The Prof G Pod with Scott Galloway
China Decode: The AI Advantage No One Is Talking About
21 Apr 2026
Chapter 1: What is the current state of China's economy and GDP growth?
Hey, I'm Matt Buchel, comedian, writer, and floating head you may or may not have seen on your FYP, and I'm starting a brand new podcast. Wait, don't swipe away. It's called That Sounds Like a Lot. You know that feeling when you check your phone, read a few headlines, and think, that sounds like a lot. I can't do this. Well, I can, and I'm going to get into it every Friday.
You can watch on YouTube or listen wherever you get your podcasts. I'm going to start by breaking down whatever insanity is happening in the world, and then I'll sit down with a comedian or actor or writer or, honestly, anyone who responds to my DMs. This is not the place to get the news, but it is a place to feel a little bit better about it.
That Sounds Like a Lot, coming May 1st, part of the Vox Media Podcast Network.
There is really a gold rush now, a frenzy in the US and in other countries around the world to get hold of these cheap Chinese tokens. And that's the reason why this is becoming a geopolitical issue, because A lot of startups in Silicon Valley are preferring to use Chinese tokens, in other words, Chinese either agentic AI or LLMs, to power their startups, to power their technology.
And that's making a lot of people in the US quite concerned, both from a technological perspective and from a geopolitical perspective.
Welcome to China Decode. I'm Alice Han.
And I'm James King.
In today's episode of China Decode, we're discussing the advantage China might be developing in the AI economy, how the country is strategically using its export controls, and how a push for innovation in the domestic market is creating a wave of unusual new products for Chinese consumers.
That's all coming up, but first, let's do a quick check-in with how the Chinese markets are starting the week. On Monday, the Shanghai Asia Index ended the day up about 0.76%, while the Shenzhen Component Index hit its highest point since December 2021.
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Chapter 2: How is China becoming a leading exporter of AI tokens?
And that's the reason why this is becoming a geopolitical issue because a lot of startups in Silicon Valleys are preferring to use Chinese tokens, in other words, Chinese either agentic AI or LLMs to power their startups, to power their technology. And that's making a lot of people in the U.S. quite concerned, both from a technological perspective and from a geopolitical perspective.
But what are you seeing in this, Alice? Do you think we're at a kind of turning point? Is this a big moment?
Well, it's interesting. I think over a year ago, you had the Airbnb founder and CEO, Brian Chesky, saying that Airbnb is actively using Chinese LLMs, models from DeepSeek and Alibaba Quinn, because they were cheaper and it was easy to then fine-tune them for the engineers. But I don't know how sustainable that is. That was my next question to you.
My own sense is that right now we're in a bit of a gold rush
But at some point, just as we saw in terms of the Biden administration putting tariffs on Chinese EVs and effectively blocking them, I wouldn't be surprised if in a year or two we see similar movement politically coming out of Washington and Silicon Valley to start clamping down on Chinese AI companies being used, not just the LLMs, but also the agentic layers on the basis of national security threat.
And I think that that isn't off the table in terms of the realm of possibilities. In fact, I assign a pretty high probability to that. I would also say that even though China may in a couple of years or maybe less be effectively you know, blocked out of the US market. The EV example, which we talked about previously, shows that there's so many other markets for China, right?
The fact that last March we saw over 140% year-on-year growth in EVs, obviously spurred by the oil crisis, suggests that even though Chinese EVs don't have that lucrative big US market, that there is plenty of other markets to play in.
I think that to your point, James, given that these agentic AI models are really quite a bit cheaper, in fact, to some extent, almost about 10 times cheaper than what is coming out of the US. This makes it, I think, very cost-effective for a lot of consumers and some corporates overseas outside of China. But all of this suggests to me that NVIDIA is the big winner, right?
Because NVIDIA's Jensen Huang has really come out and said, effectively, agentic AI systems are going to be great because they're good. To your point, James, they're more token consuming, intensive, and that will be net beneficial for NVIDIA's AI chips. How do you think about sort of the winners and losers in this space? I certainly think there's a lot of Chinese winners, right?
