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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the.

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Speaker 1: Bloomberg Daybreak Aisia podcast. I'm Doug Krisner. You can join

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Speaker 1: Brian Curtis and myself for the stories, making news and

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Speaker 1: moving markets in the Apec region. You can subscribe to

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Speaker 1: the show anywhere you get your podcast and always on

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Speaker 1: Bloomberg Radio, the Bloomberg Terminal, and the Bloomberg Business app.

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Speaker 3: And joining us now for some discussion on this is

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Speaker 3: Alex Barinka, Bloomberg Tech Reporter. We should add there are

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Speaker 3: a number of interesting angles here, not least of which

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Speaker 3: is the conduct versus content arguments of the algorithm, and

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Speaker 3: that was something that we just heard there from Mark Ginsburg,

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Speaker 3: but also the political angle, the legal angle, and then

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Speaker 3: it brings us to what happens in the Senate. So

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Speaker 3: we know that the House passed it easily, even though

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Speaker 3: Donald Trump expressed reservations. Will that be a big issue

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Speaker 3: in this and what are we expecting them?

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Speaker 4: It?

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Speaker 2: Certainly might. You know, the Senate's been a place where

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Speaker 2: some House bills have certainly gone to die, and still

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Speaker 2: so far, Senate Majority Leader Chuck Schumer has not yet

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Speaker 2: endorsed this bill, even though there are concerns from folks

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Speaker 2: on both sides of the aisle, not only about the

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Speaker 2: content on TikTok, but as well as kind of the

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Speaker 2: fear of Chinese influence. So I will say this is

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Speaker 2: the furthest A bill that would limit TikTok has gone.

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Speaker 2: This bill is different because it doesn't just call for

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Speaker 2: an outright ban. It actually calls for a divestitor, although

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Speaker 2: the company says that's in essence a ban.

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Speaker 5: So while we've.

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Speaker 2: Seen kind of TikTok be stuck in these machinations as

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Speaker 2: you kind of ran through them, the America China relationship,

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Speaker 2: the fear of kids on social media, the data collection

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Speaker 2: question that's been out there for almost years now since

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Speaker 2: Trump was president, this is the one that seems to

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Speaker 2: at least have the most momentum. And look, it moved

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Speaker 2: incredibly quickly from introduction to passing this morning in the

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Speaker 2: US in the House of Representatives.

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Speaker 1: I'm curious about the lobbying efforts. I was reading a

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Speaker 1: story on Bloomberg Alex jeff Yos, who is the mastermind

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Speaker 1: behind Susquehanna International. He owns a stake in the parent

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Speaker 1: company Byte Dance. I think it's worth around fifteen billion,

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Speaker 1: and from what I understand, mister jos has used a

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Speaker 1: lot of his wealth nearly forty one billion dollar fortune

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Speaker 1: to become the largest donor in the current election cycle.

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Speaker 1: I were going to see a lot of money thrown

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Speaker 1: at members of the Senate to try to block this

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Speaker 1: bill from becoming law.

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Speaker 2: We certainly might, and we already have byte Dance, the

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Speaker 2: parent company of TikTok, which is the company under which

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Speaker 2: they register their lobbyists, spent a record eight point seven

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Speaker 2: million dollars on federal lobbying last year alone. They have

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Speaker 2: about four dozen laws who work for them trying to

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Speaker 2: kind of sway opinion in DC. But it seems like

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Speaker 2: some of those folks might have been surprised by this.

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Speaker 2: Yaus in particular is a very big name, the one

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Speaker 2: that often operates behind the scenes with that Susquehanna Steak.

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Speaker 2: He has reportedly been meeting with Trump, who if you've

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Speaker 2: been following the headlines on all this this this week.

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Speaker 2: President Trump, when he was in office, was the first

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Speaker 2: to write the executive order to potentially ban TikTok, but

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Speaker 2: in the last few days he said, wait, TikTok should

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Speaker 2: actually stay because banning it would give Meta and Mark

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Speaker 2: Zuckerberg too much power. So that kind of lobbying machine

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Speaker 2: has been working behind the scenes, but it's clear maybe

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Speaker 2: that something in that that that big kind of horde

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Speaker 2: of dollars that's gone towards lobbying is not quite hitting

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Speaker 2: with the voices in d C. Just given how kind

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Speaker 2: of quickly this has gone.

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Speaker 3: Through the House, and even if it does pass, we

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Speaker 3: understand that there will be legal challenges that might last

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Speaker 3: for years. I'm curious, what are you hearing about what

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Speaker 3: would happen in the meantime.

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Speaker 2: Absolutely, we broke the news earlier this week that TikTok

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Speaker 2: sees a divestitor as the last resort, that they will

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Speaker 2: exhaust every single legal challenge possible. That was confirmed by

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Speaker 2: a statement from TikTok CEO in the last hour that

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Speaker 2: they posted on social media saying that we will continue

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Speaker 2: to do everything we can, including exercise our legal rights.

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Speaker 2: So we could see kind of a pretty long drawn

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Speaker 2: out battle that they might take here. We saw a

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Speaker 2: little bit of flavor of that in Montana. The governor

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Speaker 2: of Montana signed a bill into law in that state

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Speaker 2: to ban TikTok. There was a suit there that ended

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Speaker 2: that bill ended up being kind of abandoned after creators

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Speaker 2: on TikTok actually brought a suit.

