The Prof G Pod with Scott Galloway
China Decode: Why China’s Baby Bust Meets a Condom Tax
16 Dec 2025
Chapter 1: What is the main topic discussed in this episode?
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Trump is focusing more on doing deals and a lot less on American ideals, you know, for the world. We've left that Reagan-esque type of America as a shining city on the hill, a beacon for mankind, an ideal for global aspirations, the leader of the free world. All of that rhetoric Well, and it was a lot more than rhetoric, really.
From Reagan's time until now, it's been followed up with military might and economic muscle. This is the world that Pax Americana has created. So if this holds, and that is a big if, then it really is a big change.
Welcome to China Decode. I'm Alice Han.
And I'm James King.
In today's episode of China Decode, we are discussing Trump's new China playbook, why China's baby bust meets a condom tax. Plus, we'll chat with Chris Miller about Trump's big AI chip reversal. 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 A share index fell 0.6% and the Hang Seng H share index fell 1.3% after key economic data were released, which revealed that China's slowdown lasted into November. Social media company Kuaishou Technology closed down 5%. Search giant Baidu slid 6% and Alibaba fell 4% as investors are increasingly anxious about the fragile Chinese economy.
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Chapter 2: How is the U.S. changing its strategy towards China?
Again, one line I think that's worth mentioning, and it might be a slight dig to China or a is countering non-hemispheric influences in Latin America.
That could also be, I think, a pointed reference to China's trade and investment relationships in Latin America, not just Venezuela and keeping that regime afloat, but certainly other countries like Brazil or Argentina where there's significant amounts of trade that China is involved in.
So again, I think when you read between the lines, there are some references to China, but clearly from a PR standpoint, The doves in the administration have won the argument, and they wanted to make this document less incendiary than it could have been, than it certainly had been in the first Trump administration. James, how do you think the Chinese government is viewing this document?
Because they definitely have dedicated teams that specialize in this.
I think they're absolutely delighted. And I have been talking to Chinese, well, think tank people last week in London. And I think they are really very pleased about this because the previous two national security strategies mentioned that the US wanted to oppose China's desire to, quote, shape a world antithetical to US values and interests. This version dropped that completely.
And as you mentioned earlier, it started to talk about economics a great deal more. And so the key sentence in this one was that America wanted to be working to, quote, rebalance America's economic relationship with China. Just look at how much more mild that sentence is compared to describing China as, antithetical to US values and interests around the world.
So what I think is happening is that Trump is focusing more on doing deals and a lot less on American ideals for the world. We've left that Reagan-esque type of America as a shining city on the hill, a beacon for mankind, an ideal for global aspirations, the leader of the free world. All of that rhetoric, well, and it was a lot more than rhetoric, really.
From Reagan's time until now, it's been a great deal more than rhetoric. It's been followed up with military might and economic muscle. This is the world that Pax Americana has created. And now we're just talking about doing better deals and America focusing on its economic interests in the world. So if this holds, and that is a big if, then it really is a big change.
And I must just say, Alice, that I think your phrase of non-hemispheric influences is going to be a zeitgeist for 2026. I think that we are going to be talking about re-hemisphering the world a lot more over the coming months. It's a bit like the Monroe Doctrine of old is going to get reborn in some shape or form, or at least rhetorically reborn. I have a feeling...
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Chapter 3: What are the implications of China's baby bust?
But maybe from the ground up, can you walk us through why this actually matters and why this has been a big shift to, say, go from the H20s, where he relaxed, to the H200s?
Chapter 4: How does the new condom tax relate to China's birth rate crisis?
What is the quantum leap, so to speak, between the two?
If you start by looking at the goal that the U.S. government has been trying to accomplish since it began imposing controls on AI chips in 2022, the theory was that if you want to build big AI systems, you need lots and lots of high-end chips. And almost all of these chips are manufactured at TSMC in Taiwan and largely designed by U.S. companies, including Intel. NVIDIA.
So the US and Taiwan have this unique choke point over AI processors. And the US wanted to give US firms and firms from allied countries a leg up in the AI race by giving them privileged access to AI computational capabilities. And that was the origin of this control regime.
And Trump has now decided for the first time since the controls were put in place to actually reduce some of the controls and allow more chips at the high end of the spectrum to flow to China.
And why is he issuing this policy shift? Because to my mind, he was really the first to issue this clarion call in his first Trump administration about the need to do export controls. This year, I think we've seen a move towards being dovish on some of these chips issues. And certainly people point to David Sachs being the crypto and AISR as being one proponent of this.
But what is the rationale from Trump's perspective in basically reducing these export controls?
You know, I think you're right. This is a big reversal, of course, relative to the policy of the first Trump administration, which was very tight on technology control. I think there are two rationales that you hear from the administration on why this changed now. The first is financial in focus. NVIDIA, obviously a critically important company for the U.S., a driver of the stock market.
And so there's a straightforward rationale to let NVIDIA sell more chips to China. So that's part one. There's a second argument that suggests if you sell chips to China, China won't want to build out its own AI chip ecosystem. And we've seen Chinese firms like Huawei, most importantly, become important designers and manufacturers of AI chips.
They're still far behind what NVIDIA plus TSMC can do in terms of quality and and quantity. But there are some people in the administration, including I think David Sachs, you mentioned who argue that if you sell more chips to China, you'll take some of the air out of the effort to build up China's own self sufficient AI ecosystem.
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Chapter 5: What are the broader implications of China's declining birth rates?
And they've made a lot of progress in many types of chips. But when it comes to cutting-edge AI chips, they're not there yet. And this is why, from the Chinese government's perspective, there's actually a rationale for keeping these chips out of the market because it opens up space for Huawei and the other AI chip designers in China to sell to China's own AI firms.
I think if you're in the shoes of the Chinese internet sector or the AI sector, companies like ByteDance or Alibaba, they'd actually probably prefer to just get the best chips on the market, which are NVIDIAs. And so you probably have a bit of a gap between what the tech sector wants and what the Chinese government wants.
But I think this is a space where the Chinese government usually wins these arguments. And so I think we are going to see some limitations on the number of H200s rather that flow into China. because the Chinese government does want to support Huawei and support this self-sufficiency drive to the extent that it can.
Great point. And looking to the Chinese industry as a whole, you know, your book really, if anybody hasn't read it, they need to read it. It really lays the foundation for this ongoing competition between the US and China over semiconductors. How do you assess the Chinese semiconductor industry today versus when you wrote that book? Because certainly there's a lot of hype
about Chinese homegrown talent. You just mentioned a couple, Huawei, Cambricorn, Morse Threads more recently. How are you looking at their capabilities when it comes to the ground up? Because there's a lot of attention being paid to the sector right now.
You know, I think China has made real strides in catching up in many segments of the chip industry, but there are also a number of areas where they're far away from the cutting edge. If you look first off at the manufacturing of semiconductors, what you find is that TSMC in Taiwan,
is not only able to produce significantly better chips, and we know this because the capabilities of the leading Chinese chipmaker SMIC basically track along TSMC at a five or six-year delay. That delay has been relatively steady over time.
There's a meaningful delay in terms of quality, and there's a huge gap in terms of quantity because TSMC can access the tools that are used to make chips, machines that are produced by companies like ASML or Applied Materials, in ways that China can't because of export control. So on manufacturing quality and quantity, there's a very big gap.
When it comes to chip design, the gap is much, much less significant, which is why Huawei, for example, is a top-notch designer of semiconductors, both for smartphones and also increasingly for AI chips. But design only matters if you can get them manufactured. And that's the challenge that Huawei and the other Chinese chip designers have faced.
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