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Speaker 1: Right now, though, let's go to Asia. Peter Lewis is

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Speaker 1: our correspondent in Hong Kong, heavy Chinese New Year.

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Speaker 2: Peter, thank you very much and happy you have to

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Speaker 2: sneak to you. Ryan.

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Speaker 1: So the big story, and we've been following it closely

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Speaker 1: over here, but I'm dying to know. This is Deep Seek,

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Speaker 1: the AI company. I'm dying to know how it's all

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Speaker 1: been received in China and well in Asia more generally,

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Speaker 1: but specifically in China.

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Speaker 2: Well with with great interest, partly because this company has

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Speaker 2: really come out of nowhere. Most people have never heard

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Speaker 2: of it until this week. It's based in Tuangzhou, which

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Speaker 2: is on the eastern coast of China, and it's that's

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Speaker 2: the city that's hosts the headquarters of Ali Baba, so

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Speaker 2: Guangxio is known as being a sort of a center

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Speaker 2: of entrepreneurship. But this really did take people by surprise.

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Speaker 2: But what it has prompted is in a rush just

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Speaker 2: before Chinese New Year, other companies to also get out

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Speaker 2: similar models, which they say they have also been done

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Speaker 2: very very cheaply. Deep six said its model cost just

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Speaker 2: five five and a half million dollars. Well, when you

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Speaker 2: look at open Ai, it's worth about three hundred and

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Speaker 2: fifty billion. It's sort of really the minnows sort of

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Speaker 2: fighting back. But what it sort of shows that's interesting

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Speaker 2: here is that in some ways, all these restrictions that

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Speaker 2: have been put by the US on tech companies to

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Speaker 2: try and stemmy their growth haven't really worked, and they've

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Speaker 2: sort of had unintended consequences, one of which is this

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Speaker 2: in that companies find new ways to become innovative, to

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Speaker 2: get around them, to carry on developing their products. And

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Speaker 2: Chinese people in general are very innovative when the government

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Speaker 2: doesn't interfere. I mean, look at companies like Ali, Barbara

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Speaker 2: and ten cents. They grew into global giants before the

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Speaker 2: government trampled on them. China has a very good university system,

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Speaker 2: lots of good engineers, mathematicians, scientists. It really is a

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Speaker 2: highly educated country, lots of entrepreneurs. It's a big, big country,

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Speaker 2: so lots of people who really can sort of get

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Speaker 2: involved in things like this. And it reminds me a

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Speaker 2: little bit of Japan in the nineteen eighties, when America

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Speaker 2: had the same problem with Japan that it has now,

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Speaker 2: in that Japanese companies were becoming bigger and overtaking American companies.

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Speaker 2: They put all sorts of restrictions on them selling their products,

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Speaker 2: but it didn't stop them. Firms like Toyota still became

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Speaker 2: the largest Manu motor manufacturer in the world. Where we

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Speaker 2: think the same thing happened here. Chinese companies are learning

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Speaker 2: how to get around these restrictions. They're making their own

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Speaker 2: development innovatively and you know, and building up their companies. Now,

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Speaker 2: of course there are issues about sort of intellectual property

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Speaker 2: theft and the likes, but nevertheless, some of this is

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Speaker 2: being done off their own back and off their own initiatives.

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Speaker 1: What about the Chinese National Intelligence law that apparently requires

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Speaker 1: any organization like the deep Seat for example, they have

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Speaker 1: to support and cooperate with the government should the government

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Speaker 1: request it. I mean, this is one of the things

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Speaker 1: that is in Australia, for example, they're saying the cybersecurity experits,

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Speaker 1: they're saying, don't download deep seak because there is this law.

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Speaker 1: There is this control is there, and do they use it?

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Speaker 2: Oh? Yeah, absolutely. I mean this is one of the

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Speaker 2: reasons why TikTok's claim that it would never hand over

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Speaker 2: data to the Chinese government really doesn't hold much water

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Speaker 2: because if the Chinese government, they say that they would

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Speaker 2: refuse to do so. Well, if the Chinese government ordered

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Speaker 2: TikTok or deep seak or any other company to hand

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Speaker 2: over data on its users, they would have to do so.

