderated by the fact that we do not have the fine print, so we can’t read it. The true good news there requires one to read all that fine print, and one also should not assume that the fine print will get implemented. Nor do we yet have access to what the actual fine print says, so we cannot read it.
Semianalysis Defends the Deal
Dylan Patel and others at Semianalysis offer a robust defense of the deal, saying clearly that ‘America wins’ and that this benefits American AI infrastructure suppliers on all levels, including AI labs and cloud providers.
They focus on three benefits: money, tying KSA/UAE to our tech stack, and electrical power, and warn of the need for proper security, including model weight security, a point I appreciated them highlighting.
Those seem like the right places to focus, and the right questions to ask. How much of their money is really up for grabs and how much does it matter? To what extent does this meaningfully tie UAE/KSA to America and how much does that matter? How much do we need their ability to provide electrical power? How will the security arrangements work, will they be effective, and who will effectively be in charge and have what leverage?
Specifically, on their three central points:
They call this macro, but a better term would be money. UAE and KSA (Saudi Arabia) can make it rain, a ‘trillion-dollar floodgate.’ This raises two questions.
Question one: Was American AI ‘funding constrained’? The big tech companies were already putting in a combined hundreds of billions a year. Companies like xAI can easily raise funds to build giant data centers. If Google, Amazon, Apple, Meta or Microsoft wanted to invest more, are they really about to run out of available funding? Are there enough more chips available to be bought to run us out of cash?
Semianalysis seems to think we should be worried about willingness of American companies to invest here and thinks we will have trouble with the financing.
I am not convinced of this. Have you seen what these companies (don’t have to) pay on corporate bonds? Did we need to bring in outside investors? Should we even want to, given these investments look likely to pay off?
This is a major crux. If indeed American big tech companies are funding constrained in their AI investments, then the money matters a lot more. Whereas if we were already capable of buying up all the chips, that very much cuts the other way.
Question two: As we discussed earlier, is the trillion-dollar number real? We keep seeing these eye-popping headline investment numbers, but they don’t seem that anchored to reality, and seem to include all forms of investment including not AI, although of course other foreign direct investment is welcome.
Do their investments in US datacenters mean anything, and are they even something we want, given that the limiting factor driving all this is either constraints on chip availability or on electrical power? Will this be crowding out other providers?
If these deals are so positive for American tech companies, why didn’t the stock market moves reflect this? No, I will not accept ‘priced in.’
They call this geopolitical, that UAE and KSA are now tied to American technology stacks.
As they say, ‘if Washington enforces tight security protocols.’ We will see. David Sacks is explicitly dismissing the need for tight security protocols.
Classically, as Trump knows well, when the bank loans you a large enough amount and you don’t pay it back, it is the bank that has the problem. Who is being tied to whose stack? They will be able to at least cut the power any time. It is not clear from public info what other security will be present and what happens if they decide to turn on us, or use that threat as leverage. Can they take our chips and their talents elsewhere?
This can almost be looked at as a deal with one corporation. G42 seems like it’s going to effectively be on the UAE side of the deal, and it is going to have a lot of chips in a lot of places. A key question is, to what extent do we have the leverage on and control over G42, and to what extent does this mean they will act as a de facto American tech company and ally? How much can we trust that our interests will continue to align? Who will be dependent on who? Will our security protocols extend to their African and European outposts?
Why does buying a bunch of our chips tie them into the rest of our stack? My technical understand is that it doesn’t. They’re only tied to the extent that they agreed to be tied as part of the deal (again, details unknown), and they could swap out that part at any time. In my experience you can change which AI your program uses by changing a few lines of code, and people often do.
It is not obvious why KSA and UAE using our software or tech stack is important to us other than because they are about to have all these chips. These aren’t exactly huge markets. If the argument is they have oversized effect on lots of other markets, we need to hear this case made out loud.
Seminanalysis points out China doesn’t even have the capacity to sell its own AI chips yet. And I am confused about the perspectives here on ‘market share’ and the implied expectations about customer lock-in.
They call this infrastructure, I’d simply call it (electrical) power. This is the clearly valuable thing we are getting. It’s rather crazy that ‘put our most strategic asset except maybe nukes into the UAE and KSA’ was chosen over ‘overrule permitting rules and build some power plants or convince one of our closer allies to do it’ but here we are.
So the question here is, what are the alternatives? How acute is the shortage going to be and was there no one else capable of addressing it?
Also, even if we do have to make this deal now, this is screaming from the rooftops, we need to build up more electrical power everywhere else now, so we don’t have this constraint again in the future.
Semianalysis also raises the concern about model weight security, but essentially think this is solvable via funding work to develop countermeasures and use of red teaming, plus defense in depth. It’s great to see this concern raised explicitly, as it is another real worry. Yes, we could do work to mitigate it and impose good security protocols, and keep the models from running in places and ways that create this danger, but will we? I don’t know. Failure here would be catastrophic.
Understanding the China Hawks
There are also other concerns even if we successfully retain physical and digital control over the chips. The more we place AI chips and other strategic AI assets there, the more we are turning UAE, Saudi Arabia and potentially Qatar into major AI players, granting them leverage I believe they can and will use for various purposes.
David Sacks continues to claim to not understand that others think that ‘winning AI’ is mostly not about who gets to sell chips, who uses our models and picks up market share, or about superficially ‘winning’ ‘deals.’
He not only thinks it is about market penetration, he can’t imagine an alternative. He doesn’t understand that many, including myself, this is about who has compute and who gets superintelligence, and about the need for proper security.
David Sacks: I’m genuinely perplexed how any self-proclaimed “China Hawk” can claim that President Trump’s AI deals with UAE and Saudi Arabia aren’t hugely beneficial for the United States. As leading semiconductor analyst Dylan Patel observed, these deals “will noticeably shift the balance of power” in America’s favor. The only question you need to ask is: does China wish it had made these deals? Yes of course it does. But President Trump got there first and beat them to the punch.
Sam Altman: this was an extremely smart thing for you all to do and i’m sorry naive people are giving you grief.
Tripp Mickle and Ana Swanson (NYT): One Trump administration official, who declined to be named because he was not authorized to speak publicly, said that with the G42 deal, American policymakers were making a choice that could mean the most powerful A.I. training facility in 2029 would be in the United Arab Emirates, rather than the United States. [Jordan: this is a wild line to be giving to the NY Times—I thought all the China hawks already got purged!]
But Trump officials worried that if the United States continued to limit the Emirates’ access to American technology, the Persian Gulf nation would try Chinese alternatives.
The hawks are concerned, because the hawks largely do not think that the key question is who will get to sell chips, but rather who gets to buy them and use them. This is especially true given that both America and China are producing as many top AI chips as they can, us far more successfully, and there is more than enough demand for both of them. One must think on the margin.
Given that so many China hawks are indeed on record doubting this deal, if you are perplexed by this I suggest reading their explanations. Here is one example.
Tripp Mickle and Ana Swanson (NYT): Mr. Goodrich said the United States still had the best A.I. engineers, companies and chips and should look for ways to speed up permitting and improve its energy grid to hold on to that expertise. Setting up some of the world’s largest data centers in the Middle East risks turning the Gulf States, or even China, into A.I. rivals, he said.
“We’ve seen this movie before and we should not repeat it,” Mr. Goodrich said.
Sam Winter-Levy, a fellow at the Carnegie Endowment for International Peace, said the huge chip sales did “not feel consistent with an America First approach to A.I. policy or industrial policy.”
“Why would we want to offshore the infrastructure that will underpin the key industrial technology of the coming years?” he asked.
This does not seem like a difficult position to understand? There are of course also other reasons to oppose such deals.
Here is Jordan Schneider of China Talk’s response, in which he is having absolutely none of it, explicitly rejecting that either America or China has chips to spare for this. rejecting that UAE and KSA are actual allies, not expecting us to follow through with reasonable security precautions, and saying if we wanted to do this anyway we could have held out for a better deal with more control than this, I don’t know why you would be confused how someone could have this reaction based on the publicly available information:
Jordan Schneider: It’s going to cannibalize US build-out and leave the world with three independent power-centers of AI hardware where we could’ve stuck to our guns, done more power generation at home, and only had China to deal with not these wild-card countries that are not actual allies. If this really is as important as we believe, why are we letting these countries and companies we deeply distrust get access to it?
The Gulf’s BATNA wasn’t Huawei chips, it was no chips. Whatever we’re trying to negotiate for, we can play harder to get. BIS can just say they can’t buy Ascends and it’s not like there’s enough capacity domestically in China to service global demand absent the TSMC loophole they charged through. Plus, we’re offering to sell them 10× the chips that Huawei could conceivably sell them anytime soon even if they use the TSMC-fabbed wafers.
Where’s the art-of-the-deal energy here? Right now I only see AMD and NVDA shareholders as well as Sama benefiting from all of this. I thought we wanted to raise revenue from tariffs? Why not charge 3× the market rate and put the premium into the US Treasury, some “Make America Great Again” industrial-development fund, use it to triple BIS’ budget so they can actually enforce the security side, put them on the hook for Gaza…I don't know literally anything you care about. How about a commitment not to invest in Chinese tech firms? Do we still care about advanced logic made in America? How about we only let them buy chips fabbed in the US, fixing the demand-side problem and forcing NVDA to teach Intel how to not suck.
Speaking of charging through loopholes, all of the security issues Dylan raises in his article I have, generously, 15 % confidence in USG being able to resolve/resist industry and politicians when they push back. If it’s so simple to just count the servers, why hasn’t BIS already done it / been able to fight upstream industry lobbying to update the chips-and-SME regs to stop Chinese build-outs and chip acquisition? What happens when the Trump gets a call from the King when some bureaucrat is trying to stop shipments because they see diversion if they ever catch it in the first place?
Why are we doing anything with G42 again? Fine, if you really decide you want to sell chips to the UAE, at the very least give American hyperscalers the off-switch. It’s not like they would’ve walked away from that offer! America has a ton to lose in the medium term from creating another cloud provider that can service at scale, saying nothing of one that has some deeply-discomforting China ties pretty obvious even to me sitting here having never gotten classified briefings on the topic.
Do the deal’s details and various private or unvoiced considerations make this deal better than it looks and answer many of these concerns? Could this be sufficient that, if looked at purely through the lens of American strategic interests, this deal was a win versus the salient alternatives? Again: That is all certainly possible!
Our negotiating position could have been worse than Jordan believes. We could have gotten important things for America we aren’t mentioning yet. The administration could have limited room to maneuver including by being divided against itself or against Congress on this. On the flip side, there are some potentially uncharitable explanations for all of this, that would be reasonable to consider.
Rhetoric Unbecoming
Instead of understanding and engaging with such concerns and working to allay them, Sacks has repeatedly decided to make this a mask off moment, and engage in a response that I would expect on something like the All-In Podcast or in a Twitter beef, but which is unbecoming of his office and responsibilities, with multiple baseless vibe and ad hominem attacks at once that reflect that he either is willfully ignorant of the views, goals and beliefs of those he is attacking and even who they actually are, or he is lying and does not care, or both, and a failure to take seriously the concerns and objections being raised. Here is another illustration of this:
David Sacks (May 17): After the Sam Bankrun-Fraud fiasco, it was necessary for the Effective Altruists to rebrand. So they are trying to position themselves as “China Hawks.” But their tech deceleration agenda is the same, and it would cost America the AI race with China.
There are multiple other people I often disagree with on important questions but whom I greatly respect who are working on in administration on AI policy. There are good arguments you can make in defense of this deal. Instead of making those arguments in public, we repeatedly get this.
Everything Sacks says seems to be about vibes and implications first and actual factual claims a distant second at best. He doesn’t logically say ‘all so-called China hawks who don’t agree with me are secret effective altruists in trench coats and also decels who hate all technology and all of humanity and also America,’ but you better believe that’s the impression he’s going for here.
Could China Have ‘Done This Deal’?
Would China have preferred to ‘do this deal’ instead? That at best assumes facts, and arguments, not in evidence. It depends what they would get out of such a deal, and what we’re getting out of ours, and also the security arrangements and whether we’ve formed a long lasting relationship in which we hold the cards.
I’m also not even sure what it would mean for China to have ‘done this deal,’ it does not have what we are offering. Semianalysis says they don’t have similar quantities of chips to sell, and might not have any, nor are their chips of similar quality.
I do agree China would have liked to ‘do a deal’ in some general sense, where they bring UAE/KSA into their orbit, on AI and otherwise, although they don’t need access to electrical power. More capital and friends are always helpful. It’s not clear what that deal would have looked like.
[Jordan: the fact that the administration is citing some old news of Huawei promising to gift just $75m in chips to the Malaysian government (and not even today! Over two years!) is policy malpractice. Plus, this administration just made clear that using Huawei Ascend chips violates US export controls, giving America an enormously powerful lever to dissuade fence-sitting countries not to buy into what is already an inferior tech offering.]
Tyler Cowen: Of course Saudi and the UAE have plenty of energy, including oil, solar, and the ability to put up nuclear quickly. We can all agree that it might be better to put these data centers on US territory, but of course the NIMBYs will not let us build at the required speeds. Not doing these deals could mean ceding superintelligence capabilities to China first. Or letting other parties move in and take advantage of the abilities of the Gulf states to build out energy supplies quickly.
Energy and ability to overcome NIMBYs is only that which is scarce because America is refusing to rise to this challenge and actually enable more power generation. Seriously, is there nowhere in America we can make this happen at scale? If we wanted to, we could do this ourselves easily. We have the natural gas, even if nuclear would be too slow to come online. It is a policy choice not to clear the way. And no, I see zero evidence that we are pulling out the stops here and coming up short.
I think this frame is exactly correct - that this deal makes sense if and only if all of:
The security deal is robust and we retain functional control over where the compute goes.
We trust our friends here to remain our friends at a reasonable price.
We counterfactually would not have been able to buy these chips and build data centers to power these chips.
As far as I can tell China already has all the power it needs to power any AI chips it can produce, it is using them all, and its chip efforts are not funding constrained.
So for want of electrical power, and for a few dollars, we are handing over a large amount of influence over the future to authoritarian powers with very different priorities and values?
Tyler Cowen: In any case, imagine that soon the world’s smartest and wisest philosopher will soon again be in Arabic lands.
We seem to be moving to a world where there will be four major AI powers — adding Saudi and UAE — rather than just two, namely the US and China. But if energy is what is scarce here, perhaps we were headed for additional AI powers anyway, and best for the US to be in on the deal?
Who really will have de facto final rights of control in these deals? Plug pulling abilities? What will the actual balance of power and influence look like? Exactly what role will the US private sector play? Will Saudi and the UAE then have to procure nuclear weapons to guard the highly valuable data centers? Will Saudi and the UAE simply become the most powerful and influential nations in the Middle East and perhaps somewhat beyond?
Yes. Those are indeed many of the right questions, once you think security is solid. Who is in charge of these data centers in the ways that matter? Won’t they at minimum have the ability to cut the power at any time? Who gets to decide where the compute goes? What are they going to do with all this leverage we are handing them?
Is this what it means to have the future be based on American or Democratic values? Do you like ‘the values’ of the UAE and Saudi Arabian authorities?
Tyler Cowen: I don’t have the answers to those questions. If I were president I suppose I would be doing these deals, but it is very difficult to analyze all of the relevant factors. The variance of outcomes is large, and I have very little confidence in anyone’s judgments here, my own included.
Few people are shrieking about this, either positively or negatively, but it could be the series of decisions that settles our final opinion of the second Trump presidency.
The administration thinks that the compute in question will remain under the indefinitely control of American tech companies, to be directed as we wish.
Sriram Krishnan: Reflecting on what has been an amazing week and a key step in global American AI dominance under President Trump.
These Middle East AI partnerships are historic and this “AI diplomacy” will help lock in the American tech stack in the region, help American companies expand there while also building infrastructure back in the U.S to continue expanding our compute capacity.
This happens on top of rigorous security guarantees to stop diversion or unauthorized access of our technology.
More broadly this helps pull the region closer to the U.S and aligns our technological interests in a very key moment for AI.
It’s a very exciting moment and a key milestone.
I hope that they are right about this, but I notice that I share Tyler’s worry that they are wrong.
The justification given for rescinding the Biden diffusion rules is primarily that failure to do this would have ‘weakened diplomatic relations with dozens of countries by downgrading them to second-tier status.’
But, well, not to reiterate everything I said last week, but on that note I have news.
One, we’re weakening diplomatic relations with essentially all countries in a series of unforced errors elsewhere, and we could stop.
[Jordan: that feeling when you treat Dubai better than Canada]
Two, most of the listed tier two countries have always had second-tier status. There’s a reason Saudi Arabia isn’t in Five Eyes or NATO. We can talk price about which countries should have which status, but no our relations are not all created equal, not when it comes to strategically vital national interests and to deep trust. I don’t share Sacks’s stated view that these are some of our closest and most trustworthy allies. Why does this administration seem to always want to make its deals mostly with authoritarian regimes, usually in places where Trump has financial ties?
Tripp Mickle and Ana Swanson (NY Times): The announcements of the two deals follow reports that $2 billion has flowed to Trump companies over the last month from the Middle East, including a Saudi-backed investment in Trump’s cryptocurrency and plans for a new presidential airplane from Qatar.
There’s always Trust But Verify. The best solution, if you can’t trust, is often to set up things so that you don’t have to. This can largely be done. Will we do it? And what will we get in return? What is announced mostly seems to be investments and purchases, that what we are getting are dollars, and Bloomberg is skeptical of the stated dollar amounts.
At Best A Second Best Solution
This deal is very much not a first best solution. It is, at best, a move that we are forced into on the margin due to our massive unforced errors in a variety of other realms. Even if it makes sense to do this, it makes even more sense to be addressing and fixing those other critical mistakes.
Electrical power is the most glaring in the context of this particular. There needs to be national emergency level focus on America’s inability to build electrical power capacity. Where are the special compute zones? Where are the categorical exemptions? Where is DOGE with regard to the NRC? Where is the push for real reform on any of these fronts? Instead, we see story after story of Congress actively moving to withdraw even the supports that are already there, including plans to outright abrogate contracts on existing projects.
The other very glaring issue is trade policy. If we think it is this vital to maintain trade alliances and open up markets, and maintaining market share, why are we otherwise going in the opposite direction? Why are we alienating most of our allies? And so on.
The argument for this deal is, essentially, that it must be considered in isolation. That other stuff is someone else’s department, and we can only work with what we have. But this is a very bitter pill to be asked to swallow, especially as Sacks himself has spoken out quite loudly in favor of many of those same anti-helpful policies, and the others he seems to be sitting out. You can argue that he needs to maintain his political position, but if that also rules out advocating for electrical power generation and permitting reform, what are we even doing?
If we swallow the entire pill, and consider these deals only on the margin, without any ability to impact any of our other decisions, and only with respect to ‘beating China’ and ability to ‘win the AI race,’ and assume fully good faith and set aside all the poor arguments and consider only the steelman case, we can ask: Do these deals help us?
I believe that such a deal is justifiable, again on the margin and regarding our position with respect to China, if and only if ALL of the following are true:
Security arrangements are robust, the chips actually do remain under our physical control and we actually do determine what happens with the compute. And things are set up such that America retains the leverage, and we can count on UAE/KSA to remain our friends going forward.
This was essentially the best deal we could have gotten.
This represents a major shift in our or China’s ability to stand up advanced AI chips, because for the bulk of these chips either Big Tech would have run out of money, or we would have been unable to source the necessary electrical power, or China has surplus advanced AI chips I was not previously aware of and no way to deploy them.
Entering into these partnerships is more diplomatically impactful, and these friendships are more valuable, than they appear to me based on public info.
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Check out some ChinaTalk coverage from least year about China’s Middle East AI ambitions.
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What does the future of industrial policy in America look like, and what state capacity investments are needed to get there? How does China factor into the future of the U.S. semiconductor industry? And what do government affairs offices actually do? To explore these questions, we’re concluding our CSIS Chip Chat series with Bruce Andrews. Bruce has had a long career on Capitol Hill, led government affairs for Ford, served as Deputy Secretary of Commerce under President Obama, and most recently headed up government affairs at Intel. He’s now a fellow at CSIS.
We discuss…
How to bring expertise and legislating back to Capitol Hill,
The case for a new “Department of Competitiveness”
Industry’s role in policymaking and what it took to get semiconductor manufacturers on board with the CHIPS Act,
Why Silicon Valley suddenly became interested in politics,
How to optimize industrial policy in a stick-focused political environment.
Biden tours an Intel factory with CEO Pat Gelsinger and factory manager Hugh Green, March 2024. Source.
Jordan Schneider: Bruce, you were intimately involved in the birth and execution of the CHIPS and Science Act. Throughout the discussion around the legislation and grant implementation, politicians and officials kept saying, “We haven’t done this in decades. We’re building this muscle again. We’re learning on the fly.” This is something America had done in the past, but the energy atrophied over time. Reflecting back, maybe let’s start with the legislation writing process. How did the fact that these policy tools hadn’t been worked out in so long impact the discussion and development of the legislation?
Bruce Andrews: The United States government is actually not set up well and is challenged in two ways when implementing big industrial policies. First, the executive branch is not organized properly — we really have a 20th-century cabinet structure for 21st-century problems. Second, we don’t have the muscle memory of how to effectively implement industrial policy.
We’ve been fortunate in the United States to have a robust private sector that, with government investment and R&D spending, has been successful. But the world has changed significantly. For Congress in particular, there’s not necessarily the expertise, and they often rely on dealing directly with the executive branch to identify issues and the lack of authority that the US Government has. In many cases, we don’t have statutory authorities for executive branch agencies to carry out these policies.
When writing legislation, there’s always a balance between being specific enough while also giving enough flexibility to the administration to execute those policies. The CHIPS and Science Act was actually a good example, and it was done in two parts. The first part was drafted in the second half of the Trump administration and passed at the beginning of the Biden administration. Then they had to provide the funding because you had the authorization, but needed to appropriate the dollars that would actually be spent.
This was a huge legislative lift, and Congress added many new requirements during the funding legislation phase.
Jordan Schneider: You started your career in the early 90s and ended up as general counsel to Senate Commerce in the early 2010s. Thinking back on the arc of legislative ambition, principal quality, and staff quality — what trends did you observe over that time?
Bruce Andrews: Things have changed significantly since the early and mid-90s. The quality of staff — and this is not to say there aren’t still tremendous staff on Capitol Hill — but there used to be really deep expertise. The growth of lobbying is partly to blame for this change, as it has deprived Capitol Hill of many good staff members.
I’ve always believed we need to pay congressional staff more. Frankly, we should pay executive branch career civil servants more as well. When you’re a young Hill staffer or even a very experienced one, and you see your colleagues in the private sector making two or three times what you’re making, your incentive to stay on Capitol Hill and develop deep expertise is diminished.
Jordan Schneider: Last year, I did a show with Philip Wallach, who wrote the book Why Congress?, which examined the post-war arc of congressional capacity and willingness to put itself center stage. We’re recording this on May 6, and Congress is currently in a situation where money it appropriated isn’t being spent because an executive feels like withholding it, and they’re not doing much about it.
We’ve seen this before. After Nixon, Congress regained a real sense of institutional pride and reasserted itself in a way it hadn’t for decades. Who knows if that’s the future Donald Trump will leave us with in 2028? But if you’re imagining a more ambitious and energetic legislative branch, where does that leave the institution? Where does that leave America? What would need to happen to bring about a new flourishing?
The CHIPS and Science Act was a perfect storm of COVID, bipartisanship, and an eager executive that allowed for a significant bill. But for a broader shift in congressional ambition and execution capacity, what ingredients would we need to see in the body politic or what incentives would enable more legislation like the CHIPS and Science Act?
Bruce Andrews: I think success does beget success, but I also think it’s both sides coming together and identifying what the issues are. There are really three things. One is agreement and bipartisan agreement on what the issue is that you’re trying to solve. In the CHIPS and Science Act, there was real clarity on trying to get particularly advanced logic, but also trying to move semiconductor production back to the United States.
Second is an agreement on what tools the government has, or should have, in order to do that. In the CHIPS and Science case, people looked and they said, “Taiwan, Korea, and China have spent the last 30 years providing incentives to help their industries be successful. The US has sat on the sidelines and let the private sector do it. And we now have watched the majority of Atlantic Advanced Logic production move overseas.” Second is seeing the problem, which is the need to close the cost gap between the US and Asia, and putting in a solution that was able to do that.
Third is bipartisan support. There were a number of heroes of the CHIPS Act on both sides of the aisle. On the Democratic side you had Ro Khanna and Chuck Schumer and Doris Matsui and people who said there’s a problem. And then on the Republican side, you had great senators like Todd Young and John Cornyn, Mike McCall in the House who said, “We agree with you, this is a big problem and let’s work together and work even over the politics."
As you’ll recall, at the end, the CHIPS Act sort of got caught up in a little bit of last-minute politics because of some other things that were going on unrelated to the CHIPS Act. To their credit, the champions on the Republican side, including Mike McCall, John Cornyns, and Todd Young, really helped push it through and helped to get it done. You need all three. You need clear identification of an issue, you need a clear government solution in a narrow and tailored way to provide the tools to do it, and you need bipartisan support to be successful.
Chuck Schumer celebrates Senate passage of the CHIPS and Science Act with a bipartisan group of the bill’s backers (left to right: Senators Roger Wicker, Mark Warner, Schumer, Todd Young, John Cornyn, and Maria Cantwell). Source.
Jordan Schneider: That’s nice to hear, but it seems like we have never been further away from that. When you have a president who’s blowing up the NIH because he feels like it’s too big, we’re going to need to have some big thermostatic response to what we have now, because this is not the glide path. This is the plane that crash-lands, and only then we become motivated to do something.
Bruce Andrews: That’s right. You’ve got to have an agreement that there are solutions we can put in place. When you get down to the member level, you actually get a lot of good thinking and a lot of good bipartisan agreement. But then translating that — unfortunately, if I were going to have one critique of Congress right now, it would be that often we’re not legislating big issues. We’re more legislating when there’s a crisis.
There are lots of really important issues out there every single day that we need to be addressing. Unfortunately, it seems that we get to the level of a crisis, and then it’s easier to pass legislation. We need to get back to the old days — real bipartisan agreement and the ability to work in a bipartisan way, and not to be pressed by your colleagues in either party to say, “Why are you working with those people of the other party? Let’s just win the next election, and then we can do it our way.”
That’s been going on for a long time, where both sides have thought, “If we just wait until the next election, we’ll win — we’ll be in charge of the House, Senate, and the White House, and then we can get our package.” The reality is that it doesn’t work. With the filibuster in the Senate, with the need for getting things done in the close margins of the House, and with the nature of the White House, it’s a mistake to put off our problems because, “Oh, if we just win the next election, we’ll solve them.” It’s never that easy.
Beefing Up The Executive
Jordan Schneider: Let’s turn to the executive branch. The CHIPS and Science Act basically got to hire the pick of the litter because they had special hiring authorities and were able to really bring together this crack team from some government vets, but a lot of folks from Wall Street and a little bit from the semiconductor industry, too. Recently, Dan Kim said that in 2015, there were only two people who were thinking about the commercial semiconductor industry in government. What does good look like here? What are the institutions you would have loved to have had that were building that commercial understanding and institutional muscle for whenever we have to do this the next time, so it’s not from such a dead start?
Bruce Andrews: First of all, I don’t think the answer is just taking a chainsaw and eliminating agencies, but I do think having some flexibility to reorganize government for the 21st century and for the digital world would help. We still have a very 20th-century analog model that was built mostly post-World War II and over the second half of the 20th century for a very different world.
If I were king for the day, I would start by reorganizing the government to be much more focused and move some things around so that they made more sense. President Obama tried to do that or talked about doing that with government reorganization.