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Chapter 3: What are the implications of China's export controls on global supply chains?
the fact that it can produce tokens much more cheaply and export these tokens to the US and other countries around the world, is creating substantial data, strategic, and regulatory concerns for the United States. And I can certainly see that from a US point of view. I mean, if you've got a Chinese LLM or a Chinese agentic AI model,
operating in the United States, there is very little way that the US can regulate those because head office for those companies is back in China. The algorithm is back in China. The staff are back in China. It really is the genuine export of this Chinese technology.
And the more that Chinese tokens and Chinese chatbots and agentic AI is used in places like Silicon Valley, the more embedded it becomes in one of the most critical and strategic sectors in the entire US economy, i.e. AI, and more generally tech. So that has to be a big concern. But my question is, how do you actually stop it, given that this is basically a click away?
I can find a Chinese Gentic AI model or a Chinese LLM simply with a search on my computer. So I don't know how the US could stop it, if they decide that they wanted to do that.
Well, I think it would have to, I mean, definitely government agencies would have to crack down in the way that they have. in a couple of years on using Chinese apps, certain Chinese apps, right? But also Chinese hardware, right? Phones are effectively, Chinese phones are effectively banned by American government agencies.
That I think will be a low-hanging fruit to impose in terms of restrictions. The next question is, will Silicon Valley get politicized about this issue and basically mandate from top down that the engineers can't use Chinese agentic AI or LLMs on the basis of data security. That will be contingent on company decisions by the leadership in Silicon Valley companies.
But given, I think, the recent tidal shift I wouldn't be surprised if that does happen, if at some point you have Mark Zuckerberg coming out and saying, like, these are our big strategic competitors, not just in terms of corporate competition, but also national security, and we need to crack down on using Chinese models.
I don't think they're at that stage yet because they're still interested in seeing where it goes. Meta just bought Manus, as we talked about previously, although that seems to be in a bit of... the crosshairs with China investigating the legality of that purchase.
And then one last thing I will say is that I get a sense that American and Western investors are frothing at the mouth with regards to Chinese AI companies from a public and private markets perspective. You know, and a lot of people think
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Chapter 4: How is China leveraging its domestic innovation for consumer products?
And more recently, China has retaliated with rare earths. And now it seems that instead of being on the defensive or reciprocal front, it is going out on the offensive and trying to consolidate an export control regime that encompasses not just a whole panoply of rare earths and rare earth-related equipment technologies, but also solo panel parts. and solar panel green technologies.
Now, the question then is, what is next, right, James? And why is China doing this? I have my own thoughts, but I'm curious what you think.
Yeah, my sense of this is that we often focus on the measures that the US has taken against China in the trade war and tech war. And there has been a lot over the last five years, more than 3,000 Chinese entities, mostly companies, have been subjected to licensing requirements or other forms of US export control. But as you mentioned, China has been much quieter recently
about its own sanctions against the US. And as you've mentioned, it's actually tripled its use of export controls over the past five years. There have been, according to a EU Chamber of Commerce in China study, there's been 30 times between 2021 and 2025 that China has put
export controls on and that's up from about 11 times in the previous five years and when we look at what's happening in each of these 30 times the picture becomes a little bit clearer and particularly what becomes clear is china's use of global choke points in supply chains to exert pressure on trade partners that it wants to punish.
So there are 10 instances of China using global choke points in supply chains, such as the time last October when China put a whole slew of restrictions on exports of rare earths. Rare earths are these crucial materials used in making many, many different technologies, often high-tech, around the world. So China's shown that it will weaponize its supply chain on 10 of these occasions.
And in 10 other occasions, these have been different measures to coerce its trade partners to do what it wants. But I think why this is becoming really perturbing right now is because last week, there was a new set of controls. These are called the State Council Regulation on Industrial and Supply Chain Security.
A bit of a mouthful there, but basically what these say is a whole load of legal rules and stipulations that are so vague that that nobody around the world can actually ascertain what they really mean in concrete terms. One of these rules makes it illegal to, quote, harm the security of the country's industrial and supply chains. The country's, in this case, is China's.