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Speaker 2: And they ask many people who have seen the consequences

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Speaker 2: of firms that don't oblige by these don't accept these

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Speaker 2: data security law and don't follow them. The consequences are

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Speaker 2: pretty dire. People go to jail, the companies can get

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Speaker 2: broken up. And even the biggest, biggest companies like Ali Baba,

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Speaker 2: like ten Cents, they have suffered from this as well.

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Speaker 2: So no, that law is very much inforced. It is

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Speaker 2: enforced on a daily basis. And it's simply a beggars

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Speaker 2: belief that a company could say we somehow wouldn't follow

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Speaker 2: the instructions of the Chinese government. The Chinese Communist Party

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Speaker 2: as it is at the moment, intrudes in every single

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Speaker 2: area of business and of life.

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Speaker 1: Yeah. Absolutely, and to be fear to deepstick, they do

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Speaker 1: put it in their t's and c's. So I guess

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Speaker 1: you can't say you didn't know. Yes, you've got some

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Speaker 1: data for well, you've got the more broadly some economic

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Speaker 1: data for US out of China this week, Yes.

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Speaker 2: We had some pmis coming out. Once again, the economic

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Speaker 2: data in general is not really matching up the growth

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Speaker 2: target the GDP days. So last year up is GDP

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Speaker 2: grew five percent. That net Beijing's growth target. A lot

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Speaker 2: of people are very skeptical about that because the anecdotal

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Speaker 2: evidence on the ground doesn't suggest at all that China

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Speaker 2: is really meeting that businesses are struggling, they're having to

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Speaker 2: lay off people, there's been a big slump in consumption.

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Speaker 2: Retail sales are not really growing, and we saw that

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Speaker 2: in the PMI data that came out earlier in the

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Speaker 2: week where the manufacturing PMI showed its first contraction since September. Well,

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Speaker 2: that's not in support of an economy that's growing at

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Speaker 2: five percent. So, you know, the anecdotal evidence shows that

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Speaker 2: China really has some problems, and in particular, it's got

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Speaker 2: to get people out spending. And one of the reasons

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Speaker 2: why they don't go out and spend is because the

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Speaker 2: lack of a social security net in China. If you

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Speaker 2: lose your job, there's no support. You may find that

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Speaker 2: even if you have health insurance, as people did during

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Speaker 2: COVID doesn't cover you. So people are now saving more

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Speaker 2: for the future, saving for their healthcare, saving for their kids'

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Speaker 2: education because the state isn't providing anywhere near enough support,

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Speaker 2: and that of course effects consumption.

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Speaker 1: Fascinating stuff. I can remember. I still live in Beijing, Peter,

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Speaker 1: and there were these economic investigators. I'd never heard of

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Speaker 1: them before, but they were like private investigators that would

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Speaker 1: go around because the obviously the party would say this

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Speaker 1: is the growth rate, and you would have big multinational

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Speaker 1: corporations who go, well, do we believe this? And they

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Speaker 1: would go around and they'd look at you know, steel plants,

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Speaker 1: they look at factories, they'd look at how much activity

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Speaker 1: was going on, how many trucks are coming in, how

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Speaker 1: many trucks are going how many cranes are in the sky,

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Speaker 1: how much building activity is going on, and try and

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Speaker 1: come up with a with an estimate for growth. So

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Speaker 1: I'm fascinating the country, isn't it.

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Speaker 2: Yeah? And I mean you know that's that's how a

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Speaker 2: command economy works. And the difference between a command's economy

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Speaker 2: like China and like Australia or the US. A growth

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Speaker 2: GDP is an output you put in all the parameters

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Speaker 2: and outcomes. The GDP in China, it's an input. They say,

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Speaker 2: we want GDP of five percent, how are we going

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Speaker 2: to go and get it? And it's down to the

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Speaker 2: local governments to make sure they achieve it. And that's

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Speaker 2: where these inspectors come in to make sure they are

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Speaker 2: achieving it.

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Speaker 1: Yeah, fascinating. Hey, thanks so much, Peter. Great to Heavy

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Speaker 1: on People, E's Asia Business correspondent. For more from Hither

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Speaker 1: Duplessy Alan Drive, listen live to news talks it'd be

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