The Commerce Department is a perfect example. I would meet with counterparts from METI in Japan, or Ministry of Commerce in China, or the European Union. Counterparts would have a much clearer set of mandates and authorities and a clearer set of responsibilities, and would have basically all of the business-related functions within the country within one agency. Organizing government in the right way is important, but I don’t know if that’s going to happen anytime soon.
Jordan Schneider: No, let’s stay here. Let’s do a little more fan fiction. What are you pulling in and putting out?
Bruce Andrews: If it were up to me, I would pull all business-related economic development and competitive stuff into the department. I actually would rename it the Department of Competitiveness. I would focus on the economic tools, the commerce tools, the trade tools, the industry tools and give the authority for real industrial policy to work with public-private partnerships with the business community to make sure that we’re making these smart investments in R&D and building the future.
Second, I would set up a set of programs that help the Commerce Department, or hopefully the new Department of Competitiveness, have a set of tools that it can use to support industry. China, Japan, Korea, and Taiwan have all for the last 30 years had very focused policies, and they’ve been successful at encouraging certain industries.
We can criticize some of the competitive practices the Chinese used, but they put in a Made in China 2025 plan and set out key industries that they wanted to successfully dominate. If you look at those industries that they identified, they’ve actually done pretty well.
You need the magic of the private sector. A huge advantage that the United States has is our robust private sector. But you also need public-private partnerships in order for that leadership to take place. The world is too complicated right now for companies to just go at it alone.
When I was at Intel, I would always say, “We’re not just competing with companies, we’re competing with countries.” That’s the case — many US companies are going at it alone, competing not just against their foreign competitors, but the tools and resources of their foreign competitors’ governments as well. We don’t want to recreate that. We don’t want to copy, but we need to establish our own model that works.
Secretary Lutnick has proposed what I would call “SelectUSA on steroids.” During the Obama administration, we created the SelectUSA office to attract foreign investment. To Secretary Lutnick’s credit, I think he’s identified that there are investments and then there are what I would call the mega investments.
Having an office within the Department of Competitiveness that would help facilitate both US companies and foreign companies making those investments in the United States would be fantastic. Giving the US Government some more flexible tools to help incentivize those investments and to help those investments be successful is important for us to be competitive.
For 30 years, there were reasons why globalization was a good economic theory, and there was a lot that was good for consumers and a lot of other things. But we also live in a very different world now. We need to have a structure and tools that allow the US Government to be competitive and the US to be competitive in this very different world.
Jordan Schneider: Not to be your assignment editor, but I think this should be your first CSIS piece — what authorities you want to be here. It’s a fun future-casting exercise where you don’t really have to engage with the present messiness. But can we do one more pass on this? What do you give up? The Commerce is already a giant mess. What do you slough off it? I guess there are three buckets — what do you slough off, what do you take from other agencies, and aside from SelectUSA, what’s on your wish list for new authorities and power?
Bruce Andrews: First of all, I would point out that the Commerce Department is perfect. I would probably change nothing. But if I had to change something — Obama made a proposal, for example, to move NOAA (National Oceanic and Atmospheric Administration). I could argue that that’s important to business and that things like the National Weather Service and others actually are key facilitators of public goods that help business.
There was talk of moving the Small Business Administration into the Department of Commerce. It doesn’t necessarily make sense that we have SBA, we have SBIR programs around the government, we have Economic Development Administration in Commerce, and that we have the Minority Business Development Administration.
I would consolidate all of these different economic and small business minority business programs into one part of the Department of Competitiveness for it to be successful.
I would also take all the technology agencies around the government. We have NTIA, we have NIST, we have various technology programs, rural broadband at the Department of Agriculture. We have all these different programs around different agencies. I would consolidate them together and say the Department of Competitiveness has an economic development piece, it has a technology piece, and it has an international trade piece.
One of the things that was very controversial, and I could argue this both ways, is moving USTR within the Department of Commerce and having the International Trade Administration and the US Trade Representative’s Office be one super trade organization.
Government statistics — why are the Bureau of Labor Statistics, the Bureau of Economic Analysis, and the Census all separate organizations throughout the government? Take all government statistics and put them in one place.
I think there are a bunch of things that you could do to rationalize all this and to help the US really be supercharged and competitive. Frankly, one of the reasons that Obama ran into trying to get this consolidation authority was Congress didn’t want to give up the various committee jurisdictions. When I was at the Commerce Department, we had, I think, eight full committees and 79 subcommittees that had jurisdiction over the Department of Commerce. That doesn’t really make a whole lot of sense.
Jordan Schneider: Within this context, let’s do a little history lesson on how CHIPS and Science came to be.
Bruce Andrews: The interesting thing — you mentioned something that’s really important, in 2015, there were only two people within the US government who were experts on semiconductors. I learned that in November of 2015, when I spoke as the Deputy Secretary of the Commerce Department to the Semiconductor Industry Association.
Interestingly, at that time, the SIA (Semiconductor Industry Association) CEOs, who previously had all been very confident of “government stay out of our way, we don’t need your help, we’ve got this, we’re 10 years ahead of China, we don’t really need government assistance” — when I spoke to them in November of 2015, I saw what I would almost describe as a sense of fear in their eyes about the Made in China 2025 program and what was called “The Big Fund,” the $250 billion fund that the Chinese government had set up to help facilitate their semiconductor industry.
I took that back and sat down with my then-boss, Secretary Penny Pritzker. Penny and I said, “Let’s put a plan together to help the US Semiconductor industry. What would that look like to help the US semiconductor industry compete with Made in China 2025?”
What’s funny is I called the Assistant Secretary of the International Trade Administration for Industry and Analysis. I said, “Okay, we need to put together a semiconductor plan.” He said, “Okay, I’ll bring my one guy up and let’s talk about it.” We only had one guy doing this. Now, the good news is there’s a guy named Travis Mosier who is super talented, super smart, and knew these issues quite well.
We put together a plan, a playbook, and we said, “Okay, what can the US Government do?” Interestingly, we initially got some pushback because people said to us, “Why are semiconductors special?” Secondly, we got some pushback because people said, “Well, if we help the semiconductor industry, won’t other industries be unhappy and feel like we should help them too?” My response was, “Well, yes, but that doesn’t make it any less important.”
We spent several months working with the White House team and the interagency team. Interestingly, Paul Selva, who was the Vice Chair of the Joint Chiefs of Staff, was also really interested in microelectronics. Paul and I got together and pushed through the NSC process a plan to start having much more focus and attention on semiconductors.
We had none of the tools. Those came later. Eventually, Penny Pritzker gave a big speech that really helped define the challenge. We had a PCAST report, which is the President’s Committee of Advisors on Science and Technology, which for the first time made a series of recommendations. That was right at the end of Obama, but it then carried into the Trump administration, and all of that attention and focus eventually became the CHIPS and Science Act.
It shows two things. One is you need to identify a problem and start talking about the solutions to those problems. Two, you need focused energy and intensity because nothing happens fast, either in the federal government or in Congress. Even though it took several years for all of this stuff to come together, we were successful at both putting focus on the attention, setting a set of tools, and then enacting a program that represents by far and away the biggest piece of industrial policy we’ve seen, at least in the last 50 years.
The Policymaking Ecosystem
Jordan Schneider: Let’s continue the story from the perspective of an Intel executive. What is Government Affairs? And maybe using this story as a case study, what can and can’t — or what is easy and what is hard — for industry to do to make things happen in the legislative and executive branch?
Bruce Andrews: Government affairs is really about education. It is bringing information to government policymakers to help understand the challenges that the private sector is facing and then also help to start having a discussion about what the solutions look like.
The irony of the CHIPS Act is that it was actually not started by Intel, although Intel will be the biggest beneficiary. Where it started was actually Mike Pompeo trying to recruit TSMC to come to Arizona. What TSMC said to Pompeo was, “We have a huge cost gap. We get incentives in Taiwan to build. We need something in the United States."
Ironically, when I was Deputy Secretary of the Commerce Department, I met with Terry Gou, the chairman and CEO of Foxconn, who basically said to me, “I want to build in the United States, but you need to give me big federal incentives.” I said, “Well, here’s the problem. We don’t have federal incentive programs in the United States. It doesn’t work the same way it does in China and Taiwan.” Terry eventually did start that project, but it ended up not working.
People were starting to realize that if we wanted to bring manufacturing back — and I give Secretary Pompeo a lot of credit because I think he recognized that was the way to get TSMC back. Interestingly, when Pat Gelsinger came in as the Intel CEO, he recognized that Intel needed to become a contract manufacturer for other companies. Foundry would provide more competition to TSMC and Samsung. The CHIPS and Science Act allowed Intel to do the construction in the United States. It allowed Intel to really make a fundamental change to its business model, moving manufacturing or building manufacturing in the United States.
It’s often forgotten that the CHIPS Act started in the Trump administration. It didn’t get passed, but when Biden came in, it got passed quite quickly. That set off the debate for funding the CHIPS and Science Act, which was eventually passed in July of 2022.
Jordan Schneider: Coming back again to — what does education mean? How does one educate? Is it easier or harder today versus back in the day where you have more or less sophisticated staffers and all the stuff we were talking about?
Bruce Andrews: In the same way that you did not have expertise within the Commerce Department, I’m not sure there was a single person who had any level of expertise on semiconductors in the Congress. Someone’s probably going to call me and say, “Hey, I was that person. You’re wrong.” But let’s just say for the purposes of argument, there really was not a deep level of expertise.
The good thing about a company like Intel is it’s got a huge number of very smart experts who are thinking about understanding the global industry. Being able to present a picture through data — and I will say the Semiconductor Industry Association is actually really good at providing data and information that gives a very full and complete picture to help educate lawmakers.
Generally you’ve got to assume lawmakers start at a relatively low level of understanding just because they’re not experts. You do get some members who come in as experts or you get a guy like Todd Young who really learns about the semiconductor industry and has a state like Indiana and a university like Purdue that want to focus on how to be effective and successful in the semiconductor space. You generally start with not a huge amount of information, but you start with an interest.
I give Doris Matsui and Mike McCall credit in the House. As I mentioned, you had Young, Cornyn, and Schumer in the Senate who said, “This is really important.” They then turned to industry and said, “Help educate us on two things. First, what is the status of the global industry? What’s the problem we want to solve? Second, what tools do you need to help us?”
In the case of the CHIPS Act, it was identifying that there was a 30-55% cost gap between manufacturing in the United States and manufacturing in Asia. The CHIPS Act — including the grants, but also the 25% investment tax credit — was all about filling that gap and helping US manufacturing to be competitive. That’s not necessarily something that members of Congress or the people in the administration would totally understand well on their own. That’s where private sector actors can come in and help educate them as to what those tools would look like to be the most successful.
Jordan Schneider: That is a nice story. Perhaps your average American — or maybe your average independent tech policy podcaster — would see this and see something wrong here. The fact that the US government had one guy, the fact that Congress, the executive branch had one guy, the fact that Congress had no one, and that there were not think tanks — we can debate how independent they are from corporate money — academics, we can also debate how they are from corporate money, particularly when you’re talking about these high technology industries where there’s a lot of university to industry connection.
As a big fan of the CHIPS Act, it was kind of concerning to me seeing that every voice in this debate was funded or connected to industry. If we end up doing more and more industrial policy, it would be nice to have voices whose paychecks are not necessarily connected to these outcomes to also be able to inform legislators.
Bruce Andrews: I would say two things to that. The American people had a real crash course in the importance of the semiconductor industry during COVID when they couldn’t buy products because there was not an availability of semiconductors because they were all being sourced out of Asia.
I hear you, and obviously this is why I think bipartisanship is so important. You bring members from both sides who have different constituencies, but they come to the table and they say, “Let’s get the best policy we can and reflect a lot of views.”
The semiconductor industry has never been a particularly big or politically active industry. They don’t have big PACs. It’s not like a lot of industries where there’s a huge amount of money flowing through. It’s actually been relatively unsophisticated in Washington.
That’s where the identification of the problem was so important. I think there were two voices that were critical. One was actual consumers. I’ll never forget when we went to meet with a very senior senator, and he told us that he had autos sitting on lots in his state waiting for semiconductors to be put in so that they could go out to dealers. One senator told us he actually bought a Ford F150, but it didn’t have the heated seat yet because the chip that would heat his seat was not available. This is a guy who lived in a really northern state that was super cold. I felt bad for him.
The second piece of this is the voice of the national security community. What also makes semiconductors kind of unique is the national security implications. As I mentioned, Paul Selva, the Vice Chair of the Joint Chiefs, was very focused on microelectronics and having a trustworthy supply of microelectronics in the United States.
You saw a lot of leading members of the national security community and the committees in Congress. Mark Warner is a great example — both a tech guy and a national security leader, as the chair of the Senate Intelligence Committee — is one of the most vocal voices for the CHIPS Act. Not because Virginia is a big semiconductor manufacturing state, although I think Mark would like that. It was more out of a recognition that this is a huge national security imperative that he was very supportive of.
There’s no doubt that there’s lots of stuff where there needs to be public scrutiny, there needs to be public debate. You need to hear all kinds of voices to make sure that special interests don’t just take advantage of a process. But I think in this case there were two pieces. One was the passage of the congressional legislation, and then the second was the implementation by the CHIPS Program Office to try to make sure that this was done in the way that was most focused on the national interest.
Jordan Schneider: Do you have any thoughts about think tanks as institutions and what they can and can’t do and what their purpose is?
Bruce Andrews: I think think tanks are actually very important. I should have mentioned them earlier. My experience with think tanks is, yes, they need money to run and some do take corporate and other types of money. It’s not just corporate — there’s all kinds of money that help fund think tanks. But in my experience, people tend to be very independent because their reputation is on the line. They’re very focused on doing the highest quality work.
Think tanks are really important because they do provide an independent perspective and sometimes an independent validation. Sometimes they can do studies that a company can’t do. I’ll give you an example. I just saw this morning that the Rhodium Group came out with a study about the China Made in 2025 plan’s effectiveness. That’s not something that a single company could do.
There are a lot of good think tanks with a lot of really smart, thoughtful people who are adding to the debate.
When I was a policymaker, both in Congress at the Senate Commerce Committee as a very senior staffer and general counsel, but also as the Deputy Secretary of the Commerce Department, everybody who came in had their self-interest. Part of my job was to get enough voices to make sure that someone’s self-interest was validated, to try to incorporate other perspectives.
My rule when I was in government was always I would meet with anybody and listen to you. I might tell you no and I might tell you that I think you’re completely wrong. But that’s okay. That’s actually how the system works. It should be a dialogue and it should be a back-and-forth. It should be a really robust public debate and we should have hearings in Congress and we should have lots of different perspectives aired. And then you’ve got people who in the end are going to have to make decisions, but at least you’ve had a broad set of opinions and views and data put on the table.
Policymakers have to be able to sort through all that. That’s one of the reasons both policymakers having expertise, but also having staff with expertise, helps to sort through this massive amount of information that comes in. I’ve many times seen think tank reports that really help to shape legislation or help to shape either the identification of problems or identification of solutions and frankly sometimes bring bipartisanship — my three components for what you need to be successful. Think tanks play a very important part in that.
Jordan Schneider: You mentioned America or senators getting lessons in the semiconductor industry from cold butts. America’s also about to get a whole lot of lessons in trade policy thanks to what’s been happening over the past few months. What do you want to say about this stuff? We can do chip specific economy in general.
Bruce Andrews: No, I mean, look, this is obviously a very complicated topic. You know, I get that. What President Trump has said, I agree with him on two things. One is that we need to identify strategic sectors where we need to be investing as a country in manufacturing. I wouldn’t say that it’s everything because there are a lot of things that we just can’t do. But one level should be what can we do strategically, both out of our own economic interest, national security interest, and where we can be successful.
Second is how do we work with allies? When I was at the Commerce Department, there was a lot of discussion about NAFTA and Mexico because a good that was made in Mexico had 46% US content. A good that was made in China had 4% US content. Everybody realized — this light bulb went off to people with that data — basically saying, “Hey, for things that we can’t economically or cost effectively do in the United States, it’s actually in our interest to have them be done in Mexico or Canada.” You’ve seen a lot of work with various allies to try to have things manufactured in ways that are good for the United States.
Third is the availability for consumers. On one level, you’ve got to protect the workers. The story I told you earlier about when Penny Pritzker and I decided to make semiconductors a priority for the Department of Commerce, one of the reasons was I had met with the steel industry executives and the National Steel Workers union several days before. I literally said to Penny, “I don’t want to be in a position in 10 years,” and in meeting with the steel workers, I basically said, “Hey, look, we don’t have the tools to be able to be helpful to you. We want to help you, but the statutory tools and authorities we have will not allow us to be helpful to you here.”
Penny and I said, “Okay, let’s make sure that’s not the semiconductor industry in 10 years — the experience we’re having with the steel unions and the steel industry today.” I do think that’s important — identifying what is really in our core national interest, and what can we as a country be successful at.
Tariffing everything in sort of a broad way isn’t necessarily going to be effective. We’re already starting to see some of the economic effects of that. I’m hoping that the administration looks and says, “Okay, what are we trying to solve for here?” What are the authorities we have and how do we do it? Thus far it doesn’t feel like we have clarity on what problem we’re trying to solve or exactly what solutions we’re trying to enact to do that. I’m hoping that the administration, as they do these negotiations with other countries, will get more clarity on that. Otherwise, I do worry that this is going to be a trade war that isn’t successful for the United States, for American consumers, but also American companies.
I’ll give you an example. One of the things that really concerns me is if you are a US manufacturer, there are a lot of things that you have to import from overseas as inputs into machinery and all kinds of things. A great example is Intel and an Intel fab. There is a $450 million ASML EUV lithography machine. What happens if you put a 25% tariff on an EUV lithography machine coming from Europe? Intel has to buy with those tariffs, but their foreign competitors in Taiwan, Korea, China don’t. What happens fairly quickly is it makes US companies completely non-competitive as manufacturers.
If our goal is to be successful in manufacturing, which it should be — I think that’s actually really important — helping US manufacturers, then we need to be doing everything we can to help them be successful, not tariffing intermediate goods in a way that actually harms the competitiveness of US manufacturers.
Jordan Schneider: Anything else you want to say about the future of Intel? Your well wishes for the new squad over there?
Bruce Andrews: Intel is a very important company to the United States, and it was one of the reasons I went there when Pat Gelsinger laid out his vision for a third US competitor. TSMC is a remarkably impressive company. Samsung’s a great company as well, but having a not over-consolidated industry and having manufacturing in the United States is really important. Intel is actually a very important company to this country. I spent a lot of time there because I believe in the mission and American manufacturing, but also the importance of having a leading advanced logic manufacturing company who does its R&D and whose primary operations are in the United States.
Jordan Schneider: Ben Thompson of Stratechery’s diagnosis of the challenge of the CHIPS Act was that it focused too far on the supply side and not enough on the demand side. His vision of what Intel is going to need to succeed on the foundry side at least is designated customers. On one hand, Qualcomm, Nvidia, Apple — they’re not excited to live under a monopoly decade going forward where the only people who can supply them are TSMC. But it is hard to be the first mover to go in with Intel and work with them to get all the tooling right and be that sort of guinea pig when on the other hand, you have someone who can charge you a huge markup, but you know they’re going to deliver.
His vision is that you solve the collective action problem with the government stepping in and banging heads and forcing everyone to go in on Intel. That seems like a high degree of difficulty to put on Howard Lutnick. How would you work on the demand side from a policy perspective to give Intel Foundry a boost?
Bruce Andrews: I tend to be a carrot guy, not a stick guy. The stick can work in certain cases, but you’re better off having the carrots. One example is that a number of companies on the fabless side have talked about having a design tax credit for American fabless companies. During the CHIPS Act, they lobbied, but Congress did not add an investment design tax credit for the fabless industry.
I could see, and I know there are policymakers who would say, let’s give them a design tax credit, but let’s do it if they manufacture in the United States, because what we don’t want to do is give them a design tax credit to then go and manufacture in Korea or Taiwan or China. That’s one possibility.
There’s going to be a set of discussions because we have identified this as a national priority. Trying to find some tailored solutions is important — Intel’s got to do its piece to be competitive. On the other side, having some carrots to encourage companies to embrace manufacturing here in the United States would actually be a really good thing.
Jordan Schneider: Earlier you mentioned as Deputy Secretary of Commerce and in the Senate as well, you meet with everyone. I’m curious, thinking back to that, before you spent the past few years in the semiconductor industry, were there other industries where you’re just like, “Oh, man, these guys really get it. They’re super sharp?”
Bruce Andrews: It’s a really good question. The short answer is yes. There are a lot of really smart and talented companies out there. I was constantly surprised by the quality, and I think the tech space is one. There are a whole bunch of areas where you have really sharp, really talented leaders in those companies.
Tech was definitely one because tech, particularly since the late 90s, has attracted a lot of great talent. The people running these companies are actually very smart, talented people. When I meet them I go, “Wow, they are really smart.”
Every once in a while I would meet with people and I’d think, “God, your arguments suck. I could help you write your talking points better than you have written them.” But for the most part, I found most companies, particularly in areas that tended to be both technical but very competitive industries — I actually found people to be quite smart and impressive most of the time.
Jordan Schneider: There’s a story that Nvidia had like two government affairs officials before October 7, 2022. You were talking earlier about how the semiconductor industry was quite hands-off for a while. But even Robert Noyce in the 80s was like, “We’re going to do Sematech.” It’s this weird ebb and flow of caring about Washington, not caring about Washington, really realizing you have to care about Washington again. Is it a California thing? At what point, maybe for semiconductors and industries broadly, does the light bulb turn on that this place is really important to us and we’ve got to get serious about it?
Bruce Andrews: I think it’s been an evolution over the course, but particularly it’s accelerated in recent years. For manufacturing companies, they tend to get it more because they actually had physical locations. For a company like Intel or Global Foundries or Texas Instruments, you understand the importance of interrelationship with the government.
Nvidia is a good example where they didn’t have a PAC, they didn’t have any lobby, they didn’t have anybody registered to lobby probably until 2022. When I first met them when I was at SoftBank, they said, “Oh yeah, we have nobody registered to lobby in Washington. We don’t do lobbying.”
A couple things have happened. One is the world has become much more complicated. The geopolitics are driving a lot of the technology policies. Second is things like export controls which directly impact companies.
There has always been, particularly in Silicon Valley, but in a lot of other industries, a deep libertarian streak where it’s like, “Hey, we don’t need help from government. Leave us alone, we’ll compete, we’ll be successful, we can do this, we don’t need you.”
Other industries— pharmaceuticals is a good example where government health policies have always been very directly related because you have Medicare and Medicaid funding, or the auto industry where government policies on CAFE standards matter.
The semiconductor industry had not been particularly heavily regulated, particularly true on the fabless side — the companies that just did design but didn’t do their own manufacturing. The world has changed, and as the world changed, people realized, “Wow, we really have to engage here and we have to be in the game.”
That is not unusual of many other industries. The libertarian ‘leave us alone’ streak in Silicon Valley really tended to be much deeper than a lot of other places.
Jordan Schneider: Yeah, I think Trump trade policy is going to put that to bed for literally every industry probably.
Bruce Andrews: It has been a wake up call to a lot of companies, for sure.
Jordan Schneider: I’m curious for your reflections from a sort of GR corporate messaging perspective on how you bend to the prevailing winds in Washington. There have been a lot of examples, I think, over the first few months of the Trump administration, which almost show the extreme of this, with corporations really bending over backwards to kind of use the language and rhetoric of the Trump administration. But this is something that happens all the time. I’m curious, to what extent you see this as a disjuncture versus just kind of par for the course of trying to ingratiate yourself with the party in power.
Bruce Andrews: Look, I would say it’s a little of each. Historically, all players — it’s not just companies and corporate CEOs and lobbyists or whoever — have always tailored their message to how they think it will be best received by policymakers in power. I do think starting in 2017, but accelerating, China has become a much more used argument for almost every regulatory policy or whatever. When you see Meta saying ‘Oh, we need to not be regulated as much because we need to compete with China’, you realize that’s something probably because it actually appeals to policymakers. The speakers are always going to tailor their message to what they think is going to be most effective with the audiences. That’s one piece.
President Trump is very assertive. Companies have approached the administration carefully, wanting to get on their good side and understanding what those things are that President Trump sees as part of his priorities and his legacy. You have seen companies tailor their messaging as they have for pretty much every other administration. But they have definitely tailored that messaging as part of dealing with the administration.
Jordan Schneider: Can we reflect back a little bit on the PAT era? Because it was sort of remarkable, right, where he wouldn’t say China, he would say American national competitiveness or what have you. But then I remember he still had to go to China every once in a while because it was such an important market for Intel to sell into. Reflecting back as you guys were sort of managing that and then managing annoying podcasters like me whining that Intel is investing in Chinese chip design companies or whatever— how do you think through that calculus as you’re trying to maintain market access to a country that the US is not super happy you get so much revenue from?
Bruce Andrews: Well, I mean, I guess I would say two things. One is you’ve got to look at facts. For everybody in the semiconductor industry, and Intel is probably in the pack sort of average, but there are definitely companies that have a much higher amount of their revenue come from China. For American semiconductor companies to remain not just competitive, but to remain as leaders, the Chinese market is quite important because about anywhere from 30 to 40% of the market is in China.
That’s changing a little bit now that Apple’s moving phones out and Dell and HP are moving laptop production out. You’re seeing changes in the footprint, but you’re still going to see China be a very significant market for all these companies. The companies have a balance, right? Because on one hand, in order to continue investing in R&D and investing in factories and other things in the United States, you can’t drop your revenue 30%. If you lose 30% of your revenue, you’re dead. If you lose 30% of your revenue, you stop being competitive.
The question is how to find a balance which is to remain competitive and be successful while also respecting US national security concerns, which is a lot of what has driven the government to make policies that tend to reduce companies’ access to the Chinese market.
What’s interesting about this is each company has its own profile. They have to make a decision — how important is access to the Chinese market? What percentage of the revenues and then how are those revenues spent? What does it mean to their long-term and future competitiveness? It’s a very challenging calculation for any company to make.
For companies that want or need to be successful in the Chinese market to remain competitive, it is definitely a delicate process. How do you maintain that? I do think you see a lot of companies trying to do that because they recognize the importance of the Chinese market.
I don’t know if you’ve read Eric Schmidt’s piece in the New York Times, but there are a lot of very successful Chinese companies. Sometimes, if you go too far on export controls, what you actually end up doing is accelerating indigenous innovation in China. There are plenty of Chinese companies that would much rather buy, for example, Nvidia chips. But then you’ve got people in the United States government who are saying there are national security concerns.
It’s finding that balance and recognizing that there are really two pieces to this. One — how do we help American companies run faster to remain competitive and successful? Two, how do we balance the national security concerns?
Jake Sullivan called it the small yard and high fence. People in the industry always said, “Sure, but just keep the yard small and the fence low.” That is a constant balance. Industry is always going to prioritize self-interest, and they’ve got a fiduciary duty to their shareholders to try to maximize revenue. US government officials — there are plenty of people who’d say, “Oh, let’s just not sell anything to China,” which I don’t think is realistic because it will both undermine the long-term competitiveness of US companies, but also undermine the short-term competitiveness because of massive revenue loss where there’s not really a clear national security interest.
Jordan Schneider: I think that might be a nice place to end it. Bruce, thank you so much for being a part of ChinaTalk and looking forward to having you back once you’ve fleshed out your Department of Competitiveness.
Bruce Andrews: I’m excited for that. The Department of Competitiveness is actually very important — something that I used to spend a lot of time thinking about, I have thought less about. But it’s one of the things that has really struck me in reading about Ezra Klein’s new book, Abundance, is the need for having a government that works well. We are not organized for how the world exists today. We’re organized for how it used to exist.