So, I mean, what could that be? We have no clue what that means in real terms. Another of the articles in the latest legislation says that China would carry out action against anyone who quote, carries out information gathering activities related to industrial and supply chains in China. So let's say a
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Chapter 5: What role do AI tokens play in the global tech economy?
where not only we are at risk of being choke-pointed by other countries, but where potentially we won't be able to control our dominance in certain domains in the future. And so then the big question to my mind, which I don't have an answer for, is what other industries will China go for? Certainly in green technology, China is a leading player
We've already seen some announcements of semiconductor export controls, mainly on the basis of dual use technology. But I think the next thing will be, you know, what other areas, if it's petrochemicals, if it's commodities, and that is a huge part of the global supply chain, we'll try to be putting in these technologies. export licensure regimes or export controls.
That, I think, is the next big question. But certainly, I get a sense that they're changing their whole attitude towards the export control regime, which is we're no longer just doing what the Americans have done in a tit-for-tat iterated game theory.
But we're actually going to work out a supply chain strategy to make sure that China has maintained dominance across several key chokepoint industries.
Yeah, absolutely. I think that's a very astute comment, Alice, because I mean, when it comes to the balance of power, China has the power in terms of its supply chain. Its supply chain is of unrivaled superiority in the world. Just a few numbers in terms of... these generic drugs, China makes more than about 60% of the world's total.
In terms of sort of legacy semiconductors, so that's semiconductors above, I think, about 14 nanometers, China's making around 70%. Rare earths, we've already mentioned, China makes about 80% to 90% of the world's rare earths. In sector after sector, China has potential chokeholds over the rest of the world economy. And I think it's just showing the US that, hey, don't tangle with us.
We can beat you. If you're going to put a whole load of restrictions on us, then we can hit you back by restricting our supply chain exports to the US and other countries. And I just wonder how This plays into the summit between Trump and Xi Jinping, which is supposed to, I believe, take place in early May.
I don't think we've got final confirmation of that yet, but maybe there's an element of this, particularly with the rules that I just cited, the ones that have just come out last week. that China is just trying to build leverage in trade negotiations between it and the United States ahead of the Trump visit so that there aren't any nasty surprises from Washington. I don't know.
That's purely speculation on my behalf, but I've seen this movie a few times before, and China does tend to do things like that.
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Chapter 6: How is the US reacting to China's advancements in AI?
But it's still very hardy and intensive and durable, like your traditional wheels. And, you know, they're pretty much the only factory, I think, in the world that does it. They supply directly to Tesla. So there's a lot of industrial innovation that I sense, to your point, James, that's happening. And it might take us in very exciting directions like the Japanese did for the toilets, right?
There might be some interesting consumer resources. related inventions that will be coming out of China very, very soon. All right, James, you know what time it is. It's prediction time. As you peer into the future this week, what do you see?
So I'm going rather bold this week, Alice. My prediction is measured in the hundreds of billions of US dollars. What I would like to say is that I think the gap between the total stock market valuation of China's top four five technology companies, and the top five tech companies in the US will close somewhat over the next year. In other words, the gap in the valuation will close.
So just to give you a few numbers on this, the combined market value of the top five US tech companies, which are Nvidia, Alphabet, Apple, Microsoft, and Amazon, was $17.8 trillion last Friday. And the market cap of the top five Chinese tech companies last Friday, those companies are Tencent, Alibaba, CATL, Xiaomi, and PDD Holdings, was $1.48 trillion.
So in other words, at the moment, the market is saying that the top five Chinese tech companies are worth one twelfth of the value of the US's top five. I reckon by this time next year, this is not a scientific projection, but I just feel that it shows the direction of travel. I reckon this time next year, you know, it could be one-tenth or something like that.
So in other words, the Chinese companies will be worth more relative to the US companies, although, of course, the US companies will still be worth far more in an absolute basis.
Yeah. I mean, that sort of chimes with what could be happening in the U.S. economy where, you know, if you see inflation prolong a series of rate hikes, you know, you might see the market start to cool and then people get worried about the AI bubble in the Mach 7. I think that that chimes with, I think, the directional trend. travel of things in the US. So I could foresee that.
So I'll be on the same side of that bet. So my prediction is a little bit more niche, but I think it's important. And it picks up on a theme that we had a couple episodes ago. And that is, the UAE has just said that it's potentially facing liquidity crunch because of the oil crisis coming out of Iran. And it's asking I think in some reports, the U.S.
administration to help with currency swap lines. A couple years ago, I think, I believe in November 2023, China's PBOC agreed a $5 billion U.S. dollar currency swap agreement with the UAE's central bank.
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