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等我反应过来之后，确认自己身体上没有受伤，缓了一口气顿觉惊险一场。司机在路前方紧急刹车停了下来，原本向前继续跑步的我回头走到车前，等司机打开车窗和她说，我没有受伤，I am sorry（当下反应不过来责任在自己还是司机），司机也问了我，但我不懂西班牙语，不明白她的意思，但看到她听我说没事后，整个人趴在方向盘上，后排还有一个约莫五六岁的小孩时，我想她的惊吓和冲击，不会比我少。
On April 25, observers of China’s AI scene got an important new statement of Xi Jinping’s views on AI in the form of remarks concluding a Politburo “study session” on AI led by Xi’an Jiaotong University professor Zheng Nanning. Couched in the turgid language of Partyspeak, the readout nevertheless merits close attention as one of precious few utterances direct from the General Secretary himself on AI. To read this new tea leaf, we need to understand some background on study sessions in general, and this one in particular.
What are study sessions?
Politburo study sessions, or 集体学习 (literally, “collective study”), are regular two-hour meetings of top CCP leadership devoted to learning about some topic deemed a priority by the General Secretary. Typically, most of the session is taken up by a lecture from an academic expert in the matter in question, but occasionally Politburo members themselves make presentations. The structure was originally established by Hu Jintao shortly after he was elevated to General Secretary of the CCP in 2002, and used to consolidate his power and promote his policy priorities.
These study sessions are a far cry from your undergrad TA office hours. The topics reflect key focus areas of the paramount leader, ranging from foreign policy to technology to stuff like “Opening New Frontiers in the Sinicization and Era-ification of Marxism”. The process for putting them together is extremely involved. Party functionaries choose an expert and work with them to ensure the lecture is pitch perfect for the leader’s priorities. A professor brought in to recant the gospel of historical materialism for the group in 2013 said it took over three months to prepare for his session. There can be as many as three dress rehearsals. Study sessions typically serve to solidify and broadcast the leader’s views on some developing policy topic, not to workshop or introduce new policy. However, they do sometimes signal further action coming down the pike — occasionally to dramatic effect. A 2023 July study session on “governance of military affairs,” for example, preceded a wave of PLA purges including the ouster of 9 generals in December 2023, and more in 2024. Leader’s comments in readouts are sometimes referenced in later policies, as with “guiding opinions” on blockchain from the Ministry of Industry and Information Technology in 2021 that quoted a 2019 study session.
Why study AI now?
With plenty of other signs of attention to AI coming out of Beijing these days, it’s not surprising that Xi would want to get everyone on exactly the same page on this notoriously complex topic. The last time the Politburo had a study session on AI was in 2018, led by Peking University Professor and Chinese Academy of Engineering Academician Gao Wen. This study session followed the publication of China’s landmark New Generation AI Development Plan in 2017 and presumably served to clarify how that plan should be interpreted and implemented. It could be that this April’s study session was intended partly to inform the severalnewfunding programs announced recently.
The obvious answer, of course, is Deepseek. DeepSeek’s impressive releases of late 2024 and early 2025 catapulted the previously “low-key” company to directattention from the very top echelons of the CCP. If the process for organizing a study session was initiated in January 2025, then a few months of preparation time would land us exactly in April. (Perhaps coincidentally, last week’s study session also comes exactly 2 and a half years after the launch of ChatGPT in November 2022 — almost precisely the same amount of time as between AlphaGo’s victory over Lee Sedol in November 2016 and the last Politburo study session on AI in October 2018. This gives some indication of the metabolic speed of the CCP system.)
What did Xi have to say about it?
Alas, the Politburo neither livestreams their study sessions on Zoom, nor even shares the slides after class. But we do have a summarized version of Xi’s closing comments for the session. Given the role of study sessions in communicating the leader’s views, this is at least as important as the content of the lecture itself.
China’s approach to AI has demonstrated a lot of consistency since 2018, so Xi’s comments on this study session hit many familiar notes. The topline summary, as given in the first paragraph, is that China will use the advantages of its “whole of nation” system to persist in “self-strengthening,” with an orientation towards applications, promoting “healthy and orderly” development in a “beneficial, safe and fair” direction. Self-strengthening should especially target “core, high and foundational” technologies. Essentially, China will maintain aggressive industrial policy in an attempt to indigenize important tech supply chains, while also developing valuable applications of AI, but all subject to certain guardrails and, of course, the salubrious guidance of the Party.
Similar themes through the two texts include concerns about China’s weakness in basic research and foundational tech but confidence about strengths in scale of data and market, a goal of properly integrating research and industry, and cultivating a thriving talent ecosystem. On many counts, however, the exact language is tweaked, often expanded or made more specific.
But some things are new! This year’s mention of “application-orientation” is similar in nature to mentions of “needs-orientation” or “problem-orientation” in 2018’s readout, but it’s now far more prominently placed, alongside “self-strengthening” in the title and in the one-sentence summary in the first paragraph. It also seems to imply more of a focus on diffusing technologies that already exist rather than creating new ones, even if “mere” engineering rather than fundamental breakthroughs, to serve national goals. This year’s readout also calls specifically for developing strategic emerging and future industries (战略性新兴产业和未来产业) and seems to give a nod to “AI for science” by referring to “a revolution in the paradigm of scientific research led by AI” (以人工智能引领科研范式变革).
As analysts have pointed out, Xi’s discussion of safety issues here is more forward-leaning than in 2018, or possibly any statement coming directly from the leader’s mouth. He describes risks from AI as “unprecedented,” and suggests implementing systems for “technology monitoring, risk early warning, and emergency response.” This is much more specific than previous policy statements calling to establish an “AI safety supervision and regulation system” or to strengthen “forward-looking (risk) prevention.” The study session readout’s language almost more closely echoes that of documents passed around at the recent Paris AI Action Summit by China’s new AISI-equivalent body, the China AI Safety and Development Association. Among a litany of priorities for the new organization, one of the more ambitious referred to setting “early warning thresholds for AI systems that may pose catastrophic or existential risks to humans.” Clearly, the thinking of safety-concerned AI experts such as famous computer scientist Andrew Yao and Tsinghua professor Xue Lan, who himself has lectured at study sessions thrice, most recently on emergency management in 2019, is finding resonance at the very top of the Party hierarchy.
A wholly novel component of the 2025 readout is the discussion of international engagement. While vague enough to be consistent with an intention to engage productively with the US and its partners’ efforts on AI governance, Xi’s focus on capacity building in the Global South and closing the “global intelligence gap” (全球智能鸿沟), as well as calling elsewhere to “grasp the initiative” in governance, suggests that this is also viewed at least partly as a dimension of international AI competition. We can imagine that Xue Lan, in particular, may have taken note of Xi’s description of AI as a potential “international public good” (国际公共产品) benefiting humanity. Xue was the lead author on a report that framed AI safety as a “global public good.” The same language later appeared in a statement from a group including Xue at the International Dialogue on AI Safety in Venice, and in a paper published by Oxford University including coauthors who work closely with Xue. Although it seems plausible that Xi’s language was influenced by this meme, there are two key differences here.
Here, Xi is referring to the benefits of AI development being a boon to the world. Though the paragraph does mention strengthening governance and creating a global governance framework, it is in the context of AI capacity-building. The most natural interpretation is that the idea here is to ensure a harmonized global regulatory regime to facilitate global diffusion and adoption of, and preempt backlash against, Chinese AI. This is distinct from the idea that AI safety is a public good, in that mitigating the downsides of AI development is beneficial to all by reducing transnational risks.
The second distinction is more subtle: Xi’s vision of AI as a public good is “international” (国际) rather than “global” (全球), notwithstanding Xinhua’s mistranslation in its English reporting on the comments. “Global” implies the whole world, taken as one single entity (especially in Chinese where the word is literally 全球 quánqíu “whole globe”). “International,” on the other hand, merely implies something that occurs between nations — and if we know one thing about nations, it’s that they don’t always treat all their fellow nations equally. In the context of a paragraph about diffusing AI technology in the Global South, a cynical read is that what this is saying is essentially: “work with China on AI, you’ll get a good deal.” In the past, the Chinese government has rhetorically promoted “open source” as a pillar of international cooperation and capacity building; here, Xi does not go so far as to use those exact words, but the fact that AI tinkerers in Indonesia can download and build on DeepSeek’s R1 may in fact be what he’s gesturing towards. The upshot here may be not so much that China hopes to save the world with, or much less from, AI, as that they are willing to cut deals with positive externalities to bind a sphere of influence together into a “community of common destiny.”
Whether in the intervening years or during their cram session, the Party has clearly learned some things about AI development.
What does this all mean for AI in China?
Although an important statement of policy, this study session may or may not indicate any significant change in policy. As discussed above, study sessions are typically less inflection points than moments of crystallization. Thus, it is most important as evidence for things we have the least evidence for otherwise.
Most striking here may be the surprising introduction of new language related to risk management. It is notable that both of the two experts to ever brief the Politburo on AI have been vocal on potential risks, with Gao Wen coauthoring a paper in 2021 on “Technical Countermeasures for Security Risks of Artificial General Intelligence” (though he is better known as the Director of the military-associated Peng Cheng Laboratory in Shenzhen). Let’s not forget either Xi Jinping’s personal letter of high praise to Andrew Yao, a key leader in the development of China’s STEM talent but also one of the key pillars on the Chinese side of the International Dialogues on AI Safety. Xi’s hand-chosen experts on AI seem more like the Yoshua Bengios and Geoffrey Hintons of the Chinese AI world than the Yann LeCuns. This would seem to bode well for the prospects of China making reasonable efforts to mitigate risks in AI development domestically, as well as via international coordination. However, besides the establishment of the China AI Safety and Development Association, a body seemingly mostly positioned currently as a talk shop to engage with the barbarians, the mention of “constructing an AI safety supervision and regulation system” in July 2024’s Third Plenum decision has yet to bear any substantive fruit. Whether they’re serious about risk mitigation will ultimately be decided by actions, not words.
For our recent debate on whether China is “racing towards AGI,” this study session is a continuation of ambiguity. Xi definitively did not signal any particular emphasis on AGI, and the focus on “application-orientation” and overall ecosystem development falsifies any kind of specific, singular technological goal for China’s AI policy. At the same time, it shows that AI is indeed a top priority for Xi. The intent to “comprehensively plan” compute resources and promote data sharing point towards the kind of national-scale mobilization of resources that would likely accompany a push for breakthroughs in general intelligence. And the Party clearly has very concrete ideas about how to compete in AI. Things are serious now.
What this study session should impress on us more than anything, however, is that top CCP leadership is not only thinking about AI, but may even be having relatively in-the-weeds shower thoughts about things like data resources, talent pipelines, and risk indicators. This attention may facilitate prudent action to avert catastrophe, but it is guaranteed to stimulate action to advance China’s long-standing goals of achieving supply chain independence and strategic technological breakthroughs. Their success will be decided by the cooperation or contention of millions of ordinary Chinese with their own hopes, fears and uncertainties for their lives in a world with AI, as well as the sharp strikes and careless fumbles of China’s geopolitical competitors, and the assistance of what partners they can muster.
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But who is Zheng Nanning in any case?
Experts selected to deliver study session lectures are not so much chosen to bring something new of their own to the table as much as to bring exactly what Xi expects. So, what does the ideal avatar of Xi’s preferences for AI look like?
Zheng Nanning is an accomplished academic who takes his broader role in society seriously. His expertise lies particularly in computer vision and pattern recognition, but he has increasingly also been involved in robotics and industrial automation, promoting an idea of “intuitive intelligence” focused on enabling AIs to interact with an uncertain physical world based on semantic understanding. While we don't have the slides of the Politburo's study session, we do for a talk on “Machine Behavior and Embodied Intelligence” Zheng gave in 2023, with wide ranging discussion of machine perception, robustness, human-AI coordination and more. An academician in the Chinese Academy of Engineering, he has served as Chief Scientist in the Information Science field with the 863 Program, one of China’s longstanding key strategic technology development programs, as a member of the first Expert Advisory Committee for State Informatization, and as President of his alma mater Xi’an Jiaotong University. He has also been active in talent development efforts, leading the establishment of one of China’s first experimental undergraduate AI majors.
A profile on Zheng from last year paints him as empathetic and well-rounded: during a graduation speech in which he takes personal responsibility for the failings of super seniors and dropouts who didn’t graduate on time, he quoted from Lu Yao’s thousand-page novel Ordinary World, famous for depicting the struggles and aspirations of ordinary rural Chinese during the 1970s and 1980s. He is something of a fitness influencer, who claims to be able to do 50 pushups in one go and encourages students to set their hearts on “50 years of healthy work for the motherland.” Although it may seem cringe for your professor to try to get you to pick up a jogging habit, it instead reads as poignant in the context of a recent spate of early deaths of high-profile AI leaders in China which many attributed to the intense pressures of the field. Zheng even describes his educational philosophy as importing the “physical education spirit” into academics, saying that studies and research require the same tolerance for loneliness and constant pursuit of breakthroughs as athletics. Nor does he ignore imparting a moral formation on his pupils, stressing the importance of giving students “full and correct faith” in the CCP’s socialist core values.
Give him credit he practices what he preaches!
This personal history is a close match for much of China’s focus in AI currently: computer vision is key to the extensive surveillance apparatus of the Chinese state and a field where China leads the world technologically; “embodied intelligence,” and especially industrial robotics, is a core part of China’s bet on AI to produce “industrial upgrading” and escape the middle-income trap, called out as one of four priority “future industries” at the 2025 Two Sessions; talent development is a fundamental pillar underlying China’s goals in both basic research and diffusing AI into commercially valuable applications; and while Xi seeks to re-engineer China’s economy towards a high-end, high-tech structure, he is also attempting to re-engineer Chinese society towards cultural self-confidence, greater athleticism, and — as always — ubiquitous, intimate alignment with the Party.
There is one subtle surprise in Zheng’s profile, however. Though he attended Xi’an Jiaotong University for his bachelor’s and master’s, he did his PhD at Japan’s Keio University in the early 1980s. In recent years, foreign educational experience has flipped from a coveted asset in the Chinese professional landscape to arguably more of a liability, especially for roles with the government. In Xi’s increasingly nationalist China, a history of immersion in Western cultures suggests possible spiritual corruption. (In an overview of the study session, one Chinese blogger jokingly referred to recent comments from the chairwoman of appliance manufacturer Gree Electric that she refuses to hire such “returnees,” as there are “spies among them.”) We should not read too much into this, as education in Japan was very common for Zheng’s cohort and is generally viewed as less potentially problematic than education in the US. However, if Party planners had at all wanted to choose someone who was only educated domestically and is at least as impressive as Zheng, they probably easily could have. Under Xi, study session lecturers have increasingly come not even from academia, but from within the party-state system itself. It’s possible that, like the inclusion of an apparent foreigner in the audience at Xi’s recent visit to an AI hub in Shanghai, this weak signal of endorsement of international exchange was, though not actively sought, at least passively welcomed to communicate a marginally more open attitude to foreign and foreign-educated talent in AI. With the Trump administration giving anyone on a visa in the United States a new gray hair daily, China must certainly recognize an opportunity to win back diaspora STEM talent, and potentially even some from third countries.
Zheng also has a long history of giving comments on AI and society which appear to attune closely with Xi’s approach to AI. Already back in 2016 he was talking about the need to pursue both basic research and application-driven development as “grabbing with both hands.” He has discussed in detail the dilemma inherent in this two-pronged approach, where heavy pressure to produce scientific work can lead to researchers feeling “like ants on a hot wok” and choosing projects less ambitiously as a result. In line with Xi’s focus on attending to both safety and development, he has cautioned that AI is a double-edged sword, noting that technology has been used in the past to “stymie societal development and even cause disasters for humanity.” As a well-rounded scholar, he has pointed to the need for interdisciplinary contributions from the humanities, philosophy and law to address the risks of AI. He carves a middle path unfortunately rare also in the Western AI ecosystem in calling for scientists to neither buy into hype or spread unrealistic projects regarding AI, nor to engage in goalpost-shifting or downplaying advancements.
What does Zheng see for the future of AI? Since at least 2016 and as recently as 2021, he has described the field as facing three major challenges. The first is to make machines “learn without teachers.” Arguably, this has already been achieved by LLMs, pretrained on massive datasets via unsupervised learning and capable of impressively broad in-context learning with mere prompting. The second is to make machines perceive and understand the world like humans do. It’s unclear what exactly this would entail but it's hard to feel like we aren’t on the way there with, for instance, AI systems that can distinguish any arbitrary object in any scene. The final challenge in Zheng’s telling is to endow machines with “self-awareness, emotions and the ability to reflect on their situations and behaviors.” Hopefully, thoughtful AI researchers such as Zheng will reflect on the complex risks and philosophical questions which situational awareness and AI sentience may pose before the wrong edge of the sword cuts.
Jordan is in Tel Aviv for the next two weeks. It would be fun to do a meet up if there’s a critical mass! Respond to this email to connect.
Best Podcasts
Inside the Soviet Cold War Machine
Sergey Radchenko’s To Run the World explores the Cold War not as a clash of ideologies, but as a tragic and often absurd contest for prestige, legitimacy, and recognition among insecure leaders struggling to validate their power, both externally and at home. In this interview, Radchenko argues that authoritarian regimes, especially the USSR and China, pursued global influence to compensate for internal weakness.
A propaganda poster in support of North Korea. The title reads, “Annihilate the American aggressors!” ca. 1950. Source.
Part two came out in April, and it’s even better than part one! In this deep-dive, Radchenko unravels how personal egos and the battle for international prestige shaped Soviet decision-making — from Khrushchev’s downfall to Brezhnev’s Vietnam gamble, the paranoid Sino-Soviet split, Nixon’s unlikely détente, and the disastrous invasion of Afghanistan. This episode asks the question, what if boredom, not grand strategy, is what starts wars?
Gorbachev was very well-tailored!
Allied Scale and Net Assessment with Rush Doshi
This interview with Rush Doshi explores how the U.S. should strategically compete with China by leveraging partnerships with allies. While China faces real challenges like demographics and debt, Doshi argues that China’s scale, manufacturing dominance, and industrial capacity pose enduring strategic threats. He critiques both the Biden and Trump approaches to alliances: Biden’s overemphasis on persuasion and Trump’s heavy-handed use of coercion. Instead, Doshi emphasizes the need for capacity-centric statecraft, where allies help each other build economic, technological, and military strength.
EMERGENCY EDITION: Trump's Pivot to Putin + AGI and the Future of War
Defense analyst and Economist columnist Shashank Joshi alongside former Pentagon official Michael Horowitz explore the future of war. So much talk online around AI and national security flattens out to “AGI is a nuclear bomb, the first to get there wins” that it was a real treat to get to explore a richer vision of the future with two true experts. I want to point you in particular toward the second half of the episode, where we explore the Pentagon’s bureaucratic inertia, the potential for AI to reshape warfare, and the possibility that an adversary launches a first strike on the eve of AGI.
I’m hoping to expand on this show with an interview series exploring AI’s impact on national security. Too often today, debates center on “superweapons” lazily pattern-matched to the nuclear era or go in circles on cyber offense vs defense. The goal instead is to repeat the exercise Dario did for biotech in Machines of Loving Grace: deeply explore the bottlenecks and potential futures across domains like autonomy, decision-support, stealth, electronic warfare, robotics, and missile defense. Guests will be engineers and technologists who can also explore second-order operational and strategic impacts.
But this needs a sponsor in order to happen! If you work at an AI firm, defense tech, VC, university or think tank and want to help facilitate the best conversations about the future of warfare, please reach out to jordan@chinatalk.media.
China AI
Is China Racing to AGI?
This article explores whether China is truly racing toward artificial general intelligence (AGI) by staging a debate between two perspectives: the Believer, who argues that China is committed to beating the US to AGI, and the Skeptic, who contends that China’s focus remains on practical, application-driven AI development rather than AGI moonshots. While China has prioritized AI in general, the article argues that China's fragmented AI ecosystem, bureaucratic caution, and investor risk-aversion could disincentivize transformative superintelligence-focused research.
DeepSeek and Destiny: A National Vibe Shift
This guest post by Afra is a must-read. The rise of Chinese AI startup DeepSeek has ignited a nationwide wave of techno-cultural euphoria, reawakening the traditional concept of Guóyùn (國運) — the belief in a nation’s destiny. Viewed as both a technological milestone and a symbol of China’s long-awaited ascension, DeepSeek has become a focal point for patriotic pride after the trauma of COVID-19. As state rhetoric, popular culture, and grassroots sentiment converge around national destiny, DeepSeek's story reveals how technology in China is never just utilitarian — it is deeply entwined with myth-making, nationalism, and a collective need to prove that China’s time has finally come.
Manus: A DeepSeek Moment?
In this podcast discussion, Rohit Krishnan, Shawn Wang, and (now White House official!) Dean Ball analyze the potential of AI agents and the degree to which Manus matters overall. Unlike the research-heavy ethos of Western labs, Manus reflects a pragmatic, product-focused approach, prioritizing functionality over grand AGI visions. The conversation explores why Western AI giants have lagged in building compelling agents, citing safety concerns and regulatory risk aversion.
We also took a look in an article at Manus’ founder. Founded by pragmatic serial entrepreneur Xiao Hong and prodigy Ji Yichao, Monica evolved from a browser plugin into an AI agent business focused on product-market fit and international expansion, eschewing grand AGI ambitions in favor of practical use cases and aggressive data collection. With a flashy invite-only launch, Manus positions itself as a user-friendly, multilingual AI tool targeting overseas markets — a strategic move amid geopolitical tensions and growing scrutiny of Chinese tech.
Tariffs
How the Drive for Autarchy Caused WWII
In this sweeping conversation from the ChinaTalk archives, historian Nick Mulder explains how the obsession with national self-sufficiency fueled the economic insecurities that led to World War II. From the League of Nations’ failed sanctions on Italy to the Nazi quest for “raw materials freedom” and Japan’s desperate turn to war after facing an ABCD (America, Britain, China, Dutch East Indies) embargo, the episode shows how economic pressure, when mishandled, can backfire and accelerate conflict.
MAGA: A Guide for the Perplexed with Tanner Greer
In this podcast episode, Tanner Greer analyzes the chaotic dynamics of Trump’s second administration, particularly its approach to China and global trade. Greer explains Trump’s unpredictable decision-making style, his use of internal factional conflict as a management tool, and the administration's disjointed tariff policies. The conversation explores four quadrants of Trump World ideology and how adherents of each quadrant approach trade, industrial policy, and Taiwan.
Dylan Breaks Huawei and Tariffs Right
In this podcast, Dylan Patel of SemiAnalysis outlines a smarter semiconductor tariff policy aimed at boosting US manufacturing, moving supply chains out of China, and increasing America’s capital-intensive domestic production. This podcast also includes discussion from Dylan and Doug O’Laughlin about how Huawei is successfully circumventing US export controls by leveraging its vertical integration, supply chain workarounds, and large-scale system engineering.
Are We Cooked?
In this podcast, Peter Harrell, Kevin Xu, and Matt Klein discuss the chaotic implementation of Trump's new tariffs, the damage they’ll cause to international alliances, and the broader risks of US governance failures. The conversation explores the interaction between structural American strengths — innovation, entrepreneurship, and private R&D — and damage from erratic policymaking, attacks on the rule of law, and capricious foreign policy. The guests cautiously conclude that America is not yet “cooked,” though the heat is rising.
Trump's Semis Trade Policy
This CSIS Chip Chat episode explores the conflicting goals of Trump’s semiconductor tariff strategy. Bill Reinsch and Jay Goldberg highlight how poorly coordinated tariffs risk undermining enforcement of semiconductor manufacturing equipment controls, inadvertently benefit Chinese chip firms, and alienate allies needed for collective action.
Export Controls and Chinese Compute Infrastructure
Why China's Cloud Lags
This article by JS Tan analyzes why China’s cloud computing sector lags behind the US, despite massive investments from tech giants like Alibaba. While Chinese cloud providers have built extensive low-margin Infrastructure-as-a-Service (IaaS) capacity, they struggle with the high-value Platform-as-a-Service (PaaS) offerings that drive profitability in the US. Factors such as low enterprise IT spending, cheap labor, a weak enterprise software ecosystem, and the absence of professional IT consulting services hinder China’s cloud adoption beyond basic functions. Additionally, state-owned enterprises dominate China’s cloud landscape, prioritizing strategic control over compute capacity rather than developing profitable software services.
Mapping China's HBM Advances
This article by Ray Wang examines China's accelerating progress in high-bandwidth memory development, focusing on CXMT's narrowing gap with global leaders like SK Hynix, Samsung, and Micron. Despite US export controls aiming to restrict China's AI capabilities by targeting HBM supply chains, CXMT is now only 3-4 years behind in HBM technology. China's cloud and AI sectors, especially firms like Huawei, drive demand for advanced HBM, pushing CXMT to leapfrog into higher-value technologies. While CXMT’s still faces major obstacles, its rapid progress could reshape market dynamics, especially within China, and pressure global memory players on pricing, even if technological parity remains elusive.
Chinese AI Will Match America's, But Will That Matter?
While China may achieve AI model parity with the US in 2025, this article argues that America’s real advantage lies in its vastly superior compute capacity, which enables broad economic integration, innovation, and global AI leadership. Despite setbacks like TSMC's illicit chip production for Huawei, US export controls have successfully slowed China's AI progress by raising costs and limiting scale. The author contends that US policymakers should focus less on temporary model comparisons and more on leveraging compute dominance for sustained technological and economic leadership, warning against complacency and policy missteps that could squander this critical edge.
Ban the H20: Competing in the Inference Age
This article argued that China's AI ecosystem, long hampered by fragmented infrastructure, is increasingly well-positioned to dominate in an inference-heavy era, thanks to access to inference-optimized chips like NVIDIA’s H20, stockpiles of older GPUs, domestic alternatives like Huawei’s Ascend 910C, and major advances in inference efficiency. Evidently, the call to ban the H20 reached the right person, and the Trump administration has since cracked down on China-bound H20 exports.
Chinese Industry
Unitree CEO on China's Robot Revolution
In this translated interview, Unitree Robotics CEO Wang Xingxing lays out a bold, techno-optimist vision for the future of humanoid robots, predicting they will transform every industry within our lifetime — from manufacturing and construction to healthcare and even environmental restructuring at the microscopic level. While dismissing large language models as insufficient for robotics, Wang anticipates a breakthrough in general-purpose AI models tailored for robots by the end of 2025. He discusses Unitree’s competitive edge and the strengths of China’s domestic supply chains for manufacturing cost-effective robots. Despite skepticism toward Silicon Valley hype, Wang remains confident in China’s potential to lead the humanoid revolution, citing a rapid pace of development, youthful entrepreneurial energy, and abundant capital inflows.
Humanoid Robots: The Long Road Ahead
In this Q&A with Angela Shen, robotics PhD “KL Divergence” outlines the challenges and future trajectory of humanoid robotics, emphasizing that true viability hinges on achieving a “data flywheel” where robots deployed in real-world settings collect diverse, high-quality data to train better models. Industrial applications like logistics and manufacturing will likely see robots first, while home use remains at least a decade away. This article discusses what it will take to succeed in the humanoid robot race — as the field rapidly evolves, companies must navigate tough trade-offs between making robots in-house versus partnering, and focus on amassing the data, talent, and infrastructure that will ultimately determine long-term advantage.
Pharma Access with Chinese Characteristics
Angela Shen investigates China’s pharmaceutical landscape as it undergoes major government-led reform. Through programs like the National Reimbursement Drug List (NRDL) and centralized volume-based procurement (CVBP), authorities have dramatically slashed drug prices, yet concerns about the quality and effectiveness of low-cost generics persist. Corruption and inefficiencies remain endemic, while access to cutting-edge imported drugs is still limited, partly due to Beijing’s protectionist tilt toward local firms. As China’s disease burden shifts toward chronic and complex conditions, its ambitious vision of “Healthy China 2030” hinges on whether it can deliver innovative treatments through a system strained by economic and political pressures.
WWIII
Nuclearization
In this interview, Vipin Narang, Pranay Vaddi, and Junichi Fukuda explores how the Trump administration’s approach to alliances is shaking the foundations of America’s nuclear umbrella. They discuss America’s historical role in preventing ally proliferation, and analyze the “hardware” (military capability) and “software” (political will) components of deterrence. While hardware investments continue, allies like Japan, South Korea, and Poland are increasingly hedging against perceived US retrenchment. China's rapid nuclear expansion compounds these fears. The panel warns that allied proliferation would weaken U.S. security, destabilize the global order, and risk entangling the US in unwanted conflicts.
Industrial Policy and Grand Strategy
Rickover’s Lessons
This article by Charles Yang highlights the enduring relevance of Admiral Hyman Rickover’s approach to industrial leadership. Rickover, known as the “Father of the Nuclear Navy,” spearheaded the development of nuclear propulsion through a hands-on, deeply technical, and unorthodox management style that emphasized personal responsibility, rigorous training, and relentless oversight. His success lay not just in technological breakthroughs but in building a resilient industrial ecosystem.
Manufacturing’s Missing Revolution
Despite early hype, the US has largely failed to realize the promise of the Industrial Internet of Things (IIoT). In this article, Gary Wang argues that the IIoT “revolution” faltered not due to a lack of technology, but because of deep coordination failures. IIoT is a patchwork of technologies requiring complex integration across connectivity, cloud computing, cybersecurity, and machine learning — a challenge the free market struggles to solve alone. While US manufacturers remain stuck in pilot projects, China has leapfrogged ahead by using top-down industrial policy to address technical bottlenecks and platform fragmentation, enabling broad adoption of automation and AI in “dark factories.” Wang warns that similar challenges threaten US leadership in AI and quantum computing, and calls for industrial policy that supports entire ecosystems, not just headline-grabbing tech — before the US falls even further behind.
How to Build Compute in America
As US demand for AI computing infrastructure surges, a looming bottleneck in power generation threatens to stall progress. This podcast explores the challenges in energy, permitting, and financing for scaling America’s AI infrastructure. Arnab Datta, Tim Fist, and Ben Della Rocca also discuss the promise of next-generation geothermal energy as a power solution alongside gas and solar, as well as fusion and small modular reactors in the long term.
How to Compete
In this podcast episode, “Tony Stark,” author of Breaking Beijing and Ex Supra, discusses what the US must prioritize to compete with China throughout each decade of the 21st century. Stark critiques Washington's lack of a coherent China strategy and warns that without decisive action, the US risks strategic drift while China expands its global influence and military capabilities. The conversation also explores how AI will change warfare, how foreign aid supports U.S. security interests, why literacy and education are critical to military effectiveness, and how thoughtful, independent writing can shape policy discourse.
Weapons of Cold War 2.0 + 'People's War' Invasion Fleet
In this installment of Friday Bites, Kyle Chan argues that the US-China conflict is a full-scale cold war, not just a trade war, encompassing economic, technological, military, and ideological competition. Both sides are wielding a range of tools — from tariffs to cyberattacks and supply chain disruptions — without clear escalation dominance, as each action inevitably harms both parties due to deep economic interdependence. In the second half, Joseph Webster argues that Taiwan is unprepared to confront an invasion assisted by civilian ships armed with drone fleets, and suggests ways to get serious about national defense.
Media mentions
Jordan and Angela Shen coauthored an opinion piece in the Washington Post, entitled “Trump’s crackdown on foreign students is a gift to China.”
Jordan had a ton of fun on TBPN discussing business in China, Deepseek, and the search for truth:
Could America pursue an abundance agenda without the threat of the PRC? And can podcasters change the world?
To discuss, ChinaTalk interviewed Ezra Klein and Derek Thompson, who need no introduction, as well as Dan Wang, who has written all those beautiful annual letters and is back in the US as a research fellow at Kotkin’s Hoover History Lab. He has an excellent book called Breakneck coming out this August, but we’re saving that show for a little later this year.
Today, our conversation covers…
The use of China as a rhetorical device in US domestic discourse,
Oversimplified aspects of Chinese development, and why the bipartisan consensus surrounding Beijing might fail to produce a coherent strategy,
The abundance agenda and technocratic vs prophetic strategies for policy change,
How to conceptualize political actors complexly, including unions, corporations, and environmental groups,
The value of podcasting and strategies for positively impacting the modern media environment.
So last week we published our 400th episode! I’ll be doing a Q&A show in the next few weeks. Leave your questions in the comments.
The Thucydides Stimulus
Jordan Schneider: Let me start with a line from Ezra’s show with Tom Friedman. Friedman said, “Whether I’m writing about China from Washington, or whether I’m writing about China from China, I’m always just writing about America. My goal is to use China as my permanent Sputnik.”
Ezra, you mentioned over email that initially there was more China in “Abundance,” but in the final text, I think it primarily just plays that Sputnik role too. What do we lose when policymakers and policy advocates treat China primarily as a rhetorical device rather than a complex object of study?
Ezra Klein: Those feel like two separate questions. One reason “Abundance” is not heavily about China is that I’m perfectly aware I don’t understand China. What I do understand is the gravity that China exerts on American politics.
We have a very complex relationship of antagonism, competitiveness, and envy with China.
Going back to at least the 2010s, probably before, I’ve begun to really notice this feeling in American politics that they can build and we can’t. This became a pathway through which different kinds of bipartisan legislation that would not otherwise have been bipartisan began to emerge.
The re-emergence of industrial policy in America is 100% about China. Take China out of the equation, and there is no re-emergence of American industrial policy. It’s reasonable from the American perspective, when you’re trying to understand American politics, to understand China as an American political object, because that’s what it actually is in our discourse.
American policymakers don’t understand China at all. Most of what they think about it has a high chance of proving to be dangerously misguided. Dan will be much more expert here than I will, but I’m very skeptical of the bipartisan consensus that has emerged. Nevertheless, it’s completely trackable that China exerts a force on American politics. It has reshaped the American political consensus, often in ways that operate in the shadows because they don’t become part of the major partisan fights of modern American politics.
“Let the ‘Sputnik’ of high production circle in the sky forever.” Chinese poster, 1958. Source.
Derek Thompson: The only thing I would add, because I also don’t think I understand China, is that this was primarily a book about trying to deeply understand not all of America, but some very specific questions — Why can’t America build houses? Why can’t America build clean energy? What’s wrong with America’s invention agenda? These are very narrow questions about this country. The book’s scope did not include a deep dive into Chinese industrial policy or the nature of Chinese politics.
My interest in China is one of relatively blue-sky curiosity. We have this term “the Thucydides trap,” which explains how throughout history, when you have a dominant geopolitical power and a new rival emerges, that new rival discombobulates the status quo power. Modern American history has demonstrated something more like not necessarily the Thucydides trap, but the “Thucydides stimulus" — the idea that when a new rival emerges, it can inspire the existing superpower to think differently.
Sometimes that Thucydides stimulus comes through a sense of geopolitical threat. I’m very interested in the history of Sputnik and how the Sputnik moment inspired all sorts of changes in American policy in the 1950s and 1960s. But there’s also an approach that isn’t based on fear of geopolitical threat, but rather on open curiosity. How does China build its trains so quickly? How does China build so many bike paths that are beautifully integrated into the environment? What are the different ways in which Chinese versus American politicians think about designing their society such that each could learn from the other?
Without venturing too far into territory we’re saving for Dan’s wonderful book, there’s a way to engage with this idea of the Thucydides stimulus that isn’t exclusively motivated by fear, but rather by open curiosity.
Jordan Schneider: I’m going to throw it to Dan, but I love how your response to my first question shows that you guys are the masters and I’m still the student. I was debating for a whole week what my first question should be, and then I just gave it to OpenAI and asked them to squish these two ideas together. Your seeing through that is very impressive. Dan?
Dan Wang: I would always be the first person to put my hand up to say I know nothing about what’s going on in China. That is always true.
Ezra Klein: Welcome to ChinaTalk, where nobody knows anything about China.
Dan Wang: Well, Jordan knows something about China.
Jordan Schneider: Less than Dan.
Dan Wang: China is very messy. That is always my first proposition about China — it is very big, and many things are true about China all at the same time. They are a country that claims to be pursuing “socialism with Chinese characteristics,” which is still one of the most wonderful political science terms ever.
What sort of socialism is this? In my view, this is one of the most right-wing regimes in the world. A country that would make any American conservative salivate in terms of its immigration restrictions, its incredible amount of manufacturing prowess, and its enforcement of very traditional gender roles in which men have to be very macho and women have to bear children.
China is all of these things. It is also a place where there are really wonderful bike paths, specifically in Shanghai. This year, Shanghai has completed around 500 parks. By 2030, they want to create 500 more parks. It is a country that is getting better and getting worse all at the same time.
Ezra Klein: This goes back to this idea of envy — the degree to which the right envies China is fascinating. It doesn’t just want to compete with it or beat it. It’s not just afraid of it. What it wants is to be more like it.
In wanting to be more like China, the right is now overlooking virtually every advantage and competitive strength America itself has.
America’s politicians are so obsessed with trying to take manufacturing back from China, which I don’t think they have a well-thought-through approach to doing, that they look quite ready to give up America’s financial power. They seem to have reconceived of dollar dominance, which used to be called the “exorbitant privilege” because we got so many advantages from it, as some sort of terrible weakness that has hollowed out our industrial base and that we need to shatter.
Throughout history, being the power that controls the money flows has proven to be an extraordinary lever of control. But it has been recast in current New Right thinking as a sort of feminized decadence — something that “not real” countries and “not real” powers do, a distraction from the “real economy” and the “real work” of making things.
I’m not against bringing back manufacturing. I support the CHIPS Act. There are many aspects of manufacturing that I would like to bring back. But we can become so envious that it becomes hard to see our own advantages and strengths, and then make serious policy built on what we are doing well. That strikes me as one of the profound weaknesses of Washington’s approach to policymaking. It is so obsessed with what we are not doing well that it seems ready to set fire to what we are doing well.
Dan Wang: Edward Luttwak has this term “great state autism,” which he created regarding the US thinking about the Soviet Union. There is certainly an aspect, once you are a “superpower,” of becoming obsessed with the other party. You have to choose your enemies very carefully because you will end up looking quite a lot like them.
I wonder in which way the US is actually quite mimetic in thinking about how to be like the other superpower. In my sense, China — after the 2008 financial crisis, or perhaps after 2012 when Xi came into power — Beijing decided it does not really want to look too much like the US, which has been driven by Wall Street on one coast and Silicon Valley on the other in terms of economic growth.
Rather, Beijing has this purely mercantilist view, which would be recognizable to anyone in the 18th century, which is, “Let’s just make a ton of products. That is our source of power, that is our source of advantage.”
Jordan Schneider: Maybe now’s the time to bring up Gerstle and his book, which Ezra has been referencing frequently lately. His argument is that the Soviet Union as a memetic object facilitated a long 20th century of liberal governance. People don’t date it to the 1940s but to 1917 with Lenin and all the progressivism that unlocked. We saw Eisenhower buying into Social Security and domestic politics, plus the role of the USSR in the US Civil Rights movement. It’s interesting because there’s a bit of that with Todd Young and Mike Gallagher trying to implement a different version of self-strengthening than the one dominant in the White House today. I’m curious about lessons from how the Soviet Union shaped American politics. What different futures could that suggest for the US over the next few decades?
Derek Thompson: Gary Gerstle, the Cambridge historian, has this beautiful theory of political orders, which says American political eras are essentially defined by both an internal conflict and an external threat. Together, these create a consensus between parties that lasts for decades, even as headline disputes make it seem like parties are at each other’s throats.
The two big political orders are the New Deal order from the 1930s through the 1960s-70s. The initial internal crisis was the Great Depression, while the external threat was the rise of communism and socialism around the world, particularly in Europe. The New Deal order essentially synthesized these ideas by responding to the Great Depression and softening the introduction of socialism to American politics. It created a political order that was much more expansive with aggressive and muscular domestic policy, spending to reduce unemployment and poverty through the Social Security Act, employing millions of people.
As you mentioned, Dwight Eisenhower in many ways acquiesced to that political order in the 1950s. He was a strong advocate of social welfare policies and a proponent of continuing to build in America. He built the highway system.
In the 1970s and 1980s, that order broke down. Instead of the Great Depression, you had economic stagnation in the 1970s. Instead of the spectral threat of socialism in Europe, you had the direct threat of the Soviet Union and its capacities. A new political order emerged, defined by individualism rather than the collectivism of the New Deal era. Gerstle calls this the neoliberal order, which reigned over American politics from the 1980s to roughly the 2010s.
Gerstle’s theory, which I think Ezra and I subscribe to, is that we’ve seen a decline in that neoliberal order. Today’s problems cannot just be solved by cutting taxes or embracing Reaganite conservatism. Housing scarcity, building sufficient clean energy, and building the technology we invent in the US — these aren’t problems solved merely by cutting taxes and deregulating at the national level. We need more specific solutions.
Abundance liberalism is our answer to these new problems. It tries to synthesize the best of the New Deal order and the neoliberal order. The New Deal order taught us about the power of government to intervene and see what markets themselves cannot see. The neoliberal order recognized that government bureaucracy can sometimes get in its own way. We’re trying to advance a theory of progressive governance that sees how government creates rules for itself that make it harder to achieve outcomes.
Abundance liberalism finds a way to advance a muscular theory of government that says we can build houses, clean energy, and do extraordinary things with technology. But this requires identifying how we’ve written rules that get in our own way.
Dan Wang: Derek, why fold neoliberalism into this big package? Why not just embrace the New Deal agenda in its classical flavor? When I think about the New Deal, I think about the construction of power plants, homes, and broader infrastructure. They’d pack the courts if necessary because that was part of the agenda. What are we adding with the neoliberal flavor here?
Derek Thompson: When I say we’re adding a neoliberal flavor, I mean there were insights in the 1970s and 1980s about failures of the New Deal order that were accurate diagnoses. The New Deal order built extensively, often without consideration for either the voices of the marginalized or the poor, or for the environment. As a result, one legacy of the New Deal order is that the amount of construction was partially responsible for creating a groundswell against the state and against the growth machine. This empowered the legalistic revolution of the 1960s and 1970s that we now see across the country — in NEPA, in CEQA, in the proceduralism fetish, in adversarial legalism at many different levels of government. We are, in many ways, a society defined by a very activist lawyer class.
It’s important to recognize that there were legitimate legal responses to the growth machine that emerged in the 1960s and 1970s. Another part is environmentalism. The world of the 1940s and 1950s bequeathed to us by the New Deal age was truly disgusting — the rivers and air were disgusting, and tailpipe emissions from our cars were choking the planet. It was important to pass environmental rules to allow cleaner growth. We succeeded in many ways — the air is cleaner, the water is cleaner, and tailpipe emissions are a lot lower.
Now we need a new synthesis because climate change presents different environmental problems than those of the 1940s and 1950s. We need ways to build clean energy that allow people to live modern lives without choking the biosphere. That’s why we need a new synthesis rather than returning to the 1930s.
The last point: when people ask why we can’t just roll back the clock to 1932, remember that the government then, responding to the Great Depression, hired millions of people through the Works Progress Administration. Today’s US government, with its deficit and current interest rates, not to mention the political climate, simply doesn’t have the ability to hire 5 million people to build something like the Tennessee Valley Authority. It’s not going to happen.
To build houses, energy infrastructure, or transit today, we need the private sector to do much of that building. This means we need to build a legal architecture that allows the private sector to build without despoiling the planet or running roughshod over consumer or environmental interests.
Jordan Schneider: I understand your Iraq War hangover perspective — if there’s this much consensus, maybe something is fishy. But I’m frustrated, and perhaps this shows a broader frustration with how the show has evolved into “Jordan, Media Critic.” It seems to be less about learning about a field and more about booking someone to let Ezra make a point. Over the past five years, you’ve had Tom Friedman, Jessica Chenweis, and Dan, but the show with Dan wasn’t really about Chinese foreign policy. You’re leaning heavily on one side of the professional community when it’s now split roughly 90-10 in the other direction. You have a big platform, Ezra, and I’m curious how you feel about weighing in versus interrogating policy questions that aren’t directly in your area of expertise.
Ezra Klein: One pattern I notice in media criticism is that people feel you aren’t using your platform in a curious enough way when they disagree with you, but when they agree, they find it perfectly curious. I get this from many different perspectives.
When I think the consensus is wrong, my show goes counter-consensus. When I thought Joe Biden was too old to run again while most people believed the primary had settled it, I was willing to take heat for saying Democrats should have an open convention. In this particular case, I think the ambient coverage of China on my show — except for a few specific China episodes, of which there have only been three or four — reflects the broadly speaking Washington consensus that we need industrial policy to recapture major industrial sectors from China.
What worries me most, having covered Washington for a long time, is when things become unsayable without good evidence for why they shouldn’t be said. I don’t mean within the professional China debate community, but within the political community of people who need to win elections and advance their careers. I’m not a dove who thinks there are no problems with the Chinese Communist Party, but I’m not convinced the relentless buildup of antagonism and increasingly harsh policies is working — or that we’re even evaluating if they’re working.
My show isn’t unwilling to give air to mainstream perspectives. I had Ben Buchanan on AI policy and Jake Sullivan, who defended efforts to deny China certain technological exports that would allow them to attain leadership. At the same time, Tom Friedman’s point — which you might call dovishness — is that Washington tends to compete with China as it was 15 years ago, failing to recognize how much manufacturing innovation they’re currently capable of. The belief that we can simply wall ourselves off or engage in a trade war and rebuild the manufacturing sector they’ve painstakingly developed over time isn’t clearly supported. Maybe it’s clear to you — I’d actually like to hear you defend whether tariff policy as currently structured will achieve that goal.
More broadly, is it so bad for the world if China makes many solar panels and EVs? If climate change is as significant a problem as I believe, that rapidly accelerates the dispersion of renewable energy and electric vehicles. I understand why the Biden administration made its decisions. I’m not even sure they’re wrong, but I would like to hear the other side argued more publicly.
Similarly, in AI governance, is the race dynamic between our countries beneficial? If you have concerns about AI safety — and I still do, even as it’s become somewhat gauche to express them — the fact that both countries are willing to disregard other concerns to beat each other to usable AGI should raise concerns about the structure of development emerging on both sides.
I don’t see the preconditions for wise policymaking here. The absence of those preconditions is one reason the Trump administration, in its careening effort to construct some kind of sensible tariff policy, retreated from an all-out trade war with the entire world to focusing on China. They thought that would be more defensible, but did they plan for it? Did they think through the outcomes?
I’d turn this question back to you, Jordan: Do you think the current direction of US-China conversation is leading us toward good policy?
Jordan Schneider: Obviously not, but that feels like a straw man. You’re asking me to defend Trump’s tariffs.
Ezra Klein: Hold on. I want to push this because you brought it up. The Friedman conversation is about Trump’s tariffs. It’s a view that we are getting these policies because of the views that have begun to take hold, at least in the Republican Party, about China.
Jordan Schneider: The issue is that Jake Sullivan and Ben Buchanan are not people who have spent much time reading party documents. Fundamental to all of this is understanding the system and its intentions because China is relatively equal to the US from a national power perspective and will remain so for the coming decades, regardless of what we do. Understanding Xi and the broader system is a very important intellectual foundation that deserves rigorous interrogation. Tom Friedman spending a week at the Huawei Campus won’t necessarily give you that.
Huawei’s Ox Horn campus in Dongguan, near Shenzhen. Source.
Ezra Klein: But this is a trade policy conversation. What would change in your trade policy from understanding their objectives? Let’s have the concrete conversation here. I agree my show hasn’t dug into party documents — there are reasons for that, but regardless, we haven’t done it. In terms of what we’re trying to examine, which is the output of US policy and whether it will achieve our goals, what do you think is being missed? What premise needs to be inserted?
Jordan Schneider: What are we missing? The world has the potential to go in different directions. It’s more difficult in the context of Trump because I’m not sure that China being a boogeyman is what’s empowering Trump. Yes, at some level it helped him get elected, but he could say whatever he wanted because he has this hypnotic control of the Republican Party. I don’t know why I was scared of this show, Dan, because I don’t have podcast hosts who just throw this stuff back at me.
Ezra Klein: I’m not —
Derek Thompson: Can I ask a version of the question?
Ezra Klein: Yeah.
Derek Thompson: Let’s say that I am a dedicated listener of the Ezra Klein show. I just mainline the podcast, and his ideas become my ideology. What is my ideology missing right now regarding China?
Jordan Schneider: That China is an ideologically driven system. The world in which China is able to more dramatically reshape the global balance of power over a 15-year horizon is one we should be really concerned about. I have a deep discomfort with the timeline where America and its friends are waning relative to China on a multi-decadal horizon.
It is not possible to know with a high degree of confidence what China really wants, but there’s at least a 25% chance that the Chinese government we get in the coming decades is a deeply Leninist and expansionary one. That is a scary timeline that the world needs to price in and prepare for.
That’s for the modal Ezra listener. For the modal DC Hawk, I’d just say that Chinese people are people too.
Dan Wang: I definitely want to defend the dulcet tones of both Ezra and Derek, but as an amateur member of the community of China watchers, there are debates that aren’t easily resolved. For example, a question I would pose to US policymakers would be: Do you judge it is in America’s interest that China is richer, or is America better off if China is poorer? Having that answer would help structure many subsequent policy choices.
There is debate within the China community about how expansionist China is. They certainly want Taiwan — no question there. But is the next step that they want to take Vietnam, Philippines, as well as Japan? People are extensively debating this. When we can answer these more technocratic questions and reach some agreement, many things become easier.
This isn’t about Ezra’s show, but in the US there aren’t many experts really trying to debate and resolve these questions. In my field studying Chinese technology development and manufacturing, policymakers frequently use the laziest trope that China got where it is totally through stealing. This is easily disprovable, yet we hear it all the time. As long as we can’t move beyond these tropes, it becomes much more difficult to resolve even the harder questions.
Ezra Klein: It’s funny because I definitely didn’t expect to come on the show and articulate my own quite weak philosophy of China. But this goes back to what Tom was saying and what I’ve said in the book — this is a way of talking about America. Jordan, if your disagreement with me is that you think I’m excited for a world in 15 years where America has broken substantially and China has reshaped the global order, let me set your mind at ease. As dulcet as my tones may be, I don’t want that world. What I want is a world where we try to achieve our goals through sensible policy aims.
My views are actually quite weak on many of these things. There are areas where I have very strong views about how America should build more and faster. A big portion of the book Derek and I wrote is fundamentally motivated, as we say at the end, by competition with China. We believe we won’t continue thriving as a nation in terms of our own strength if we don’t get better at manufacturing, construction, deployment, innovation, and cyclical experimental policy. There’s something for us to learn and compete with there.
On the narrower level, there’s a view that has taken hold in Washington that some version of decoupling is the way forward. One place where I’m uncertain — not certain I disagree, but the conventional view is so dominant that I’m more interested in the counter-argument — is Tom’s argument from the Huawei campus and his other experiences. He suggests we should do with China in the 2020s what we did with Japan in the 1980s and 1990s when they were outcompeting us on cars: create joint ventures in America where we develop their technological and manufacturing processes and embed them in our own companies. China did this with us too.
In Washington, this is considered virtually unsayable. I’d like to hear a better argument against it than I’ve heard because it’s not obvious that our current approach will accelerate the sophistication of our manufacturing chains.
My view is similar to Dan’s — I’d like us to have more precise conversations about means and ends. But that’s difficult in the current political atmosphere where you have to out-compete others to be symbolically tough or hawkish.
The Taiwan problem and the Indonesia question are both very severe issues somewhat beyond my ability to address confidently. America has a very unclear internal stance on whether we would actually go to war to defend Taiwan — people don’t want to answer that, and I don’t even know what I think the answer should be.
Regarding what we need to do to accelerate our manufacturing and innovative ecosystems, the question of whether we should be decoupling or trying to couple and do tech transfer, engaging in more direct competition with products like Chinese EVs while heavily subsidizing our own industries with clear goals — that doesn’t seem completely crazy to me.
Abundance Media
Jordan Schneider: Maybe the distinction is between the technocratic and the prophetic. Once discussions turn into US-China World War III prophecy, that’s where all of us get frustrated. The way you both approached abundance — you started on the technocratic side of writing. There’s now more Frederick Douglass and MLK elements — creating a vision with moral force behind it to transform policy ideas into something rhetorical that resonates. I’m curious how you think about broader theories of policy change, technocratic versus prophetic voices, and how you grappled with that in framing the book and discussing it on your media tour.
Derek Thompson: The book is both poetry and prose. We have an introduction and conclusion with sentences that I described to Ezra as aphoristic and epigrammatic — sentences that wanted to be underlined, that wanted to have that glow on Kindle when 10,000 people highlight them. It’s strange to write for that piece of coding to become illuminated in the text, but that’s writing in a memetic way — a very 2025 approach. We want to write sentences people will quote and remember, and use terms that will infect the software of people’s minds. People talk about an abundance agenda now.
Neither Ezra nor I are trying to be shy about wanting aspects of this book to be highly memetic while other aspects are admittedly and painstakingly technical. The analysis of Tahanan (the affordable housing complex in San Francisco), the analysis of funding opportunities for chips, the history of the NIH in America, and the development of solar technology — these are highly technical sections. We’re not just trying to be pie-in-the-sky poets. We really want to understand how the world works, how government works, because there’s no way to understand how to make it work better without understanding the thing in the first place.
During the podcast and speaking tour, I’ve repeatedly been asked how we expect this book to make contact with the 2026 midterms or the 2028 presidential election cycle. My feeling, which I deeply believe, is that nobody votes for books. Even in American history, where you could weakly argue a president was influenced by a book, people are still voting for that person. People vote for people. FDR voters didn’t elect John Maynard Keynes in 1932 — they elected someone inspired by Keynes. No one elected Milton Friedman in 1980, but Ronald Reagan was inspired by Friedman.
The job of writers, podcasters, and public intellectuals is this — in a crisis, and crises will come perhaps twice as fast in this decade as previous ones, people in power reach for ideas that are on the shelf around them. They throw out an arm and say, “What’s the idea nearest to me that can help explain this moment of chaos?"
What we’re trying to do with a book like this is stock the shelves with better ideas, allowing Democrats to respond to housing crises in San Francisco or Los Angeles, clean energy construction challenges in Massachusetts, or the general problem that America invents many things but can’t seem to build them the way the Chinese can. How do we resolve these observed crises? You reach for ideas on the shelf, and abundance is trying to be on that shelf.
We are trying to influence people, but we understand no one’s ultimately going to vote for a book. The world changes because of people filling out institutions — ultimately a result of personalities we can’t directly influence.
Jordan Schneider: Ezra, do you want to address the “Ezra as America’s only real rabbi” angle? I felt like I got more substantive Israel content after October 7th from you than anywhere else. You started doing very wonky Obamacare analysis, and now there’s a values discussion that you inject into more people’s lives than perhaps anyone else in the country.
Ezra Klein: I appreciate that. The reputation I developed in my wonk blog days, in my Obamacare days, as somebody who only cared about appendix tables and CBO documents was never true. I do care about appendix tables and CBO documents and the granular sections Derek described. I believe you need the narrow, granular texture of things to understand them.
I also believe that moments and eras have zeitgeists and values. I’m probably more of a mystic than people realize — although a coming podcast with Ross Douthat, probably out by the time this airs, will reveal some of that. I try to be honest about my own reactions and struggles with the moments we’re in. Like anyone else, my reaction in many of these moments is emotional.
Something I believe strongly about my work is that if you aren’t making space for the emotional layer of reaction, you aren’t making space for the reaction itself. If you can’t speak to where the audience is emotionally — which may or may not be where you are — it will be very hard to get them to listen. If people don’t feel understood, they won’t listen to you, and maybe they shouldn’t.
I don’t think I’m alone in doing this, but it has needed doing. I’ve always felt as a writer, and maybe as a person, that the emotional layer of moments isn’t unusually visible to me — it’s something that feels unusually invisible to others. I don’t know what it’s like to walk through the world and not be incredibly affected by the emotional currents of every room you’re in. I meet people who don’t seem as overwhelmed by this, and their lives seem blissful to me. It’s just how I experience the world, and I think it comes out in the show.
When you’re writing a piece or doing a podcast — and I’d be curious for Derek’s reflection on this because he’s very good at it too — you have the audience’s beliefs in your head. What am I arguing with? What is the structure of prevailing sentiment? How is the audience feeling at moments of high emotion, like October 7th or this period with Donald Trump? That’s part of the structure you’re engaging with. To ignore it makes no sense.
I was never a fan of the Ben Shapiro line that “facts don’t care about your feelings.” Maybe facts don’t care, but people sure care. Feelings sometimes should sensitize us to the idea that there are facts we don’t yet know or experiences we haven’t absorbed. It would be hard to find many people in journalism more interested in the wonky details of policy than I am, but perhaps because of that interest, I understand that wonkiness only goes so far and misses a lot. We never have full understanding of anything. We were saying this at the beginning with China — the idea that any of us, anybody in this debate, even anybody in China itself, can understand a country that big? I don’t understand America. You have to recognize that there are many ways of knowing.
Derek Thompson: I love all of that. I agree with just about all of it. What we do — me, Ezra, Jordan, Dan — we make media. I don’t know if the full value of media is feelings, but certainly an enormous amount of the value of media is feelings, even when you read a very detailed analysis of wonky things.
Just the other day, I had a conversation with an astrophysicist about transmission spectroscopy, which is how we measure faraway starlight passing through planets 100 light years away. As that light passes through those planets’ atmospheres, we can analyze the wavelengths to determine which chemicals have blocked aspects of that starlight. By determining that, we can guess what chemicals are present on that distant planet. We can say, “That blur on a telescope — that’s ammonia, methane, dimethyl sulfide. That means that planet 100 million light years away has aquatic life, has algae."
The details are technical, but the value is wonder. The value is a feeling. Ultimately what I want from people who listen to my podcast or read this book — it’s always nice to hear someone learned something, that the takeaway was informational. That’s beautiful. I love learning and information. But information itself feels like something — it feels like a dopamine hit, the relief of anxiety that I didn’t know something and now I do, or that my worldview, my understanding of what’s possible in human life, has expanded by one unit of new fact. That’s all feeling.
The greatest compliment I can receive is “your book made me feel hope” or “your podcast made me feel wonder.” When people came up to Ezra and me for book signings, many said, “You make me feel sane.” They had five seconds to speak to someone they’d listened to for hundreds or thousands of hours, and the words that came out were “you make me feel sane.” That’s the outcome of the work.
I agree with Ezra. Not only are my emotions front of mind when I’m writing, but also the audience’s emotions. That’s true both within podcasts and across podcasts. Within podcasts, I love the tension between going deep into something technical and then zooming out to the emotional impact. Across podcasts, after doing many shows about how problematic tariffs are, I might say, “We need to talk about aliens. We have to discuss transmission spectroscopy so people can get excited about detecting alien chemicals on planets 100 light years away.” We need to balance.
This play of feelings, this idea that our work exists as a kind of symphony of emotions within and across podcasts, is extremely present for me. It’s great to hear it’s present for Ezra as well.
Dan Wang: It’s really wonderful that these dulcet tones are getting more fiery. Maybe no one votes for a book, Derek, but I would vote for podcasts. I would cast a vote for Plain English, and I would cast a vote for the Ezra Klein Show.
Jordan Schneider: Now we have a choose-your-own-adventure here. Making people feel sane and heard is lovely, but there’s also a dark version of abundance. If you weren’t, as you self-describe, “pathologically agreeable,” where you have more enemies and villains — what would that book look like? How would that be embodied?
Alternatively, you partially answered this in the past 10 minutes, but are there other failure states you worry about for yourselves over the next five or ten years that you’re trying to orient away from in your work?
Ezra Klein: Let me take the first question about dark abundance. People kept telling Derek particularly that he’s too agreeable, but they tell me that too. Matt Yglesias had this funny reaction to the book where he said, “I read this book and thought it was good, but too agreeable. Nobody would argue over it because it was too soft" — and then everybody argued over it. So maybe he was wrong.
One thing I’ve learned on the tour is that I have a different sense of how to treat coalitional politics than many people I agree with, both to my right and left. Others seem more certain that you can create a group — call it corporations, unions, or whatever — and politics is really about deciding if that’s an in-group or out-group. If it’s an out-group, you should attack it as your villain. If it’s an in-group, you should ally with them as your partner.
I view this much more situationally. Environmentalists, unions, corporations — these are very big, diverse categories with a lot of internal fractiousness, as anyone who has reported on them knows, and I have reported on all of them. Different issues have different coalition structures.
It’s not that our book doesn’t have “villains,” although we don’t think many of the people we discuss are ill-intentioned. The book has plenty of instances where you can see who is standing in the way or governing poorly, and that’s led many people to get angry. When I talk to centrists, they often ask, “Aren’t public interest unions your real enemy?” From the left, the question is more, “When will you admit that corporations and corporate power are the real enemy?"
Jordan Schneider: And that’s just not interesting.
Ezra Klein: I wouldn’t say it’s not interesting. I’ve been preparing for a conversation with Zephyr Teachout and someone else that will reflect some of this debate. I’ve been reading her work and thinking about how she views the endpoint as power itself. Her critique of many she argues with across domains is that they focus on specific issues but not on power. There’s a sense that if you can move power from one place to another, you’ve solved the problem.
But what if that relocated power is used poorly? Her confidence seems to be that if you moved power from corporations to government, it would be well used. Maybe sometimes it would, but often it wouldn’t. Government gets captured by many different groups, not just corporations.
Similarly, the new left moved power from government to individuals, planning meetings, and people who can bring lawsuits, assuming individuals would be safer repositories of power than government and should tie government up in process. Sometimes that’s true; sometimes it’s not.
Many people seem to think there’s some secret “Straussian” version of Abundance in the back of our minds where we’re extremely clear about who the villains are, but due to our agreeable nature, we edited that out. Much of Abundance is an argument about being outcome-oriented, asking what we need more of and how to get it, then being rigorous about the answer.
Sometimes that leads to identifying corporate interventions that have blocked progress. In other places, it’s local homeowners or environmental groups. There are places where unions use environmental laws for reasons unrelated to the environment, making these laws potent tools of delay. Then we can’t reform environmental law in California because these groups are so committed to leveraging it that they resist any changes, even though these laws block things we need for other reasons.
There isn’t a “dark Abundance” book sitting somewhere. We don’t have the luxury of believing in some stable equilibrium of interests that gets us what we want. It’s about being deeply committed to achieving what we promise. If certain groups stand in the way of those achievements, then on that issue, they’re not our allies, and we should try to overcome that problem.
Derek Thompson: I want to ground Ezra’s principles in this current news moment because they’re so appropriate. When I talk with people on the left — I was just on Mehdi Hasan’s show the other day — they ask versions of this question: “Why isn’t your book more anti-corporate? Why isn’t it more anti-billionaire or anti-oligarchical?"
I wish I had this framing then: I don’t see business as the permanent out-group of progressivism, and I don’t see government as necessarily the singular, appropriate wielder of democratic interests. Look at what’s happening right now. The government is trying to take away the independence of the Federal Reserve. Trump has bragged about using tariff policy to try to crash the stock market. They’re using government power to entirely reshape the economy in ways that have been terrible for manufacturing.
Meanwhile, Wall Street is begging Scott Bessent to keep the Fed independent, to not crash the economy, and to remove these tariffs to protect the manufacturing sector. If your first principle is “if Wall Street asks for it, then it’s bad,” you find yourself questioning the independence of the Federal Reserve or defending the idea of trying to disrupt the stock market through random tariffs on various countries.
It’s much more helpful to recognize that in-groups and out-groups aren’t universal — they’re situational. It’s better to reason from first principles of politics rather than assigning entire groups as allies versus enemies. I hope that came across in the book, for better or worse. I’m really against designating entire groups as permanent enemies of progress, because economics is complicated and life is complicated, and sometimes people are on both sides of issues.
Jordan Schneider: Let’s speed it up. I’m going to ask you five different questions about hosting podcasts. You can pick whichever ones you want to answer: Do you have magic words you give as a pre-recording pep talk to guests? What goes through your heads during interviews? What tricks do you use to turn around guests who are performing at a B-minus level for the first 10 minutes? What are you working on as interviewers? Are there any content ideas or initiatives you’d pursue if you weren’t affiliated with large outlets?
Derek Thompson: Let me answer the meta question about shepherding guests who aren’t giving me what I want in the moment, because it’s a really tough challenge. Sometimes you can feel the conversation slipping out of your hands.
I’m never afraid to simply step up and say, “Hey, can we go back to the very first question? This is on me. I think I understand how to work our way through this conversation, and I’m going to ask a different set of questions. If you want to play with me here, let’s do A, B, C."
I try to be relatively explicit about what I want if the conversation isn’t going as planned. Much of this is to prevent the guest from feeling it’s their fault. If they become self-conscious, they develop this metacognitive layer of thought constantly judging their thinking, which prevents them from being expressive, interesting, and fluent. I try to blame it on myself and say, “Let’s try essentially a new game. We played game number one; let’s play game number two and see how it goes.” That’s how I massage the conversation.
Regarding the guidance I give guests, I don’t want to be overly prescriptive. Ezra and I were actually talking earlier about another podcaster who is unusually prescriptive at the beginning of interviews. I want to hear guests’ natural personalities come through. However, I remind them, especially those in technical fields: “This is a podcast for a generalist audience. I want you to use jargon — because jargon actually sounds cool — but please slow down and explain everything that isn’t basic 101 material in a class you might teach."
This encourages them to recognize when they’re using specific terminology. For example, as they begin talking about transmission spectroscopy, they’ll think, “Wow, that was super multisyllabic. I should definitely slow down here.” I want the conversation to be slow, conversational, and feel like a discussion after half a beer. But I typically don’t give them that level of specificity in my instructions.
Ezra Klein: When something isn’t working, you have to try something else. The more it’s not working, the more radically you need to pivot. I don’t always succeed at this. It’s very hard to abandon the mental map you had for the conversation.
Sometimes you’re just hoping things will improve later, and you’ll edit out the beginning. Sometimes I decide, “We’re throwing away the first 12 minutes of that one.” But you have to start trying riskier strategies to knock people off their current track.
The truly challenging situation is when a guest clams up — when they’re unwilling to be as open on mic as they were in previous reporting, or they’re simply nervous. To some degree, you sometimes have to rescue them. Usually, there’s a conversational vein that will activate them. Being very sensitive to people’s energy in the moment is important.
Jordan Schneider: Aside from having a better one-line takeaway for what people should think about China, do you have other feedback for China Talk? What should we be doing more of here?
Derek Thompson: I learn so much from your Substack and your show. Sometimes I feel there’s a historical layer I always appreciate — understanding how things got to where they are. People who are experts in a particular domain often forget that others might want to walk the path they walked to arrive at that moment of relative expertise.
I’m always a fan — and maybe this is just my general preference for explainer media — of stepping back and providing a little bit of the “how we got here” context. That’s not so much a criticism as an observation, but it’s a type of media I always appreciate.
Ezra Klein: You can never have too much Dan Wang. He’s been the one on the island.
Jordan Schneider: Derek’s show is called Plain English, but I’m more in the Dwarkesh mindset of just doing podcasts at my level. The audience will get 80% of it, and if needed, they can Google things. ChatGPT can now fill in the gaps for you. But I hear your point.
Let me shift topics. Ezra, I went back to your Tim Ferriss interview where you spoke about how Matt Yglesias giving you an encouraging comment when you were 19 was a big psychological boost to continue down this unusual path of writing on the internet.
I’d like all three of us to do something similar now — highlight people in the sub-10,000 Substack follower range who we think are doing excellent work.
I’ll start — , who has a weird and offbeat perspective on China and broader Asia. She went to Taiwan recently and is taking an interesting approach to technology writing.
, who writes a Substack called Sinocities, exploring regions in China. There’s so much focus on Beijing, Shanghai, and Shenzhen that examining what’s happening in other provinces is really valuable.
is great. He actually dives deep into what Huawei and BYD are doing in the broader Chinese industrial ecosystem. He can be a better guide than someone like Tom Friedman.
Lastly , who publishes less frequently but offers deep dives into Chinese economic policy and communist ideology, covering both the Soviet Union and China, which I think are excellent.
Let’s go around. Who would you like to highlight?
Dan Wang: I have only one nomination — Jordan Schneider of ChinaTalk. He brings tremendous enthusiasm, making a potentially dry topic broadly accessible. Today, we heard not only from the mystical side of Ezra but also about starlight from Derek. You don’t expect that when you tune into ChinaTalk, but that’s what you get.
ChinaTalk: now Dan Wang endorsed! Consider subscribing.
Ezra Klein: To be honest, having written a book with Derek, you can’t get this guy to stop talking about starlight. There was a beautiful starseed passage that I don’t think made it into the final book — I believe because we removed some of the nuclear material. Give Derek 30 minutes, and you’re guaranteed to hear about starlight.
I’ll recommend , whose “Programmable Matter” Substack is absolutely essential. He’s one of the great minds of our time.
— her Substack is called “Eating Policy” — it goes more deeply into how policy actually works in practice than almost anyone else.
I’ll also recommend , a professor and expert in administrative law and administrative complexity. His Substack is called “Can We Still Govern?”
Dan Wang: I second Henry Farrell. I think of Henry as a giant intellectual teddy bear. Whenever I see Henry, all I want to do is grab him in my arms and squeeze.
Derek Thompson: My two recommendations come from the world of science — and , both exquisite writers and wonderful thinkers on genetics, innovation, culture, and how science actually works. I’m incredibly interested in various scientific frontiers right now and always hungry for people who can explain complex concepts clearly and memorably. They both excel at what they do.
Arrian Ebrahimi is a J.D. candidate at Georgetown Law and a former Yenching Scholar at Peking University. Today, he’ll attempt to quantify China’s state equity investments in semiconductor manufacturing equipment. You can read more of Arrian’s writing on the excellent Chip Capitols Substack. Special thanks to Lily Ottinger for assisting with the charts.
The recent tariff chaos — first exempting only the most advanced semiconductors, then exempting a broad base of electronics important, followed by the current waiting period for more calculated semiconductor tariffs — should not come as a surprise.
Not only was the President sounding a clarion call for tariffs through the 2024 campaign, but rumors were circulating in Washington and foreign capitals that the then-candidate Trump’s tariff wishes would manifest as a tariff on the Chinese semiconductor content of downstream electronics imported into the U.S. A New York Times article recently confirmed those rumors by unnamed administration sources.
Targeting the Chinese chip content of electronics reflects a concern over the PRC’s semiconductor industrial policy that is not unique to President Trump, nor even to U.S. policymakers. European policymakers have also sounded the alarm over China’s allegedly subsidy-induced mature node overcapacity, and your author spoke at a European Commission event in Brussels last November to address just those concerns.
Washington and Brussels’ concerns, however, sound as they grasp in the dark for answers to one as-yet unanswered question: How much public money is the Chinese government spending on semiconductors… total?
Many studies over the past half-decade have tried to figure out how public funds flow from the various organs of the Chinese government to the semiconductor sector. However, the use of conservative methodologies has prevented scholars from uncovering numbers for the entire ecosystem. The two standard approaches are:
Policy Announcement Hunting: China-watching platforms have tried compiling announcements of new semiconductor incentive schemes from China’s central and local governments (see Chip Capitols here on local government programs and here on central government tax subsidies). These program compilations help explain what sorts of policy tools the Chinese government deploys, but they cannot provide even a ballpark number for the total amount of RMB invested, because the Chinese government does not have transparency standards for public expenditures in the way the U.S. does.
Public Company Calculations: The OECD’s seminal 2019 report on market distortions in the semiconductor industry examined the subsidies that governments around the world, including China, gave to their champions. However, the study limited itself to 21 publicly listed firms, only 2 of which were Chinese, because private companies do not have annual financial filings from which they could pull statistics on state investments and subsidies. This approach offers greater accuracy, but only captures a small slice of the Chinese public investment pie.
I set out to compile data as comprehensively as possible on Chinese equity investments, subsidy grants, and tax credits for the country's key semiconductor manufacturing equipment (SME) companies — regardless of whether they are public or private. This challenge required estimation based on the limited public statistics available for private companies, but has allowed me to amass a treasure trove of insights about the Chinese SME sector.
Estimation is critical for reaching conclusions about the macro-state of upstream Chinese chipmaking equipment firms. The SME sector is small — relatively few firms are publicly listed, and some of the most important firms, like Shanghai Micro Electronics Equipment (上海微电子) (China’s only lithography firm), are notably absent from public markets. At the other end of the spectrum, Huawei has increasingly sought to integrate itself vertically by investing in Shenzhen’s SiCarrier (深圳市新凯来技术有限公司), but public numbers are not available about that nascent company which is yet to release most of its products to the open market. Notably, Huawei does not count among the top investors of any of the public SME firms surveyed in this article, suggesting its SME investments are focused nearly exclusively on firms like SiCarrier that haven’t attracted attention from the state-backed Big Fund or institutional private investors.
Ass more Chinese SME firms go public and their financial details become available, I will invariably need to revise these findings. Nonetheless, the world deserves a first (if fuzzy) glance at the totality of China’s industrial policy for chipmaking equipment. In this first of two articles, we find that:
Government and private-sector investments into SME firms dropped precipitously in 2022, the year of China’s COVID lockdowns, and only recovered slightly in 2023 in the wake of the U.S.’s October 2022 export controls.
Beijing’s investment decisions have no correlation, positively or negatively, with SOE investment decisions. Their choices of which SME firms to invest in and when to invest are entirely disjointed.
The amount of liquidity created for companies via subsidies is much smaller than the liquidity the PRC government creates via equity investments. In 2021, subsidies stood at 27% of investments, in 2022 at 31%, and in 2023 at 28%.
Within the subsidy bucket, tax credits have fallen sharply as a tool of industrial policy, and politically maleable grants have come to occupy the majority of China’s subsidy tools.
Billions of Pandemic-Sensitive Dollars
China’s investment in SME firms peaked in 2021 at $6.27 billion (a figure that includes investments by the central government, state-owned enterprises (SOEs), and private entities). Investment then fell to a trough of $1.57 billion in 2022 during the height of China’s COVID-19 pandemic. By 2023, investment rebounded to $2.86 billion — less than half of the 2021 figure.
Although COVID-19 first spread in China in late 2019, stringent lockdown policies kept the country functioning mostly as normal until stronger strains forced policymakers to adopt a “Dynamic Zero-COVID” policy in 2022 that wreaked havoc on the country’s economy. (Your author first landed in China at the height of the Zero-COVID era in fall 2022 and remembers getting his nose swabbed every day.)
Around this time, local governments poured inordinate amounts of money into COVID testing programs and quarantine hotels, leaving the localities strapped for cash more broadly. The sharp dip in semiconductor investments in 2022 likely reflects across-the-board belt-tightening during that difficult year. This chart only categorizes investors into SME firms as those of (1) the central government (namely the Big Funds run as independent corporations with the Finance Ministry as lead investor), (2) SOEs (including state-owned banks), and (3) private (including all foreign) investors. As a result, the chart cannot isolate investments from local governments to see if the decline was also due to non-COVID-related trends in 2022. However, given the interlocking ownership by local governments and the central government of the largest SOEs, it is likely that the decline in SOE investments from $2.61 billion in 2021 to $0.73 billion in 2022 reflects local governments’ COVID-induced financial constraints.
It is less likely that the decline in central government investments from $0.65 billion in 2021 to $0.16 billion in 2022 was due to COVID. The only mechanism of central government investment this research identified was the (at the time) two iterations of China’s Big Fund (大基金). As a reminder for newer readers:
The first phase of the "Big Fund" raised 139 billion yuan ($20 billion) and invested in 23 companies across the chip industry from September 2014 to May 2018. There were 16 shareholders in the first phase of the Big Fund, among which the Ministry of Finance accounted for the largest share at 36.47%. Among projects receiving investment, chip manufacturing accounted for 67%, chip design 17%, packaging and testing 10%, and SMEs/materials 6%.
The Big Fund’s second phase was established in October 2019, aiming to raise 201 billion yuan ($29 billion). Besides government and SOE contributors, some private companies also joined the round, but the Ministry of Finance still accounted for the largest share at 11.02%. As of March 2022, the second phase fund had announced 79 billion yuan ($11 billion) in investments in 38 companies, with 10% for design, 2.6% for packaging and testing, and 10% for equipment/materials.
Because the Big Fund investments were arranged in advance, it is more likely that the dip in investments in 2022 was coincidental, rather than due to COVID-induced restraint.
Beijing and SOEs Not in Sync
Whenever a communist country releases its 5-year or 10-year plan, Washington takes a collective gasp. These fears assume that countries like China function like centrally controlled monoliths, where policymakers in Beijing can command and control every yuan spent across its vast territory —or at least, every government yuan.
However, the idiom 山高皇帝远 (“mountains are high, and the emperor is far”) tells a different story — it is not easy to centrally manage a country as vast and diverse as China. Government actors like state-owned enterprises (SOEs) and local governments operate with their own parochial interests in mind, and Beijing cannot always afford the political capital required to bring SOEs and local governments in line with national-level industrial policy goals.
If China’s central policymakers in Zhongnanhai (中南海) and the cadres leading SOEs were politically in sync, I hypothesized that investments by the central government into SME firms would be followed by a commensurate bump in investments by SOEs into the same firms.
For each SME company receiving investments from China’s Big Funds (大基金) in 2021, 2022, and 2023, I examined the three-month periods following investments by the Big Funds to search for such a bump in SOE investment interest:
First, I defined a “Pre-Central Stock Purchase” number as the share of total investments in each calendar year from SOE investors. This number gave me a baseline of how interested SOEs were in each particular SME firm in a given year.
Second, I defined a “Post-Central Stock Purchase” number as the share of total investments from SOEs in the three months following each company’s receipt of Big Fund investments. This number served to show what the short-term reaction by SOE investors was to demonstrated interest in an SME firm by the central government.
Lastly, I averaged out the “Pre-” and “Post-” numbers across all SME firms getting Big Fund investments to get each year’s SOE investment baseline and average post-Big Fund SOE investment bump.
The results show that investments by the central government’s Big Fund have no consistent correlation with SOE investment decisions. In 2022, there was a 25% decline in the share of total investments made by SOEs in the three months following Big Fund investments. In 2022, there was an 8% increase in SOE investments. And in 2023, the correlation was again negative at an 11% decline.
This inconsistency bears out on an individual company level, too: Naura (北方华创), for example, saw its SOE investments drop every year following central government investments. Tianshui Huatian (天水华天) saw increases in 2021 and 2022 and a slight decrease in 2023. Meanwhile, Piotech (拓荆科技) saw virtually no change to its SOE investments in any of the three years.
Beyond showing that central government investments do not affirmatively signal to SOEs that they should invest more or less in particular SME firms, these statistics show that central government investments do not signal anything to SOE investors.
An alternative explanation to the inconsistent investments received by companies above could be that the central government does in fact direct SOE investments behind closed doors, but just gives different investment instructions each year. Perhaps the central government is pursuing a deliberate substitution strategy, directing SOEs to invest in firms that haven’t already received central government funds, except in years of extreme financial hardship, like 2022.
If this theory were true, we would see SOEs making investment decisions in lockstep, which is not what the data suggests. To demonstrate investment disunity among SOEs, we look to the example of AMEC (中微公司), which is among the most important SME companies in the Big Fund’s investment portfolio. Out of 11 three-month periods following shifts in the central government’s investment stake in AMEC, SOE investors only responded uniformly (either buying or selling AMEC stock) in four cases — that is, they were aligned only 36% of the time.
(In the graph above, 1 represents all SOEs buying stock in the three month period following a central government investment; 0 represents SOEs selling stock for that time period; and 0.5 represents half of SOEs buying and half selling.)
For SME companies other than AMEC, there is a similar lack of cohesion. It is therefore unlikely that central policymakers were successfully orchestrating any unified strategy for SOE investment.
There appears to be no consistent correlation, positive or negative, between investment decisions by the central government in Beijing and those by the quasi-governmental SOEs spread throughout the country. The mountains are indeed tall, and the emperor is far.
Subsidies: Smaller Than Expected and Falling
Discussions around China’s industrial policy regularly talk about “subsidies” without really knowing what that means. Absolutely, the PRC government has been offering immense support to its domestic chip sector, but how has it offered this support? Through subsidies? Through state equity investments? More importantly, what does the answer to that question mean politically?
I define subsidies as comprising tax credits and direct financial grants that the Chinese central and local governments provide to semiconductor manufacturing equipment (SME) and chip manufacturing companies, while equity investments are purchases of firms’ newly issued stock to help them generate liquidity. Both are forms of industrial policy support for SME and chipmaking companies, but China’s choice between these policy tools suggests different levels of central government coordination about which companies receive help.
At their height in 2021, upstream SME firms received $0.87 billion from PRC government actors in subsidies (tax credits and grants), while they received $3.26 billion from government actors in equity investments. SME subsidies were also less than equity investments throughout the COVID lockdowns, at $0.28 billion and $0.89 billion respectively in 2022. Then, after the pandemic, both policy tools rebounded to $0.50 billion and $1.78 billion in 2023, though they remained well below their 2021 highs.
Another look at the graph above tells a story about how upstream SME firms benefit differently from subsidies than downstream chipmakers. The smaller scale of subsidies to SME firms (in orange) is not surprising, since SME firms are smaller compared to the firms in China’s much more mature chipmaking sector. The PRC SME sector is largely comprised of small (often private) companies, with the two largest among them, AMEC (中微公司) and SMEE (上海微电子), posting operating profits of only under $0.20 billion at their peak in 2022. In contrast, the downstream chipmaking sector boasts giants like SMIC (中芯国际), which posted over $2 billion in profit in that same year.
Given that tax credits are calculated proportionately to companies’ operating profits, it is no surprise that upstream SMEs would receive a smaller amount of overall subsidies than their downstream counterparts. What is interesting, however, is that upstream subsidies fell precipitously from 2021 to 2022 during the COVID lockdowns, while downstream subsidies fell only slightly. Then, after the pandemic, upstream SME subsidies recovered about half their lost value, while subsidies to downstream chipmakers continued to fall gradually.
At first glance, these trends suggest that SMEs are becoming a larger target of China’s subsidy efforts compared to downstream chipmakers. To confirm this political observation, however, we will need to dive deeper into the relative share of tax credits and grants within the figures for subsidies overall. Tax credits are a relatively apolitical tool once passed because they apply mechanically to any company that satisfies certain statutory requirements, while grants are allocated on a case-by-case basis and thus react quickly to political trends. These questions are explored in the next section.
The Fall of Tax Credits and Revival of Grants
Tax credits and grants are fundamentally different subsidy tools. Governments can exercise maximum discretion with their grant allocations because they are awarded on a case-by-case basis. In addition to the overall grant numbers in the financial disclosures from which I draw my data, many companies also list the individual sources of their grant awards. For example, Naura received a total of 121.7 million RMB in subsidies in 2022, of which 30.2 million RMB came from the Beijing Municipal Party Committee Office Project (北京市委办局项目). When a grant is a relatively small proportion of a company’s total, government entities can withhold it without fearing that the recipient will be utterly destroyed.
In contrast, tax credits are given out mechanically to companies that fit the credits’ qualifications. The central government’s largest tax credit is a 15% income tax deduction for companies designated under the Management Measures for the Recognition of High Tech Enterprises program (高新技术企业认定管理办法). Certainly, it is a political decision by the PRC Ministry of Finance whether to qualify companies for a tax credit (see here for an article I wrote in The Diplomat describing China’s tax credits). But tax credit qualification is a stickier (and thus more financially consequential) decision than individual grant awards, so government actors are more hesitant to use the blunt cudgel of tax credits in reaction to moderate changes in political priorities. Subsidies, rather, are the scalpel best suited for reacting to modest political shifts.
Some interesting trends emerge in the three-year period covered by my analysis. Even though the PRC released ever larger R&D tax credits over the past few years, the amount of tax credits China has provided to the chip sector has fallen since 2021. In part, this could imply that firms’ profits declined over this period, thereby decreasing the size of their tax obligations and thus making tax credits appear less valuable.
However, the graph above demonstrates that operating profits did not decline in 2022 for the companies I studied, contrary to the decline in tax credits. This suggests that a policy shift in 2022 reduced total tax credits, even as the income tax credit stayed stable and the R&D tax credit increased.1
The other trend that becomes apparent is the oscillation of grant numbers (see the first graph in this section). 2022 saw a sharp fall in the value of subsidies apportioned via grants because of COVID-induced financial strain. Since grants can be given or withheld relatively flexibly, there was a sharp decline as soon as local governments reprioritized their resources to pandemic-prevention activities.
In 2023, the value of grants recovered while tax credits continued to fall. Knowing that the PRC chip industry’s operating profits also fell in 2023, the rise of grants that year suggests that government actors are not simply doling out support to profitable companies in their jurisdictions, but rather to companies that are a political priority. This does not mean that local governments’ choice of which chip companies to subsidize overlaps with central government priorities (the second chart in this article about lack of central government-SOE coordination in investment suggests otherwise), but the political prioritization of the chip industry as a whole does seem to withstand the sector’s economic struggles.
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Methodology — Equity Investments
I analyzed the following companies for this article on equity investments. The scope of firms selected comprises (1) all of those known to have received investments from either of the first two Big Funds, as well as (2) those with the most advanced domestic technology in China in the following equipment areas: lithography, etching, deposition, implantation, epitaxy, and metrology.
Despite your author’s greatest efforts, I could not collect enough data about the not-publicly listed Shanghai Micro Electronics Equipment (SMEE) to speak confidently about its equity investments; however, subsequent charts about China’s subsidy grants and tax credits will include estimations of how SMEE benefited from those policy tools.
Firms analyzed:
中微公司｜Advanced Micro-Fabrication Equipment Inc. China
北方华创｜NAURA Technology Group Co., Ltd.
拓荆科技｜Piotech Inc.
天水华天｜Tianshui Huatian Technology Co.,Ltd.
长川科技｜Hangzhou Changchuan Technology Co., Ltd.
芯源微｜KINGSEMI Co., Ltd.
盛美上海｜ACM Research (Shanghai) , Inc.
中科飞测｜Skyverse Technology Co., Ltd.
华峰测控｜Beijing Huafeng Test and Control Technology Co., Ltd.
For public companies on the list, I identified their top ten equity holders (central government, SOEs, and private) per quarter from Wind (万得), a site similar to Bloomberg that aggregates financial data on public companies. I then calculated each investor’s quarterly change in position to determine how many of each company’s stocks changed hands per quarter. Then, I calculated how many new stocks each firm issued per year to determine how much new liquidity these investors provided each firm through their stock purchases. That “new liquidity” is the measure of support via equity investments.
For private companies on the list, I found public reporting on their investing rounds and categorized investors into the same three buckets (central government, SOEs, and private) as for public firms.
Methodology — Subsidies
Getting subsidy data for SME companies posed similar challenges as equity investments in that many of these firms are small and not publicly listed. To that end, I relied on liberal estimation methods.
For upstream public companies, I sourced all my data from publicly available financial reports. For upstream private companies, I tried to find at least one publicly reported statistic in Chinese media, like revenue or operating profit for each company in each year. Then, I estimated all of each company’s other stats by assuming they were proportional with the average ratios from all public companies of the same year. (For example, Shanghai Microelectronics Equipment 上海微电子was not public in 2022, but I found a report of its operating profit, which was 1.2 billion yuan. Therefore, I estimated its "statutory tax obligation" as 1.2 billion/[the average operating profits of public companies in 2022]*[the average statutory tax obligations of public companies in 2022].) This method is not accurate at the individual company level (some estimates even resulted in negative tax credits); however, it results in a reliable estimate in aggregate. More importantly, it provides macro-level insights about China’s SME subsidies that, though imperfect, can help Western government policymakers get a grasp on how much China is spending to catch up in SMEs.
Additionally, it was not enough to look only at SME companies’ financials to get a grasp of China’s countrywide support for these firms because China also subsidizes demand for semiconductor tools when it gives subsidies to the purchasers of these tools, i.e. downstream chipmakers. To that end, I examined downstream companies to estimate the “subsidized demand” for SMEs—i.e., the portion of subsidies received by downstream chipmakers that is used to purchase SMEs. I estimated the subsidized demand for each downstream company as [sum of subsidies]x[capex]/[total expenditures]. I got the underlying numbers for this section similarly as for upstream SME companies, but since most downstream chipmakers are public, I only needed to use media statistics–based estimations for two firms.
Upstream SME companies surveyed:
Advanced Micro-Fabrication Equipment Inc. China（中微公司）
My tax credit numbers look at the actual differences in the statutory tax obligation that a company owes and the amount that it actually pays to calculate tax credits, so it captures the effect of all credits at play. Perhaps some of these distortions are due to deferred tax payments, which the current version of this research does not account for.
德文版 Winkler, Heinrich August. Der lange Weg nach Westen: Deutsche Geschichte vom "Dritten Reich" bis zur Wiedervereinigung. München: C.H. Beck, 2002.
英文版 Winkler, Heinrich August. Germany: The Long Road West. Volume 2: 1933–1990. Translated by Alexander J. Sager. Oxford: Oxford University Press, 2007.
Can China use military force to achieve its political goals, without triggering nuclear war? To find out, ChinaTalk interviewed Fiona Cunningham, a professor of Political Science at the University of Pennsylvania and author of the new book, Under the Nuclear Shadow: China’s Information-Age Weapons in International Security.
Co-hosting today is Michael Horowitz, Penn professor who served in Biden’s Department of Defense.
We discuss…
How to use open source PLA documents to conduct deep research,
The evolution of Chinese defense strategy, including the impact of the third Taiwan Strait crisis,
Nuclear modernization and China’s “no first use” policy,
How the PLA makes decisions, including why they chose to develop cyber capabilities, anti-satellite weapons, and hypersonic missiles over proposed alternatives.
Xi inspects a starstruck PLA garrison in Macau, December 2024. Source.
PLA Sleuthing
Jordan Schneider: Fiona, why are PLA studies cool and important?
Fiona Cunningham: One of the biggest issues of the day is the prospects for conflict between the United States and China. How would such a conflict unfold if it were to occur? What can both sides do to improve their chances of not only succeeding in a conflict but preventing it from taking place? US allies, countries in the region, and stakeholders worldwide want to understand these dynamics.
The PLA is also an important domestic actor in China. It plays a big role in the party’s history and serves as the ultimate backstop that keeps the Chinese Communist Party in power because it is the armed wing of the Communist Party — not a state military. This arrangement would be similar to if the Republican Party or the Democratic Party in the United States had exclusive control of the US Military.
For these reasons, we need to understand everything possible about how the PLA operates, its weapons procurement, war planning processes, and its assessment of US and other countries’ actions.
Mike Horowitz: From a US national defense perspective, this is the most important part of the most important country in the world.
Fiona Cunningham: Mike says it better than I do.
Mike Horowitz: Not better, just shorter.
Jordan Schneider: There are obvious epistemic challenges when studying an adversary communist system’s military, particularly using open-source materials. Nevertheless, you wrote 300 detailed pages with over 200 interviews and an enormous amount of documents about Chinese domestic debate and doctrinal evolution regarding nuclear war — how to prevent and avoid it. When people say, “How can you ever know anything about the PLA?” what’s your retort besides waving your book in their face?
Fiona Cunningham: Most militaries, including the PLA, must communicate internally. They teach their students and share information within the organization. At least ten years ago, you could walk into certain bookstores in China and find books with ISBNs that revealed what the PLA was researching and teaching its students about almost every aspect of warfare, not just the areas I researched for my book.
Paradoxically, with nuclear deterrence and other capabilities China uses for deterrence, they need to communicate certain aspects of these capabilities. The objective is to avoid using them while using the threat of their use to shape adversaries’ behavior. You must disclose certain information about your capabilities, usage plans, and force organization to make those threats credible. Otherwise, you won’t get the deterrent value from the resources spent to develop them.
I acknowledge there are certain gaps that open-source researchers like me can never fill. What’s in China’s actual war plans? What are the exact specifications of their weapon systems? What are the precise details of certain PLA organizations?
There are also fundamentally unknowable elements: what was in Chinese decision-makers’ minds when they made certain choices? What choices will they make in a crisis over Taiwan? How will the plans I tried to understand through doctrinal debates actually function during wartime? Some things you can know, some things you can learn from open sources, and some things remain unknowable even with the best intelligence.
Jordan Schneider: Mike, would you like to add to that?
Mike Horowitz: This is tremendously challenging research. From a research design perspective, you face enormous uncertainty about China’s military. There’s a premium on gathering as much information as possible, especially given the challenges involved in obtaining that information.
There’s a justified premium placed on those talented scholars who, despite all constraints, can find primary source documents and information. Even if incomplete, even if different from what you would get researching the UK’s or US military, you can still gather enough information to make substantive inferences about how China’s military might behave.
Jordan Schneider: The PLA does have to talk to itself, but it doesn’t necessarily have to talk to Fiona Cunningham.
Mike Horowitz: It certainly doesn’t talk to me. Actually, I was at a conference right after I left the administration and saw somebody from China, which was probably the first time I’d seen somebody from China in years due to COVID and then being in the Defense Department. The person approached me, and I said, “Hi, it’s nice to meet you. My name is Michael Horowitz.” They replied, “Hi, I know who you are. We read all of your things.” I thought, “Well, that’s scary,” and wanted to back slowly away, much like the Homer Simpson meme.
Fiona Cunningham: Michael speaks the truth. I remember picking up a set of journals in one of the university libraries while looking through recent PLA research. There were many articles on lethal autonomous weapons and military AI applications. Many contained English language footnotes citing Michael Horowitz in the Texas National Security Review. I realized I had colleagues influencing how the PLA thinks about important questions at the cutting edge of warfare. They don’t cite me, though.
Jordan Schneider: Let’s stay on that topic. It’s fair to say that Chinese defense analysts constitute a much larger industry studying America than Western defense analysts studying China. Thoughts on that?
Fiona Cunningham: Several factors contribute to this imbalance. First, the US military is recognized by the PLA and most militaries worldwide as the premier fighting force. If you’re trying to learn from the best, you’ll dedicate a lot of resources to studying what makes the US military so effective, including how America leverages its technological and other advantages.
For China, the US is not just a potential opponent in their most important conflict scenario but also the model of military excellence. They have two compelling reasons to study the United States. Michael can probably elaborate, but I believe the United States learns less from China as an example of how to do things differently and is more interested in studying the PLA to understand how one of its two most serious potential opponents might fight in the future.
Mike Horowitz: That’s certainly correct, but the US does spend enormous time and resources studying everything we can possibly find about China’s military, though from a different perspective than learning lessons.
One challenge is that China hasn’t fought a war since the late 1970s. If we’re considering what lessons the US would learn from China in a military sense, these wouldn’t be battlefield lessons since there’s no recent battlefield data. The lessons would instead concern capability development, acquisition approaches, or force structure concepts — if you could access their doctrinal manuals.
This differs from how the world is currently studying Russia and Ukraine, intensely examining everything about battlefield lessons and what they mean for the future of warfare. The US is trying to glean everything possible about China’s military, but it’s learning lessons in a fundamentally different way.
Fiona Cunningham: The language barrier is also significant. In China, most people learn English from elementary school, making it a very common second language. This removes a major barrier for Chinese analysts studying the US military.
In the United States, or my native Australia, studying Chinese isn’t everyone’s first choice for a second language because of its difficulty. There are fewer college or high school students learning Chinese now than 10-15 years ago, as the incentives have shifted from business to national security.
Beyond language, there’s the issue of available materials. The United States publishes extensive open-source information about its military thinking. There are types of materials I would love to see in Chinese about the PLA that simply aren’t available, while equivalent US materials are accessible to Chinese researchers. I’d particularly value joint publications that would give me confidence that the doctrinal debates and materials I’ve studied accurately reflect actual PLA planning.
Jordan Schneider: Let’s start with the period from the 1960s to 1984 very briefly. China experienced the Sino-Soviet split, fought some border conflicts with the Soviet Union, and nearly engaged in nuclear war. That remained the main focus for a long time — defense in depth, learning from the Soviets.
Fast forward to 1984, when Deng realized Gorbachev was serious and wouldn’t invade China anytime soon. They could reprioritize defense relative to other national priorities. Take us from there through the period when global nuclear disarmament was being considered, up to 1995-1996.
Fiona Cunningham: This is a fascinating period for Chinese defense strategy, particularly regarding nuclear weapons’ role in China’s national defense.
Starting in the mid-1980s, China downgraded the possibility of fighting a major war against one of the superpowers. This coincided with China’s economic opening and reform gathering momentum, prompting the government to redirect resources from national defense to economic development.
China also reassessed what conflicts it might face. Prior to 1988, they prepared for general war with a superpower potentially invading China. After 1988, they shifted focus to “local wars” related to territorial disputes on China’s periphery. Taiwan was only one of several potential conflicts, with uncertainty about whether the US would become involved.
Two interesting developments emerged during this period. First, China debated the role of nuclear weapons in local wars. In conventional invasions, the role of nuclear weapons seemed clearer, even though China didn’t plan to use them first to deter conventional attacks. But their utility in local conflicts was less obvious.
Harvard professor Alastair Iain Johnston wrote a landmark article about the concept of “limited nuclear deterrence,” which was being debated within the PLA in the late 1980s through the 1990s. This concept involved acquiring tactical nuclear weapons to create more options on the escalation ladder during conventional conflicts.
Since Johnston’s influential article, more sources have become available, revealing another perspective in China’s nuclear strategy debate — waiting to see what the Soviets and Americans would do, as global nuclear disarmament might make additional nuclear investments unnecessary. By 1992, China’s leaders concluded they still needed nuclear weapons because the US and Soviets wouldn’t eliminate theirs completely, but China didn’t require large numbers.
Another interesting development arose from financial pressures on China’s military, which turned to exports to sustain its defense industrial base. They developed conventional short-range ballistic missiles intended for Middle Eastern markets. When the US pressured China not to export these weapons, China’s previously nuclear-only missile forces saw an opportunity to find a role in local wars by using short-range ballistic missiles to threaten Taiwan. This was the contingent origin of China’s conventional missile force, which presents a big challenge for the US and its allies today.
Jordan Schneider: Qian Xuesen 钱学森, who most listeners will be familiar with, deserves a mention here. He was forced out of America during the McCarthy era and became the father of China’s missile program. He remained skeptical in the 80s. You have a great quote where he warned that reports heralding a “post-nuclear era” were “deceiving people and they are all false.” The man still wasn’t buying into the new world order decades after seeing the West for what he believed it really was.
Another thing worth emphasizing is the level of military downsizing during this period. They shed almost a million people from the PLA — a dramatic reorientation for any military.
Fiona Cunningham: I don’t cover this in tremendous detail in my book because others have examined it thoroughly, but China’s conventional military modernization accelerated after the Gulf War, when China developed a clearer understanding of what they would need to do.
Mike Horowitz: They observed what the US accomplished.
Fiona Cunningham: Exactly — they saw what the US did and realized that to fight future conventional wars, they needed to develop similar capabilities. This became a decades-long project for the PLA. The decision to change conventional military strategy to enable China to fight “local wars under high-technology conditions” — their strategic guideline — was inspired by watching US operations rather than perceiving a direct threat from the United States. Taylor Fravel’s book Active Defense does an excellent job of explaining that decision. It was a very influential book while I was writing my dissertation.
Jordan Schneider: Mike, can you give us the 101 on why the 1991 Gulf War was so mind-blowing to so many people?
Mike Horowitz: The 1991 Gulf War blew everyone’s mind because it revealed the “second offset” on the public stage. All those developments in stealth technology, precision strike, and advanced weapons — things we take for granted today — made their dramatic debut.
I was in middle school when that war happened and remember seeing images of precision strikes on green-screen displays — missiles hitting specific buildings in Iraq. It seemed like magic, the ability of the US military to strike targets so precisely. This capability shocked the rest of the world.
The Soviets, who were becoming Russians at that point, understood the concept but had been unable to execute it. This was fundamentally different from how people thought wars would happen toward the end of the Cold War. It demonstrated sheer technological superiority by the United States and served as a wake-up call to the PLA.
Jordan Schneider: It’s also important to mention that the US even surprised itself with its effectiveness. There were advanced projections about the casualties required to conquer Iraq. The Senate, when Congress was debating whether to authorize war, anticipated 50,000 American casualties. It turned out to be only in the three or four figures.
Mike Horowitz: You’re referring to 2003. I’m talking about 1990-91. However, in both invasions, the projected dangers to US soldiers were dramatically overestimated. In retrospect, much of that was due to operational art (force employment and the effective use of military power) and how much the American military excelled. But equally critical were defense technology breakthroughs and the ability of the American military to integrate them in ways that shocked the rest of the world.
Jordan Schneider: China realized they needed a new playbook, understanding it would be a decades-long effort to approach the capabilities of the world’s superpower in the early 90s. Fiona, take us to the 1995-96 Taiwan Strait Crisis. What triggered it, and how did it affect China’s conception of what it needed to be nationally secure?
Fiona Cunningham: The Taiwan Strait Crisis had two peaks. The first occurred in mid-1995, with another flare-up in early 1996. The initial trigger was the United States issuing a visa to Taiwan’s first democratically elected president, Lee Teng-hui, whom China viewed as agitating for independence. China saw this visa as representing American support creeping toward Taiwanese independence.
The second peak came in March 1996 when President Lee sought re-election. China attempted to influence the outcome of that election. On both occasions, China conducted military exercises across and around Taiwan, including launching some of the short-range ballistic missiles they had fortuitously acquired earlier.
Mike Horowitz: “Fortuitously acquired” sounds like a euphemism for China beginning a military buildup after the Cold War.
Fiona Cunningham: They “fortuitously acquired” these capabilities because China’s defense industry had been instructed to generate revenue. When the US blocked the export of these weapons, they became available for domestic use.
There’s an interesting sequence of events in the late 1980s. The rocket force, which at that time only operated nuclear weapons, was called into meetings with China’s leaders who asked, “What role will you play in a local war?” They responded, “We have a great idea — we’ll be armed with conventional missiles.” They put forward this proposal in the late 80s largely for organizational survival purposes. They needed a way to remain relevant in a changed environment where most of China’s potential conflicts wouldn’t involve nuclear weapons. This demonstrates classic organizational incentives for military branches to seek new roles when the threat environment changes.
Between the exercises in 1995 following Lee’s Cornell visit and those in 1996 aimed at influencing Taiwan’s presidential election, China began its five-year defense plan. In this plan, conventional missiles and what they called “Shāshǒujiǎn” 杀手锏 (Assassin’s Mace, “trump card”) weapons, primarily missile systems, received prominent attention.
A series of leadership meetings occurred from late 1995 onward after the first set of exercises. From these meetings, we can surmise that China’s leaders began to see what the rocket force had recognized in the early 1990s — these missiles could be powerful tools for intimidating adversaries and addressing a new strategic reality. If another Taiwan Strait crisis occurred — as it did in 1996 — China wouldn’t have Gulf War-equivalent conventional military capabilities to counter the United States. This would make it much more difficult for China to use force if they felt their red lines regarding Taiwan were crossed.
These missiles provided coercive leverage — a way to threaten escalation against a powerful nuclear and conventional adversary when China had few other options. Interestingly, China’s leaders determined that threatening nuclear first use, the other obvious option, was unacceptable to them.
Jordan Schneider: Let’s stay on that topic. What is the “no first use” policy? Where does it come from? How does it constrain Chinese doctrinal thinking?
Fiona Cunningham: I’ll make my best case for why I believe it operates as a constraint on the PRC even today, five or six years into a nuclear buildup.
The “no first use” policy originated in a statement accompanying China’s first nuclear weapons test in 1964, where China pledged it would not be the first to use nuclear weapons. They stated they would only use nuclear weapons if first attacked with nuclear weapons by another country. This policy converted Mao’s views about nuclear weapons into a formal stance that later became the strategy given to the Second Artillery (China’s missile forces) when they began formulating how to implement China’s nuclear weapons strategy almost a decade later.
Before 1964, many statements from Mao and other Chinese leaders indicated they needed conventional weapons for conventional conflicts and nuclear weapons to deter nuclear weapons use. Several reasons explain why China adopted this policy during the Cold War. It differentiated China from the nuclear superpowers, perhaps making its nuclear weapons less of a challenge to the Soviet Union and the United States. It also related to China’s geography — they didn’t need nuclear first use against a conventional invasion because China’s size would exhaust any invader. China could survive a conventional conflict, but a nuclear conflict presented a different scenario.
It’s worth noting that China’s nuclear policy isn’t just a military matter — it’s a civilian policy given to the military by top leaders. Military leaders cannot change China’s “no first use” policy. Because it originated with Mao and Deng, it became orthodoxy that’s difficult for even civilian leaders to change.
Looking at available doctrinal materials — though unfortunately we lack probative information for the last two decades — it’s clear the “no first use” policy constrains how China plans to use its nuclear weapons. However, there have been debates about changing it or placing conditions on it, and questions remain within China about whether other countries see it as credible.
Mike Horowitz: All that can be true. You’ve persuaded me that China’s military believes it is constrained by the “no first use” policy and that civilians must make those changes. In a crisis, depending on the stakes — particularly if Xi thought regime survival was at risk — there could be incentives for China to strike first with nuclear weapons. The question is, to what extent would the “no first use” policy constrain China’s military in a conflict where the civilians who can make policy changes are actively engaged?
Fiona Cunningham: Several points are worth noting. First, if you plan to use your capabilities in accordance with a policy like “no first use,” your ability as a rocket force to develop operations involving first-use options becomes constrained. That doesn’t mean it’s impossible, but...
Mike Horowitz: It’s not as simple as just saying “launch the missile."
Fiona Cunningham: Exactly. It would mean launching the missile outside established protocols or training. It’s possible, but would represent a big departure from doctrine.
In my book, I detail an intense debate over adding conditions to China’s “no first use” policy in the early 2000s. These debates are fascinating because we see writing in leaked Chinese missile force teaching materials discussing lowering the nuclear threshold and nuclear deterrence signaling operations. What they don’t include, however, is a nuclear first-use campaign that would follow if an adversary didn’t back down after these signals.
Mike Horowitz: That’s interesting.
Fiona Cunningham: I found a dissertation written by a missile force officer — now I believe a deputy base commander — who essentially asks what a first-use campaign would actually look like. One option he discusses is detonating a nuclear weapon in space if a conflict over Taiwan isn’t going well. Interestingly, China subsequently developed non-nuclear anti-satellite weapons.
However, official materials produced by the Second Artillery don’t describe what warning shots or nuclear first-use actions would follow these threats. We lack visibility into current debates, though other scholars have found evidence of the Rocket Force now exercising for “launch on warning.” In my decade of interviews in China about nuclear strategy issues, I noticed a change in tone between 2014 and 2016, with some experts beginning to question whether launch on warning violates a “no first use” policy.
Jordan Schneider: What is “launch on warning,” Fiona?
Fiona Cunningham: In its simplest form, launch on warning means launching once you receive warning that your adversary has launched nuclear weapons toward you. Rather than waiting until those weapons detonate on your territory, you choose to launch your nuclear weapons during the period between your adversary’s launch and the detonation on your territory.
Mike Horowitz: Can we discuss this in relation to China’s current nuclear modernization? What you’ve described presents a paradox. Launch on warning is generally considered when you’re worried about your nuclear forces being decapitated — when an enemy’s first strike might destroy your ability to retaliate. If you have secure second-strike capabilities, you can absorb a strike and still respond. Since China has been rapidly modernizing its nuclear arsenal, that should make them more secure rather than less. Why would the PLA be thinking more about launch on warning now as their nuclear capabilities become more sophisticated?
Fiona Cunningham: It depends on which capabilities deliver your secure second strike. If you rely on road-mobile land-based missiles or submarine-based ballistic missiles — nuclear missiles mounted on trucks driving around China’s vast territory, perhaps hiding in caves — you’re depending on mobility and concealment to avoid detection by adversary satellites.
If, instead, your path to survivability is through having systems that are easier for adversaries to locate, the mindset about securing a second strike differs. If your plan involves many fixed silo-based missiles that your adversary can see, you’re relying on the fact that they can’t destroy all of them due to their quantity. However, those silos contribute little to second-strike capability unless you plan to launch the missiles before enemy weapons hit them.
The launch-on-warning approach relates partly to which capabilities comprise your secure second strike, but also concerns deterrence immediacy. Consider the effectiveness of deterrence if you wait weeks to pull road-mobile missiles from caves before retaliating against Washington, D.C.
Mike Horowitz: You maintain a hair-trigger posture to increase the credibility of your threat from a signaling perspective and increase the probability of successful deterrence.
Fiona Cunningham: What surprised me in post-book interviews about China’s nuclear modernization is that Chinese experts now acknowledge the US’s improved capabilities to detect road-mobile missiles. Examining the sensors the United States plans to deploy in space, Chinese strategists reasonably worry that the US will better locate capabilities they previously considered secure and survivable.
Jordan Schneider: America had approximately 20,000 nuclear weapons toward the Cold War’s end. Many have been decommissioned, but we still maintain high four-figure numbers. China started with double-digit quantities and is now approaching an arsenal of 400-500. This presents a challenge when you lack nuclear submarines, bombers, and ICBMs to ensure national destruction capability. The concept of playing three-card monte with tens of millions of lives by driving missile trucks around rural China is simultaneously absurd and terrifying.
Mike Horowitz: Road-mobile weapons are extremely difficult to detect. This explains why every country that has faced the United States since the beginning of the Cold War — whether Iraq during the Gulf War, the Soviets, China, or potentially North Korea — has considered mobility as a solution to overwhelming American firepower.
Fiona Cunningham: Such an approach wouldn’t work in the American hinterland, but China presents a different scenario.
Mike Horowitz: The regulatory environment in the US would make that impossible.
Jordan Schneider: Perhaps this could become our trucking industry’s future. Once autonomous vehicles replace truckers, the only humans on the road might be those randomizing their drives around Nebraska.
Fiona, let’s close the loop on Chinese nuclear military modernization.
Fiona Cunningham: My book examines how nations pressure adversaries in conventional wars by threatening escalation. There’s considerable discussion about whether China’s nuclear modernization aims to create this option with its nuclear forces, especially as it develops more theater-range precision options — capabilities approaching what would be needed for credible nuclear first-use threats.
However, my conclusion is that China hasn’t necessarily decided that its nuclear modernization will replace non-nuclear capabilities as its primary source of coercive leverage in conventional conflicts. I see the drivers of China’s nuclear modernization as primarily about achieving a more robust second strike against the United States.
There’s also a political leverage component — China wants enhanced capabilities because they believe this will make the United States behave more prudently. This doesn’t necessarily involve precise calculations about nuclear exchanges or specific force posture changes to enable credible nuclear first-use threats.
My recent interviews in China suggest a psychological and political leverage rationale for modernization that doesn’t necessarily translate to posture changes that make first use more feasible or improving China’s position in a nuclear exchange. Different schools of thought within China point to different modernization rationales, but first use doesn’t clearly emerge as one of them.
Jordan Schneider: The idea that it’s worth investing to ensure nobody in the Pentagon believes they could execute a first strike on China without America suffering consequences seems reasonable. If I were a captain in the Rocket Force, I’d consider that a worthy investment. But how far that extends and what it means from a readiness perspective remains one of those “unknown unknowns” we discussed earlier.
A Chinese ballistic missile test in the Gobi desert, ~February 2025. Source.
Mike Horowitz: This might transition us to discussing conventional capabilities. What’s remarkable about China’s military development over the last decade is that they’ve rapidly modernized in every area. There was a time when we could say, “China is prioritizing this capability over that one.” Fiona’s book brilliantly discusses this earlier period when China was making some of those choices, particularly regarding conventional missiles. Now, however, the story of the last decade is essentially “everything everywhere all at once” from a Chinese military modernization perspective.
Modernizing Warfare
Jordan Schneider: I love how your book opens in the early 90s, when China essentially said, “We don’t have computers, so we’re resilient to cyber attacks.” Then we witness the informatization of warfare and doctrinal development regarding offensive cyber capabilities to threaten targets when nuclear warfare threats aren’t credible.
Fiona, give us a brief history of cyber weapons in China. How has the PLA’s thinking about their utility evolved?
Fiona Cunningham: The major turning point for offensive cyber capabilities in China — capabilities they considered using for coercion — came after the 1999 US accidental bombing of China’s embassy in Belgrade. From China’s perspective, this incident was anything but accidental. There’s a notable quote from Jiang Zemin where he basically says, “I’m really indignant. This is not a trivial event. This is a big deal, and the Chinese people cannot be bullied."
Jordan Schneider: This presents an irony, right? In 1991, everyone marveled, “These Americans can hit a window from 3,000 miles away.” Then, suddenly, we accidentally bombed the Chinese embassy. Where do you stand on the conspiracy theories about this incident, Fiona?
Fiona Cunningham: My perspective is that even the best organizations can make mistakes, including the US military. I think China’s reasoning was, “This is a highly advanced military — we don’t believe they could have made such a mistake.” Additionally, once a top leader decides something wasn’t a mistake, that becomes the official position, even if contrary evidence emerges later. It becomes difficult to undo those narratives.
Following the Belgrade embassy bombing, a series of meetings took place where Jiang Zemin instructed China’s military leaders to develop capabilities addressing their leverage deficit — something that would make future conflicts, particularly across the Taiwan Strait, too dangerous and risky for US involvement. They concluded their plan to build a massive conventional missile force wouldn’t be sufficient.
Offensive cyber operations emerged as a promising capability, partly because China’s military studied the Kosovo air war and observed Serbian militias defacing NATO web pages — not particularly sophisticated cyber activities, but they recognized how quickly and inexpensively one could create problems for a more advanced military and society.
China’s awareness of cyber operations dates back to the Gulf War, when they began studying what they called “computer virus weapons” and noticed US interest in these capabilities. However, they didn’t actively pursue this option until after the Belgrade embassy bombing. Subsequently, they allowed “a thousand flowers to bloom” (百花齊放), with everyone of significance in the PLA entering the cyber arena. This resulted in capability development on both offensive and espionage fronts, but it lacked coordination and organization.
This disorganization became problematic for China’s leaders around 2010. They observed other countries using cyber operations for military effects that demonstrated the potential they had recognized. Simultaneously, China was becoming increasingly dependent on information networks for military, social, and economic functions. Seeing these cyber domain developments, they instructed their military to adjust their plans and organization for offensive cyber operations, acknowledging that they would be “throwing stones from a glass house.”
Jordan Schneider: What happens next?
Fiona Cunningham: A process of changing China’s cyber doctrine began around 2012. The PLA held many meetings to evaluate its progress and future direction. These discussions produced revealing statements, such as “We’ve made significant progress in capabilities, but everyone is fighting their own war, so we lack coordination.” Another noteworthy comment was: “If we aren’t careful with how we plan and execute these operations, we’ll harm the national interest — yet we still want to use them for leverage purposes."
Over approximately two years, China’s PLA developed approaches to modify their cyber doctrine. Around 2014, Xi Jinping particularly pressured the PLA to reorganize. This coincided with the US indicting several PLA officers for industrial espionage. The following year, China released a white paper acknowledging their cyber defense capabilities for the first time, though they still refused to publicly admit possessing offensive capabilities.
At the end of 2015, China established a new organization called the Strategic Support Force, which consolidated all the disparate elements of the PLA’s cyber enterprise into a single entity. The success of this consolidation remains unclear — in fact, China disbanded the Strategic Support Force just as I was completing my manuscript.
Jordan Schneider: Toward the end of this first period, the Obama administration attempted to engage Xi and establish norms about appropriate cyber activities. How does this international dimension interact with the Chinese government’s directives to its ambiguously organized cyber force?
Fiona Cunningham: One fascinating aspect of China’s cyber capabilities is that for most capabilities with direct strategic effects on adversary decision-makers, China’s top leaders never delegate authority to lower-level PLA commanders regarding their use. The only area where some de facto delegation occurred was in the cyber arena before the 2014-15 changes I outlined.
The activities the Obama administration complained about — PLA members hacking US corporations to obtain proprietary information for commercial advantage — appeared to occur without China’s top leaders’ authorization or oversight. The international pressure reinforced China’s trend toward consolidating their cyber forces and subjecting them to tighter oversight and command and control from the top. In some ways, the Obama administration was pushing on an open door.
For industrial espionage that supported China’s national priorities in certain sectors, the activities continued but shifted to non-PLA actors, while the PLA focused on military missions. The administration was pushing on an open door in seeing some activity decline. If you examine the timelines, major decreases in PLA cyber activity tracked by organizations like FireEye (a private cybersecurity company) coincided with Central Military Commission meetings deciding on major military reform packages.
It’s difficult to disentangle whether US threats of sanctions over cyber espionage or broader PLA reorganization trends were more influential. However, this suggests US pressure alone didn’t cause China to change its behavior.
Jordan Schneider: We’ve witnessed many high-profile actions by the Chinese government over the past decade-plus, but we haven’t seen something comparable to Stuxnet, Russian cyber attacks on Ukraine’s power grid in 2024, or the Viasat attack in 2022 — incidents where actors not only penetrated critical infrastructure but actively attempted to disrupt operations. Fiona, is this simply because China hasn’t engaged in a major war, hasn’t faced something as pressing as Iranian nuclear capabilities, or is there a broader hesitance to cause damage rather than just steal information, conduct espionage, and prepare groundwork for potential future conflicts?
Fiona Cunningham: The PLA is certainly willing to lay groundwork for disruptive operations. In late 2023, reports emerged about the Volt Typhoon intrusions, where Chinese actors — though public attribution to specific PLA units is limited — penetrated adversary critical infrastructure. This aligns perfectly with their doctrine of infiltrating an adversary’s critical infrastructure to pressure them in peacetime, crisis, or conflict — shaping their behavior through fear of system disruption.
What China hasn’t done, however, is demonstrate that if they wanted to “hit send” on these capabilities, they could effectively disrupt an adversary’s critical infrastructure. I wish I had an interview where someone explicitly explained their reasoning, but these questions are extremely difficult to raise within China. Even if you could ask, individuals might not know the answers.
This remains a puzzle, even in US analysis — why hasn’t China conducted a major public demonstration proving they can cause disruption in ways that would concern adversaries in future conflicts? The reasons likely align with China’s desire to control these capabilities very carefully to avoid blowback. Nevertheless, countries typically want to demonstrate their capabilities, especially with something as uncertain as offensive cyber operations.
Mike Horowitz: Shout out to the names that people give to things. In the official US Government release on Volt Typhoon, they also called that group Vanguard Panda, Bronze Silhouette, and Insidious Taurus, which is unbelievable.
Jordan Schneider: Are these American code names, or do the groups call themselves like Golden Panda?
Fiona Cunningham: I don’t know.
Mike Horowitz: It’s like “AKA Vanguard Panda, Bronze Silhouette.” There are a couple other names that are less funny, like “Dev-0391.”
It’s less puzzling to me why China hasn’t tried to break things. I view what China is doing in this context as building the capacity to break things. The demonstration that they are in US and other countries’ networks is a signal of capabilities, since the actual use of cyber tools to break things is pretty rare. Stuxnet is the overcited one-off in a way, and relied on a lot of very specific factors.
China demonstrated that it was deep in energy infrastructure and water infrastructure at the state level across the United States, which certainly illustrates the capacity to destroy — especially because of the way they gained access through routers, VPNs, and many common electronic devices that lots of critical infrastructure facilities and Americans have.
This points to one of the issues surrounding cyber capabilities in general and relates to what we discussed last time, Jordan, in the context of offensive cyber strikes in a world of advancing AI. There’s sometimes a tendency to think about offensive cyber as this magic thing you can press “go” on, when in reality, because the accesses are so limited and once you use them they can disappear, the incentive structure even for very competent offensive actors like China is often to hold back on breaking things. The more you use these capabilities, the more it becomes all hands on deck to completely knock you out.
I have no doubt that even in the aftermath of the Volt Typhoon revelation, China has other access points that we don’t know about. From a parochial American perspective, that’s incredibly dangerous. The questions become: under what circumstances would China try to activate that, and what would the impact be? There’s uncertainty surrounding both of those things.
Fiona Cunningham: That uncertainty is one of the reasons why it makes the threat to use them credible. It may be a total fizzle and a flop, but it might also be really bad.
Mike Horowitz: I agree completely.
Fiona Cunningham: What’s interesting to me is that China’s behavior with Volt Typhoon runs contrary to a lot of US academic discussions about the utility of cyber operations over the last five to eight years. It does raise these questions about strategy. US Cyber Command has been saying the real strategic value of cyber operations lies in the “death by a thousand cuts” under the threshold of armed conflict. But the PLA looks like it’s preparing for this “cyber Pearl Harbor” scenario.
Do you actually get the leverage that China thinks it will get from preparing for something the US has said it doesn’t really see as being that big of a problem?
Mike Horowitz: It depends on what they can actually do. Consider some of the things that Russia has allegedly done and how they’ve disrupted Americans. Part of this depends on what the goals are.
There’s “death by a thousand cuts,” where cyber is an enabler to other kinds of operations. This might say something about some of the academic literature on cyber, but we don’t need to discuss that now.
There’s also cyber as a disruption and illustration of possibilities for cost imposition, precisely because there’s uncertainty. It might fizzle, but it might be really important. The theory would be that if you could create a little disruption to the lives of average Americans during, say, a Taiwan crisis, it would bring the costs home in a different way.
The question becomes, how much disruption, and what would be the ultimate impact? If what you’re trying to do is influence American behavior — perhaps more so than affecting US military capacity in the Indo-Pacific — and you’re trying to influence public attitudes and perceptions, no one really knows how that would go, including us and including them.
Jordan Schneider: That’s a key factor with a lot of this. I like your framework of brinkmanship — what are we doing with our force posture? Are we engaging in brinkmanship? Are we doing calibrated escalation? Or are we actually preparing to fight a war?
The problem is that the more forward you are with these capabilities, the more likely you are to get America to take it seriously. When China starts taking cyber seriously, as we see with Volt Typhoon, that leads to more awareness, investments, and local water plant owners updating their systems.
The same applies in the Taiwan context. Do you really think that turning off the lights in Texas is going to turn out better for Beijing? This is almost like Japan’s 1941 logic — “They’ll really want to make peace with us after we bomb Pearl Harbor."
It could go both ways, depending on how focused you are, what timelines you’re working with, and how “feminized” you think America is — to use Putin’s term, not mine. These factors impact the way you’re going to think about what you show and what you don’t do on the world stage, which makes this all very tricky.
Mike Horowitz: Just to be clear, countries have made that mistake about the United States forever. Saddam Hussein made similar assumptions. Bin Laden did as well. Foreign powers often forget that the US can be relentless. When someone attacks the US hard, we respond with full force and persistence.
Arguably, those who understand that we’re somewhat unpredictable might find that beneficial for deterrence in the classical sense. I’m curious about Fiona’s thoughts on how China perceives us in this context. I encountered this topic frequently in defense conversations over recent years. Does China assume that if they attack the US, we’ll respond with everything we have? Or do they believe they could cause enough pain that the US would back down?
Fiona Cunningham: Three factors likely matter — timing, stakes, and nuclear weapons.
Regarding timing, if you strike the US hard during an active conflict, the consequences would be severe because the United States would be fully committed. However, if that threat exists before or during a crisis, it might encourage caution and prudence. China’s strategic deterrence approach encompasses wartime planning but is also designed to influence US behavior during peacetime.
From China’s perspective, there’s an imbalance in what’s at stake. Though not explicitly stated in much of the literature I’ve studied, Taiwan represents an immediate, tangible interest deeply connected to the Communist Party’s sense of mission and legitimacy. While China can tolerate the current situation of de facto separation as it has for years, for the United States, Taiwan is an island without a formal treaty alliance, far from the US homeland, and not essential to America’s territorial integrity. The outcome of any Taiwan conflict would matter more to China. The US can have strong interests too, but they’re more diffuse and indirect, whereas China’s interests are specific and direct — Taiwan represents unfinished business from the Chinese Civil War rather than America’s global position and alliance structure.
Finally, nobody wants to fight a nuclear war. Many of China’s information-age weapons — non-nuclear weapons with strategic effects — are designed to push the US to the threshold of nuclear weapons use and then call its bluff. The open question remains whether America’s seemingly unpredictable nature extends to nuclear weapons use. That’s the million-dollar question.
Jordan Schneider: Another point supporting that perspective is that we’ve now seen two consecutive presidents take Putin’s nuclear threats seriously, even though those threats were less credible and not directly aligned with major US strategic interests. This clearly impacted Biden’s calculations. With Trump, throughout his campaign and in his meeting with Zelensky, he repeatedly warned, “You’re flirting with World War III.” It’s one thing to exhibit Jacksonian intensity when fighting overseas wars, but it’s entirely different when you genuinely fear that Los Angeles could be destroyed.
Mike Horowitz: There’s something interesting about how presidents conceptualize nuclear war and risk. Looking at Trump’s public comments, they suggest he might be even more concerned about nuclear risk than some other presidents. While every president since Truman has worried about nuclear war, Trump seems particularly focused on the dangers of nuclear escalation.
Jordan Schneider: It will be interesting when we eventually see a generational change — a president who didn’t grow up during the 60s, 70s, and 80s when nuclear concerns were front and center. But returning to the PLA — Fiona, let’s discuss counter-space capabilities. We’ve witnessed several interesting and explicit demonstrations of these capabilities from China in recent years.
Fiona Cunningham: I should share a personal anecdote — one reason I became interested in writing this book was China’s anti-satellite weapons test in 2007, when they destroyed an aging weather satellite with a conventional missile. I was in college at the time and remember seeing it on the front page of the Sydney Morning Herald, wondering what it meant. The book actually opens with this ASAT weapons test, perhaps for that unwritten reason.
China pursued counter-space weapons capability for coercive purposes — to exert pressure during a potential conventional conflict with the US over Taiwan, particularly after the Belgrade embassy bombing. This decision was difficult to pinpoint precisely, but based on Jiang Zemin’s speeches, it was likely made between late 2000 and late 2002.
China recognized that anti-satellite weapons could disrupt an adversary’s space capabilities and impede the US military’s long-term objective of achieving space control. They developed a range of counter-space capabilities, including lasers that could dazzle optical sensors on US satellites. In fact, they dazzled a US National Reconnaissance Office satellite around 2005, then tested the missile that destroyed a satellite and created substantial debris, generating international criticism.
Their goal was to develop various weapons that could attack US satellites in orbit and disrupt data transmission between those satellites and Earth. These range from non-kinetic reversible effects, such as lasers and electronic warfare jamming, to irreversible effects like completely destroying satellites. More recently, China has developed co-orbital capabilities — satellites that can maneuver to grab onto other satellites, tow them elsewhere, collide with them, or position themselves close enough to jam or dazzle from proximity.
What’s curious is that China didn’t pursue counter-space capabilities earlier. There’s a common perception that China identified attacking US satellites as a valuable coercive tool following the Gulf War. However, when examining the sources, China didn’t begin contemplating counter-space attacks until the late 1990s, after the 1995-96 Taiwan Strait crisis. Before that, in the context of the Gulf War, China primarily recognized that to fight like the United States, it would need its own military satellites to guide weapons and confirm target destruction.
This desire to build military support capabilities in space constrained China’s approach to counter-space weapons. They consistently emphasized that hostilities in space should be limited, unlike their apparent willingness to consider more extensive use of conventional missiles. That’s the doctrinal capability narrative that has emerged.
Jordan Schneider: The pattern is fascinating — China demonstrates a capability, America becomes alarmed and develops countermeasures. This is the challenge with sub-nuclear capabilities — the more you reveal, the more your adversary adapts. By the end of both the cyber and counter-space chapters, you quote Chinese analysts essentially saying, “This didn’t achieve exactly what we wanted. America now has ten times more capabilities than we anticipated a decade ago.” What are your thoughts on this dynamic, Fiona?
Fiona Cunningham: While this dynamic matters, it may not be as important as we might think. Many of these capabilities were designed to give China credible leverage when it was considerably weaker than it is today. Even if these capabilities become less effective over 20-30 years, they still provided China with methods to deter and coerce the United States when China’s conventional capabilities posed minimal threat.
Currently, I don’t believe China’s conventional capabilities threaten decisive victory against the United States in the Indo-Pacific, but they’re substantially improved compared to 20-30 years ago. The US military would face much greater challenges fighting China today than it would have two decades ago.
China’s pursuit of these capabilities has pushed the US to develop countermeasures, which in some ways validates China’s strategic choices — these capabilities delivered on their promise by forcing the US to reconsider how it approaches conflicts and organizes capabilities across different domains. The cyber changes we discussed earlier exemplify this. Additionally, the US withdrew from the Intermediate Nuclear Forces Treaty partly due to China’s conventional missile force growth, creating new questions for China about how US intermediate-range conventional missiles in the region might affect its security.
Similarly, China’s counter-space capabilities have compelled the United States to rethink its satellite architecture. The US formerly relied on “big juicy targets” — large satellites for sensing and signals intelligence that supported conventional conflicts and precision strikes. Now the United States deploys smaller, less vulnerable satellites to complement these larger assets.
Mike Horowitz: Or haven’t yet.
Fiona Cunningham: Right. This adaptation means China faces many more targets if it wants to use counter-space capabilities effectively. It can no longer neutralize US capabilities by destroying just a handful of sensing satellites. Furthermore, the United States now discusses its own counter-space capabilities much more openly.
China has triggered a big reaction in the space domain. Chinese strategists are now concerned about several US initiatives, including distributed satellite constellations, US counter-space capabilities, satellites that monitor activities in orbit, and US partnerships with commercial space companies that enhance American capabilities. They’re also increasingly worried about the potential for nuclear escalation resulting from space-based conflicts — a new development over the past five years.
Mike Horowitz: Another way to think about this more broadly is the reveal-conceal dilemma when developing capabilities. Everything Fiona said is correct. Generally, you reveal capabilities to deter or coerce, while you conceal capabilities for actual conflict. China’s actions in space represent revelation specifically to impose costs, which they have accomplished by driving many changes to US space architecture — both implemented and planned.
However, some areas are difficult to conceal even when that’s the intention. Space is arguably one such domain — concealment is easier in some ways but harder in others. We don’t know exactly what China’s intentions are when they do things like dazzle our assets. Are they purposely revealing capabilities, or would they prefer to conceal these tests but can’t? Their testing options differ from terrestrial missiles, which can sometimes be tested in relative isolation. This fundamentally changes the dynamic.
Fiona Cunningham: To add one more element, PLA space deterrence doctrine often describes a tiered approach. You begin by signaling your capabilities or repositioning assets to make them visible. Mike’s point is particularly relevant because even when examining PRC doctrine, you can see there’s a strategic place for movement and revelation of capabilities intended to send a message. Determining whether they’re following established doctrine or simply couldn’t hide what they were testing remains a key challenge.
Jordan Schneider: Let’s discuss dogfighting. Mike, would you like to address this?
Mike Horowitz: Recently, a US Space Force official published an article discussing China conducting “dogfighting” in space. This terminology demonstrates how we project our understanding of one domain onto another. However, it clearly illustrates what Fiona’s book demonstrates about China’s capabilities and their testing approaches.
Despite changes over recent years, the US Space Force still feels constrained in its ability to conduct similar testing and faces questions about what would be operationally permissible. One interpretation of this discussion about Chinese “dogfighting” in space is that the US Space Force is signaling that what the PLA is doing is legitimate. The implication is that if we want to deter and defeat these tactics — rather than merely exhausting them through proliferated assets that complicate disruption of American capabilities — we need to grant the Space Force more authority to operate in space, including activities that have been considered dangerous for decades.
Fiona Cunningham: If I’m not mistaken, the report on dogfighting described a scenario where several Chinese satellites — more than three — essentially surrounded another satellite. This demonstrates advanced capabilities in rendezvous and proximity operations — the ability to position several objects close to each other in space. This relates to Mike’s point about constraints regarding how close one might be permitted to approach in these operations.
Regarding the specific terminology of “dogfighting,” I’ll note that I don’t know how you would say “dogfighting” in Chinese. This probably indicates that the term doesn’t appear in their doctrine.
Jordan Schneider: Everyone wishes they were still flying fighter jets over Korea. That’s basically the lesson of all this.
Mike Horowitz: The question for Fiona is, how sophisticated do you believe China’s conventional missile arsenal has become? China has, by my count, at least six relatively modern anti-ship missiles, including two different anti-ship ballistic missiles, something like the DF-17 anti-ship hypersonic missile, along with the YJ-class missiles. How important is this development? Coming from the Pentagon in 2024, the importance of these missiles represents one of perhaps the top five questions facing the US military today, particularly the US Navy.
Fiona Cunningham: This is an Air Force issue as well, since these same missiles can target assets on regional airfields. Examining PLA conventional missile doctrine reveals something interesting: as their forces become more precise, the described target set actually narrows. Rather than infrastructure or economic targets, they now focus on missile defenses, electronic warfare capabilities, radars, airfields, and ships.
Some advances are obvious — China’s missiles have become more accurate. Finding reliable estimates of their accuracy is challenging — how many missiles will land within a short range of their target, and how frequently they’ll hit within a certain radius of that point.
The most important change for China comes in sensing capabilities. Precision missile capability requires not just accurate missiles but also sensing systems to locate targets and confirm successful strikes. This presents a particular challenge for anti-ship ballistic missiles. Extensive analysis has examined what space-based and ground-based capabilities China might employ to locate US carriers — the key question being whether they could find and track them sufficiently for missile targeting.
Recently, China deployed an optical satellite in geosynchronous orbit that provides persistent coverage of that region, significantly enhancing their target acquisition capabilities. The black box for me is what happens between the sensor and the shooter — this can be a very difficult process. I have less visibility on whether this presents as big an issue for anti-ship ballistic missiles targeting large vessels as it would for more precise targeting scenarios.
The other question involves US countermeasures and their effectiveness against China’s attempts to hit both moving targets and fixed installations. The US could potentially use its own counter-space capabilities to disrupt Chinese sensing systems important for locating and tracking vessels. However, fixed targets like Kadena Air Force Base remain at known locations. You may not know exactly what assets are present, but you can still strike these fixed targets even with degraded sensing capability.
This leads to considering what else the US can do to disrupt China’s precision strike capability, which ultimately points toward disrupting missiles before launch. This returns us to the challenging problems of tracking mobile missiles that we discussed earlier. You can see how these issues are interconnected.
I’m not directly answering your question, Mike, because uncertainty exists about the steps in the chain that China must complete to successfully hit the more challenging US targets. Substantial uncertainty also surrounds the effectiveness of US countermeasures, both in terms of disrupting PRC capabilities and in hiding from or diverting those missiles once launched and en route to their targets.
Mike Horowitz: That’s a great answer, super helpful. What about Chinese hypersonics in general? China has tested hypersonic systems that have excited missile enthusiasts and generated concern that the US could be falling behind in this technology. Setting aside the “falling behind” narrative — and I’ll save my personal rant about hypersonics for another day —
Fiona Cunningham: I’d love to hear it — come on, we’re here.
Jordan Schneider: We’re two hours in, Mike. The people are waiting for this.
Mike Horowitz: There’s no capability that disappointed me more when I left the Pentagon than hypersonics, particularly regarding the relative value for investment. They have their place but have been somewhat overhyped considering the overall architecture of missile systems. That’s not surprising coming from me, given my advocacy for precise mass and more attritable autonomous systems.
My question for you, Fiona: How fearsome are China’s hypersonics, and how have they managed to deploy so many hypersonic systems so quickly compared to the United States?
Fiona Cunningham: The short answer to why China has been quicker than the United States: I can’t point to a specific line in a PLA manual or teaching text, but if I were to hazard a guess, it’s because this is a priority for China. Conventional missiles, and missiles in general, represent an area where China has invested a lot of effort ahead of other aspects of its conventional military modernization and certainly its nuclear modernization. When you prioritize something, you naturally progress more quickly.
It also relates to China’s specific problem set. The United States has deployed missile defense systems around China’s periphery, most visibly with the THAAD system in South Korea in 2016, which caused considerable political disruption in Northeast Asian security dynamics. China faces the challenge of defeating missile defenses. If that’s your problem at theater range, hypersonics offer a potential solution because of both their speed and maneuverability in the terminal phase, making them more difficult for missile defenses to intercept.
Regarding their effectiveness — they’ve been tested in controlled environments. Their true capabilities won’t be known until they face actual US missile defense systems, and their success will depend on how US capabilities to track hypersonic missiles progress. This represents an ongoing development with the current space sensing architecture.
This creates a cat-and-mouse dynamic where China’s investment may provide a temporary advantage, but the US can potentially close the gap — either through the precise mass approach you advocate or through countermeasures specifically designed to address the problems that hypersonics solve for China.
Mike Horowitz: To me, that’s an “and” not an “or” for the US, but that’s very helpful.
Jordan Schneider: Thinking about that exchange, I was trying to imagine how to persuade Trump to defend spending on basic research and science. This led me to recall the “super duper missile” and “invisible aircraft” comments. We’re recording this on Friday, March 21, when the NGAD, the sixth-generation fighter, is about to be announced.
My mental model suggests Trump will approve spending on things that are big, fast, and shiny — not slow and attritable. There’s an interesting tension here. Many influential tech companies like Palantir and figures connected to Trump’s circle advocate for one theory of acquisitions and victory, whereas Trump himself seems drawn to technologies you can describe with dramatic action-figure adjectives, rather than, say, cute submersible drones.
Mike Horowitz: One notable aspect of the 17 priorities that the Pentagon announced for its review of the FY26 budget is how both sophisticated systems and “one-way attack” precise mass systems were explicitly identified as investment priorities.
My instinct is that you’re probably correct. Additionally, the now-confirmed Deputy Secretary of Defense Feinberg is a strong hypersonics advocate. What we might see, due to both Feinberg’s influence and presidential preferences, is a push toward a high-low capability mix — investing in both the biggest, shiniest assets like NGAD and hypersonics, as well as more distributed mass capabilities.
Since many US capability investments over the last couple of decades have focused on that mid-tier range, this shift raises questions about those programs. As an advocate for a high-low mix for the force, I don’t necessarily find this troubling, even if the pathway there differs from what I might prefer.
Jordan Schneider: Fiona, were there alternative paths the PLA could have taken? Could they have decided in the late 80s to focus on nuclear modernization, making that threat more credible, rather than building a massive conventional force with advanced capabilities in space, cyber, and missiles? Was that a viable option? And would that approach have made China’s rise less concerning to other nations? Or do you see concerns about China as primarily related to economic growth rather than specific military capabilities?
Fiona Cunningham: That’s an excellent question. It depends on which parameters you change. What if those big incidents with the United States in the mid-1990s hadn’t occurred? In the book, I also discuss the EP-3 crisis, when a US reconnaissance aircraft and a Chinese fighter collided over Hainan Island in 2001.
Mike Horowitz: Remember how big that incident was at the time?
Fiona Cunningham: It was enormous.
Mike Horowitz: We’ve somewhat memory-holed it, especially given the current global uncertainty, but when it happened, it was a major international crisis.
Fiona Cunningham: I was in what Americans would call middle school at the time. It was another event I followed closely, similar to the ASAT test, as it occurred very early in the Bush administration. Looking back, it’s clear why my childhood dream of becoming a human rights lawyer at the UN got diverted by media coverage of these events.
Mike Horowitz: By your one true love for nuclear weapons.
Fiona Cunningham: Well, if I truly loved nuclear weapons, I’d probably study a different country. They’re not China’s favorite.
An alternative narrative might have emerged when China encountered these crises with the US that revealed its leverage deficits. China could have decided, “We have nuclear weapons. We’ve observed NATO’s approach during the Cold War. We’re watching contemporary Russian strategies in the 1990s. We’ll simply adapt our nuclear posture and follow those models,” referencing Iain Johnston’s famous “limited nuclear deterrence” article. That’s one potential pathway.
Another scenario: without these crises, China might still have developed its conventional military, but its modernization and strategy would have responded to different variables — how other countries fight wars, party unity (to reference Taylor Fravel, my advisor’s work). You might have seen conventional modernization proceed without these investments in non-nuclear strategic deterrence.
Economic factors could have reshaped China’s conventional modernization trajectory. Jiang Zemin explicitly stated in the late 1990s that China’s military modernization progress toward joining the ranks of advanced military powers — “world-class militaries,” though he didn’t use that specific term — was contingent on the country’s economic circumstances.
A third consideration: how much of the current situation stems from Xi Jinping being a different type of leader with distinct visions for China’s foreign policy and defense strategy compared to his predecessors? I tend to see more continuity than change. However, with a different leader pursuing objectives unlike those of Hu Jintao or Jiang Zemin — perhaps emphasizing greater international engagement or taking a different approach to domestic politics — China might have followed a different path.
Mike Horowitz: It’s tempting to view everything as inevitable in retrospect. My instinct is that if it hadn’t been the Taiwan Strait Crisis or the EP-3 incident, something else would have triggered similar developments. From a structural perspective, China’s rise combined with frequent US demonstrations of conventional military superiority during the Iraq invasion and subsequent conflicts created conditions where accelerated PLA conventional modernization became highly probable. The question is: what additional steps would they take beyond that?
Fiona Cunningham: That’s where politics enters the equation. Stepping back, one of the major conclusions of my book is that China’s decisions about strategic deterrence and capabilities intended to pressure the United States are all connected to political dynamics. This isn’t primarily about US capability dynamics but rather those political crises that create urgent demand for enhanced capabilities to deter the United States from engaging in future confrontations. The US doesn’t always pay sufficient attention to these political dynamics, while from China’s perspective, they’re paramount.
Jordan Schneider: Let’s close with three things, Fiona. First, recommend one PLA book for listeners who’ve made it to the end of this episode. Second, share your favorite Chinese phrase, perhaps something PLA-adjacent. Finally, which meeting in recent or older PLA history would you have liked to witness, and perhaps what organization you might have worked for during which time period.
Fiona Cunningham: I would decline working for any PLA organizations — I don’t think that uniform would have suited me well.
Regarding a meeting I would have liked to witness recently, I’m curious about why China’s military leaders decided to disband the Strategic Support Force around March or April last year. It previously housed space capabilities, cyber capabilities, and the network maintenance organization for all PLA Defense Information Networks. They announced a separate force for information networks, but almost nothing has emerged about what happened to the cyber and space components. I really want to understand why this occurred and why there’s been silence about the other elements.
For historical meetings, in approximately 1978, there was a meeting where Deng Xiaoping commented that China should continue considering tactical nuclear weapons while making decisions about the future of Chinese nuclear forces. Information about these decisions is scarce, but I’d love to know what choices led China’s leaders to still contemplate whether shorter-range, lower-yield nuclear weapons would help defend their borders against the Soviets, and why that idea eventually faded as China maintained its restrained nuclear strategy.
For a PLA book recommendation, I frequently return to an edited volume from the National Defense University titledCrossing the Strait: China's Military Prepares for War with Taiwan with editors Joel Wuthnow, Phillip Saunders, and others. It contains many valuable chapters summarizing China’s doctrine for a Taiwan conflict. Joel Wuthnow’s chapter on PLA command and control systems is particularly helpful for anyone wanting to understand China’s campaign capabilities as of a year or two ago. It exemplifies the best that PLA studies and analysis can offer regarding the dilemma we discussed at the beginning of this podcast — this remains the primary scenario and most difficult problem facing military leaders in the United States and allied countries.
My favorite Chinese phrase would be “惩戒行动” (chéngjiè xíngdòng), which appears in descriptions of China’s counter-space capabilities and roughly translates to “punitive strikes and disciplinary action” — essentially combining “punish” and “warn.” This phrase resonated with me early in developing my dissertation topic because it emphasized how differently China approaches the space domain and space deterrence compared to nuclear weapons. In many ways, it represented the variation in the dependent variable that made this not just an interesting and policy-relevant topic but one with academic merit as a political science dissertation.
Jordan Schneider: Can you use those words in a teaching or parenting context?
Fiona Cunningham: During my interviews in China, I asked what this phrase meant. People explained that “惩戒行动” referred to conflicts with punitive and disciplinary elements, like the Sino-Vietnamese War. When I asked if nuclear retaliation qualified, they said no. There’s a footnote about this in the book. No one suggested it was terminology they would use when teaching students or parenting children, so I would recommend keeping it within a military strategy context.
Jordan Schneider: Tell us more about the general atmosphere of the Chinese defense analyst community. How would you characterize them as people, using broad generalizations? And what do they gain from speaking with you?
Fiona Cunningham: When I conducted interviews for the book, mostly as a graduate student, I believe they were partly motivated by helping a student learn. The desire to assist students transcends cultural contexts. There’s also genuine interest among many Chinese experts to engage with researchers who make the effort to visit China, learn the language, and understand the strategic studies lexicon. They want to clarify misconceptions and ensure that American discourse about these topics shows a more nuanced understanding.
I was in China conducting this research during the 2015-16 PLA reforms. At times, when I asked questions about certain issues, people would simply respond that they didn’t know — until the reform package clarified, there was a lot of uncertainty.
As a group, the Chinese defense and strategic studies community isn’t fundamentally different from what you’d expect in the United States. There’s diversity in terms of gender, age, and ideological perspective — some more conservative than others. However, it’s a relatively small community, similar to the United States, where many experts know each other well and are familiar with each other’s views.
Jordan Schneider: One more question about the defense community. In a recent paper, you noted that the civilian defense consensus argued against extensive nuclear modernization, but Xi disregarded this view, and modernization proceeded anyway. However, before 2019, expert discussions often aligned with eventual PLA actions across various dimensions. What do you make of this shift?
Fiona Cunningham: One conclusion might be that the expert community has less influence or interaction with decision-makers than previously. Some have drawn this interpretation regarding nuclear policy. I have work in progress — referenced when we discussed China’s nuclear modernization drivers — showing that perspectives within China vary on why nuclear capabilities should be modernized and what specific actions should be taken.
In that paper, I focused on one segment of the PRC community involved in arms control that expressed concerns about threats to China’s retaliatory capability but didn’t advocate for substantial arsenal expansion. However, other voices within China’s strategic and defense community do support a larger arsenal — not based on intricate calculations about warhead targeting or force posturing to make credible threats, but simply because more nuclear weapons provide political leverage. This isn’t connected to military campaigns or outcomes but shows the psychological impact of greater capability. It could even be viewed as status-related, with nuclear prominence offering instrumental advantages.
This mentality helps explain the gap between what the arms control community might recommend and China’s actual behavior. More research on this is forthcoming.
Jordan Schneider: Standing invitation — we could host shows in Chinese if experts want to join us, with Fiona and me co-hosting discussions about specialized aspects of PLA doctrine.
Mike Horowitz: I look forward to the translation of that episode.
ChinaTalk is a reader-supported publication. To receive new posts and support our work, consider becoming a free or paid subscriber.
Mary Clare McMahon is an incoming Schwarzman Scholar (‘26) and former Winter Fellow at the Centre for the Governance of AI, where she researched compute governance and U.S.-China AI competition. Previously, she worked in the National Security and Cybercrime Section of the U.S. Attorney’s Office for the Eastern District of New York.
Last month, reports emerged that DeepSeek was running a distilled version of its R1 reasoning model on Huawei’s Ascend chips. While DeepSeek trained its model on Nvidia Hopper series chips, Huawei’s deployment of Deepseek R1 underscores a broader strategic question: to what extent can Huawei erode Nvidia’s dominance in the global AI chip market?
Nvidia’s position rests on what has called a “three-headed hydra” of leading hardware, networking capabilities, and, most importantly for this piece, a deeply entrenched software ecosystem. At the center of that ecosystem is CUDA, a proprietary programming framework that allows developers to efficiently map computations onto Nvidia’s GPUs. CUDA’s value lies not only in its performance but in its reach: an expansive set of libraries, optimized workflows, and tight integration with widely-used machine learning frameworks make it the industry standard. And, crucially, CUDA can only be used with Nvidia GPUs. That makes CUDA a core component of Nvidia’s competitive advantage, otherwise known as Nvidia’s moat.
This article explains Huawei’s attempt to replicate and bypass that moat. For now, Huawei appears to be advancing the following three-pronged strategy:
Building out its own software stack, including a proprietary parallel programming model and surrounding tools that developers rely on to write, optimize, and deploy code efficiently.
Deepening integration with PyTorch, the most widely adopted open-source machine learning framework for model training.
Investing engineering resources in developing the Open Neural Network Exchange (ONNX), an open standard for machine learning models that enables portability across hardware platforms, to support the deployment of non-Ascend-trained models on Ascend chips.
Huawei is not the only actor seeking to erode Nvidia’s software lock-in — AMD has made similar efforts with ROCm, and Google has a software stack fitted to run Google TPUs. However, Huawei remains the most significant challenger in the Chinese market. The core question is not whether Nvidia’s dominance is being contested, but whether Huawei’s software strategy can mature enough for a full-stack transition away from U.S. hardware. This article proceeds in two parts: part one provides background on Nvidia’s software moat and how it was constructed; part two analyzes Huawei’s evolving response.
Nvidia’s Software Moat
The roots of Nvidia’s software moat can be traced back to the late 2000s, when CEO Jensen Huang made a long-term bet on CUDA, Nvidia’s proprietary parallel computing platform. In 2007, Nvidia released CUDA as a programming model for scientific computing. At the time, the dominant paradigm for scientific research (and most other computing applications) was CPU-based computation; GPUs were considered niche accelerators, primarily designed for graphics rendering in video games. CUDA’s launch was an explicit attempt to invert that paradigm by positioning the GPU as a general-purpose compute platform.
CUDA allowed developers to write code in familiar C/C++ syntax that executed directly on Nvidia GPUs, thereby accessing the highly optimized functionality of these GPUs. But creating a new computing model meant overcoming a classic chicken-and-egg problem: developers needed hardware to test their software on, and customers needed software to run on their hardware — neither would commit without the other. Nvidia addressed this by seeding the market for CUDA with its consumer gaming cards, which already had a broad base of installation. It made CUDA freely available (without open sourcing the code), created a global developer conference, and worked directly with scientists and researchers to port algorithms to the GPU. As Huang later recalled in a speech at National Taiwan University, “We worked with each developer to write their algorithms and achieved incredible speedups.” This engagement strategy eventually paid off; in 2012, AlexNet was trained on CUDA and Nvidia GPUs.
As Nvidia’s software and hardware stacks became popular with deep learning researchers, Nvidia continued to invest in — and improve — CUDA. Nvidia created an extensive suite of libraries, such as cuDNN for deep learning, which dramatically lowered the time and expertise required to deploy high-performance models. In short, CUDA became more than just a programming model — it became the foundation of a full-stack software ecosystem.
For the next decade, CUDA continued to improve and attract more developers. And it is still improving to this day — though CUDA is closed source, Nvidia welcomes and often incorporates developers’ feedback. Nvidia also maintains online forums for developers to answer and ask questions about CUDA.
Thus, the CUDA ecosystem embeds substantial switching costs. Developers who migrate away from CUDA usually must rewrite large portions of code — by forgoing access to Nvidia’s finely tuned libraries, developers are forced to substitute with less mature equivalents, if any replacements exist at all. Further, developers also lose support from the large troubleshooting community that has grown up around CUDA.
Today, many machine learning developers do not code directly in CUDA. Instead, they write code in Python, a higher-level and more user-friendly language, using frameworks such as PyTorch and JAX. But even here, CUDA remains central: it acts as the backend bridge between PyTorch and Nvidia’s GPU architecture.
We will discuss PyTorch in greater detail in a later section. For now, it is enough to note that CUDA’s value lies not only in its impressive performance (which has improved continuously for nearly two decades), but also in the ecosystem that has formed around it. That is the essence of Nvidia’s moat — challengers with competitive hardware must also replicate an entire software environment if they want to compete.
Huawei’s Software Strategy
Undermining Nvidia’s software moat requires more than performance parity with Nvidia GPUs — it demands a credible alternative to the tightly integrated CUDA ecosystem. Huawei appears to be pursuing such an alternative. Its strategy consists of three interrelated prongs, each aimed at reducing the friction of switching away from Nvidia.
First, it is expanding its native software stack alongside a growing suite of tools designed to mirror the utility of CUDA’s broader ecosystem. Second, Huawei is deepening integration with PyTorch, the most widely adopted machine learning framework and one that, by default, pairs seamlessly with CUDA. By building backend support through adapters like torch_npu, Huawei is attempting to position Ascend as a drop-in hardware alternative. Third, Huawei is investing in ONNX (Open Neural Network Exchange), an open standard for cross-platform model representation, to allow models trained on non-Huawei hardware to run inference efficiently on Huawei chips. Together, these efforts seek to replicate the full-stack developer experience that has made CUDA so difficult to displace.
Huawei’s Software Alternatives
Huawei’s most direct challenge to CUDA comes in the form of CANN (Compute Architecture for Neural Networks), its proprietary programming environment for Ascend NPUs. CANN sits at the same level of the software stack as CUDA, providing the tools needed to execute high-performance machine learning models on Huawei hardware. Paired with CANN is MindSpore, Huawei’s high-level deep learning framework, conceptually analogous to PyTorch. Together, these tools form Huawei’s native alternative to the Nvidia-centric PyTorch + CUDA stack.
CANN has been in development since at least 2019, the year Huawei was added to the US entity list. Huawei’s 2024 Annual Report highlighted (on four occasions) the release of CANN 8.0 in September of 2024, promoting this development as a significant step in advancing AI computing capabilities.
However, developers cite serious usability issues with CANN. According to the Financial Times, one Huawei researcher complained that CANN made the Ascend chips “difficult and unstable to use.” One developer described the process of using the Ascend 910B as “a road full of pitfalls” (踩坑之路), sharing the following reflectionson Zhihu, a Quora-like Chinese website for academic discussion, in February 2025:
“I have been interning in the company for the past six months. Due to the shortage of computing resources, interns can only use Ascend 910B for training and development… Looking back, every time I encountered various problems and bugs, it was difficult to find the corresponding solutions on the Internet. Some problems were finally solved with the help of Huawei's operation and maintenance engineers. Therefore, I hope that this article, in addition to summarizing my own staged engineering experience, can help more Ascend NPU developers and help the development and progress of the domestic computing ecosystem.”
426 other users upvoted the post. One commenter responded, “It seems that it will take until 2027 for CANN to be truly mature, stable, and easy to use.”
The absence of a robust developer community for CANN further increases the onboarding burden for new developers. Unlike Nvidia’s developer forums, which benefit from community-maintained documentation and rapid peer troubleshooting, Huawei’s Ascend developer portals — both in English and Chinese — exhibit low engagement, with sporadic posts and limited public debugging activity. According to another Zhihuarticle posted in June of 2024, “When I first started exploring Ascend, I felt quite overwhelmed. Although there is a lot of documentation available, it feels quite disorganized. When encountering problems, the limited user community means you probably won’t find a corresponding solution, which leads to frequent frustration.”
While the Nvidia CUDA Programming and Performance Developer page had multiple live threads posted just days before the screen capture above, the most recent posts on the Huawei CANN developer pages were from January 2025.
Adapting models to run on Huawei’s platform is also onerous. According to that same Zhihu article from June 2024, “Any public model must undergo deep optimization by Huawei before it can run on Huawei's platform. This optimization process is heavily dependent on Huawei and progresses slowly.” By contrast, after testing the Nvidia H100 and H200 for model training applications, Semianalysis reported, “Nvidia’s Out of the Box Performance & Experience is amazing, and we did not run into any Nvidia specific bugs during our benchmarks. Nvidia tasked a single engineer to us for technical support, but we didn’t run into any Nvidia software bugs as such we didn’t need much support.”
To try to increase adoption, Huawei has adopted a strategy reminiscent of Nvidia’s own CUDA rollout in the 2000s: embedding engineers directly into customer sites to assist with code migration. According to reporting from the Financial Times, Huawei has deployed engineering teams to Baidu, iFlytek, and Tencent to help reimplement and optimize existing CUDA-based training code within the CANN environment. This mirrors the anecdote recounted above, where Jensen Huang described how Nvidia “worked with each developer to write their algorithms and achieved incredible speedups” during CUDA’s early years. Huawei is now attempting to replicate that strategy, pairing onboarding with high-touch technical support in the hope of accelerating ecosystem uptake.
In parallel, Huawei is also trying to improve its native software stack. DeepSeek engineers have reportedly said that the Ascend 910C can achieve up to 60% of the inference performance of the H100, and potentially more with CANN optimizations. As Kevin Xu noted on a prior episode of ChinaTalk, DeepSeek engineers have proven adept at “work[ing] below CUDA to maximize their Nvidia GPU.” If similar techniques were applied within the Huawei ecosystem, they could help close the performance gap between Ascend and NVIDIA hardware.
One particularly intriguing way to close that gap involves using AI to accelerate software optimization. If AI systems themselves can be leveraged to improve kernel optimization, develop the CANN and MindSpore stack, and reduce performance inefficiencies, it could meaningfully shift the competitive landscape. Sakana AI has already demonstrated a version of this approach with its “AI CUDA Engineer,” an agentic framework that translates standard PyTorch code into highly optimized CUDA kernels. According to Sakana, the system achieves 10—100x speedups for AI model training. If comparable AI-driven optimization techniques could be adapted for Huawei software, it would represent a significant step toward enhancing performance within the CANN ecosystem. Developer loyalty might follow.
Despite its investment in a native software stack, though, Huawei appears to recognize that displacing CUDA with CANN is not feasible in the near term. As a result, it has shifted part of its strategy toward interoperability rather than replacement. Nowhere is this more evident than in Huawei’s growing involvement with the PyTorch ecosystem.
Huawei and PyTorch
As part of its strategy to reduce friction in migrating away from Nvidia, Huawei has prioritized compatibility with PyTorch, the dominant open-source machine learning framework used across academia and industry. Originally developed by Meta’s AI research lab in 2016, PyTorch was released publicly in 2017, then transitioned to being governed by a wider network of companies under the Linux Foundation in 2022. The resulting PyTorch Foundation is governed by a consortium of premier members, including Meta, Microsoft, Google, Amazon, AMD, Intel, Nvidia, and, as of October 2023, Huawei.
PyTorch enables developers to define, train, and deploy machine learning models using concise and intuitive Python code. The framework's popularity stems from its "eager execution" model, which allows each operation to run immediately, making it easier to debug, prototype, and iterate than other alternative frameworks (like Google’s TensorFlow).
From the outset, PyTorch was optimized for Nvidia GPUs. New operators and features are still tested and tuned against CUDA first, and performance benchmarks are routinely conducted on Nvidia’s hardware. Installing PyTorch via Python’s package manager automatically sets it up to run on Nvidia GPUs. This makes the framework effectively Nvidia-native, and any effort to use it on non-Nvidia hardware requires not just backend substitution, but complete ecosystem engineering.
The challenge for Huawei, then, is not only to make PyTorch run on Ascend hardware, but also to make it run well enough that developers don’t notice they’ve switched ecosystems.
Huawei’s primary technical achievement has been enabling the execution of PyTorch models on its Ascend NPUs through an adapter called torch_npu. Torch_npu bridges PyTorch with Huawei’s low-level NPU drivers and CANN backend. Huawei developers publicized this development at the 2024 PyTorch Shanghai Meetup, pictured below.
Huawei’s torch_npu adapter allows Huawei's AI accelerators to interface with PyTorch, though it exists separately from PyTorch’s main codebase. (The torch_npu adapter uses PyTorch’s PrivateUse1 mechanism, an interface that lets hardware makers test new accelerators without immediately merging their code into PyTorch.) At the 2024 PyTorch meetup in Shanghai, a Huawei engineer noted that devices maintained outside PyTorch’s core, like Huawei’s, often face stability issues because changes in PyTorch's main code aren't automatically tested for compatibility. This challenge is widely recognized by the community.
For this reason, Huawei’s forked version of PyTorch is still less effective than Nvidia’s CUDA-native implementation, and developer feedback points to persistent challenges in runtime reliability and documentation. In a Zhihu thread with more than 700,000 views, senior software engineer “Mingfei” wrote that, “It’s worth emphasizing that plugins [referring to the forked version of PyTorch] are not native” and “several unavoidable issues arise,” including version compatibility; third-party extension support; and test coverage challenges. Another Zhihu contributor noted, “Ascend chips provide poor support for third-party frameworks like PyTorch and TensorFlow, making it extremely challenging to adapt to the latest large-scale models and use them effectively.” Note that the developer seems to be referring to the challenges of deploying models on Ascend chips, not training new models.
While Huawei’s patches have not yet been fully integrated upstream, there are reasons to believe that Huawei might be able to garner political support within the PyTorch Foundation to formalize its contributions. The PyTorch Foundation’s official announcement of Huawei’s status as a premier member noted that Huawei “provides easier access to the PyTorch ecosystem for more hardware vendors… [which] aligns with the PyTorch Foundation’s mission to develop AI as part of a sustainable open source ecosystem and produce inclusive technological feats.” This quote seems to suggest that PyTorch wants to support other hardware options besides Nvidia’s. Further, Huawei’s status as a premier member of the PyTorch Foundation grants it a seat on the Governing Board, as well as a formal role in setting foundation-wide policies and technical priorities. This membership was unanimously approved by existing premier members, signaling at least tacit acceptance of Huawei’s contributions by Meta, Nvidia, AMD, and Google. Finally, Huawei appears to be strongly committed to contributing to open source projects. The company’s 2024 Annual Report highlighted that Huawei is “a firm supporter and major contributor to open source communities” and explicitly mentioned its membership in the PyTorch Foundation.
In sum, Huawei is executing a long-term strategy to allow developers to use PyTorch with its Ascend series of chips. Its success will depend on the company’s continued technical contributions, the size of its developer community, and whether the PyTorch Foundation will incorporate the torch_npu and other Huawei contributions into its main code base.
Huawei and OXXN
While Huawei’s PyTorch integration aims to reduce friction in model development, it does little to solve the harder problem of model portability — that is, how to take a model trained on Nvidia hardware and deploy it on Huawei’s Ascend chips. To address this, Huawei has turned to a complementary approach, optimizing the Open Neural Network Exchange (ONNX) format to serve as a bridge between software ecosystems.
ONNX (Open Neural Network Exchange) is an open-source format originally developed by Meta and Microsoft in 2017 to enable model interoperability across deep learning frameworks. It allows developers to export a model trained in one framework, such as PyTorch with CUDA, and run inference in another runtime environment — or on different hardware entirely. It also helps optimize models, allowing them to run faster than they would if they were directly deployed from PyTorch. ONNX operates under the umbrella of the Linux Foundation AI & Data, of which Huawei is a premier member.
Put simply, ONNX is like the PDF of AI models. Just as documents created in Microsoft Word or Google Docs to be exported into a portable, fixed-format PDF file that can be opened and viewed across operating systems, ONNX allows models trained in PyTorch or other machine learning libraries to be exported into a standardized format that can then be run on different hardware platforms.
Huawei has embraced ONNX Runtime, the engine that executes ONNX models. The company maintains a public Ascend ONNX Runtime, available on GitHub, which includes optimized kernels and execution instructions tailored to CANN and Ascend chips. According to the ONNX Runtime documentation, Huawei’s ONNX Runtime page is “community-maintained,” meaning that it is maintained by Huawei rather than by the core ONNX Runtime team, and that it is Huawei’s responsibility to ensure ongoing support for the library.
Huawei’s goal here is straightforward: to enable developers to train models on non-Huawei hardware, export the files to ONNX, and deploy the models on Ascend chips, all without rewriting core logic. This workflow has clear appeal in the Chinese market. Model developers could still train on Nvidia Hopper chips or train models through the cloud, then shift deployment or inference workloads to Huawei hardware.
It’s important to note that running a model on hardware, even if using an ONNX file, can introduce bugs or compatibility issues. Some PyTorch operations don’t export cleanly to ONNX, while others need rewriting. ONNX models may also need custom operations that the hardware backend has to support. That said, Huawei’s investment in ONNX offers a practical path to inference decoupling. In contrast to the CUDA-first development loop, which binds training and deployment to Nvidia hardware, ONNX gives Huawei a way to insert itself at the deployment stage, even if training remains CUDA-bound.
Huawei’s Future
Nvidia’s enduring dominance in the AI chip market is not due to superior hardware or networking architecture alone — it’s also a function of Nvidia’s deeply integrated software ecosystem. This ecosystem — anchored by CUDA, high-performance libraries, and seamless compatibility with PyTorch — offers a robust developer experience and an active community that reinforce Nvidia’s lead. Huawei’s strategy is to build a competitive stack of its own.
Model deployment may be Huawei’s most immediate opening. Already, it has demonstrated that models trained on Nvidia hardware, like DeepSeek’s R1, can be run in distilled form on Ascend chips. If the US were to ban the export of Nvidia H20s to China, this workaround could become standard. In that scenario, indicators of improvement in the Huawei software stack would manifest not as headlines, but as reduced developer complaints, more seamless deployments, and fewer distinctions between fallback option and first choice.
Huawei isn’t there yet, though. As noted by the exasperated programmers quoted above, working with Ascend 910B chips still requires debugging without community support. But Zhihu threads where developers vent frustrations can eventually become a troubleshooting resource that contributes back to the Huawei ecosystem. With enough developers dedicated to advancing that new ecosystem, the result could be a slow, durable shift away from CUDA. That shift won’t happen overnight — remember, it took Nvidia 18 years to build the CUDA ecosystem of today; building a competitive software ecosystem is a multi-year effort even under pressure. But what started as necessity may, over time, harden into habit — and eventually, into infrastructure that can compete with Nvidia’s software stack.
Special thanks to Jeff Ding and Kevin Xu for thoughtful feedback on prior drafts.
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