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Speaker 5: So that might just be one flavor.

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Speaker 2: Of what we see here. We already see TikTok talking

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Speaker 2: a lot about constitutional rights. We've seen them bring up

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Speaker 2: the First Amendment argument, and I'm sure as this kind

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Speaker 2: of continues, if this does get signed into law, there

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Speaker 2: will be several additional legal venues that I in this

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Speaker 2: moment am not even imagining that they take because they

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Speaker 2: see this as such an urgent fight that they do

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Speaker 2: not want to lose or end up in a devastitor situation.

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Speaker 1: You know, you mentioned the Trump executive order, the attempt

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Speaker 1: at that during his administration. I remember the story around

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Speaker 1: Oracle and Larry Ellison trying to maybe weigh in if

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Speaker 1: there was some type of forced sale. But from what

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Speaker 1: I understand, Oracle did become a beneficiary in that, I

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Speaker 1: think it won a contract to host the video library.

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Speaker 1: Is that not right that Oracle is using its kind

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Speaker 1: of data service to host a lot of the content

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Speaker 1: that TikTok produces.

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Speaker 2: They are Oracle's been kind of the kind of American

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Speaker 2: partner that TikTok's lift up Oracle's been working with TikTok

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Speaker 2: on something that TikTok calls Project Texas, which is their

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Speaker 2: solution that they've spent more than a billion dollars on

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Speaker 2: to kind of allay those national security concerns. They are

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Speaker 2: hosting US users data on TikTok data centers on excuse men,

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Speaker 2: Oracle data centers. They are allowing Oracle to kind of

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Speaker 2: audit source code and look at algorithms and content moderation policies.

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Speaker 2: They're basically saying, look, we have this American homegrown partner

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Speaker 2: here who is kind of standing in to protect the data,

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Speaker 2: and Oracle is in this business relationship with them. I

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Speaker 2: will note, though, there has been something interesting as all.

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Speaker 2: As this has played out very publicly in Washington, d C,

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Speaker 2: Oracle's voice has been very silent. We have not heard

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Speaker 2: from them. So for the moment, they seem to be

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Speaker 2: a business partner.

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Speaker 6: Only.

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Speaker 3: Yeah, it's not big enough anymore. I mean, TikTok has

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Speaker 3: just gotten so big. Who could afford to buy it?

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Speaker 3: I mean, you are talking about a monster now that

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Speaker 3: Oracle I seriously doubt would be big enough. It would

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Speaker 3: have to be one of the you know, the biggest

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Speaker 3: companies in America that could afford to buy a company

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Speaker 3: like TikTok now that has how many one hundred and

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Speaker 3: fifty million viewers?

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Speaker 2: It's getting kind of one hundred and seventy million every month,

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Speaker 2: and that is certainly kind of what the shortlist would

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Speaker 2: be if if this would to be end up in

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Speaker 2: a sale to another company. But you'll remember the Biden

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Speaker 2: administration has a FTC and anti trust regulator who's been very,

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Speaker 2: very tough on big tech. So when you start going

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Speaker 2: down the list of names, it gets a little tough

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Speaker 2: when you think of meta or alphabet like who would

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Speaker 2: this end with that would keep regulators happy?

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Speaker 1: And the other thing to apply a little bit of

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Speaker 1: context that we're in an election year and it's not

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Speaker 1: a done deal yet, and if there is a second

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Speaker 1: Trump administration what happens then.

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Speaker 2: It's an interesting question, particularly now that Trump has kind

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Speaker 2: of flip flopped. Even though Republicans have been a lot

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Speaker 2: of the agitators against TikTok all of these days, I

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Speaker 2: will say the interesting part might actually happen in the

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Speaker 2: lead up to the election as well. Young used TikTok users,

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Speaker 2: a majority of them are actually against a ban. According

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Speaker 2: to a survey late last year from Pew Research. So

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Speaker 2: voters might not be super in favor of this if

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Speaker 2: they are one of those one hundred and seventy million

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Speaker 2: users of TikTok, and when you look at younger users,

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Speaker 2: they are the cohort that is most against a TikTok ban.

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Speaker 2: So as these senators are sizing up and looking at

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Speaker 2: whether or not they vote for this bill, that must

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Speaker 2: be something that they consider in terms of November election season.

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Speaker 3: Yeah, there's really a lot of just a lot of

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Speaker 3: acrimony attached to this President Biden on TikTok or at

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Speaker 3: least the reelection campaign, and yet he would.

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Speaker 6: Sign the bill.

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Speaker 3: It's fair to mention for our listeners, this really isn't

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Speaker 3: a ban. It's a forced divestiture. And no American internet

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Speaker 3: companies can operate in China.

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Speaker 6: So there's that. Thanks to Alex Barinka. This is Bloomberg.

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Speaker 1: Joe Doe, who covers metals and mining. He joins us

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Speaker 1: from here in New York City. Joe, it's always a pleasure.

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Speaker 1: Let's not forget the fact that it's an election year.

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Speaker 1: Mister Biden in the past has been very much on

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Speaker 1: the side of labor the United steel Workers, as we know,

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Speaker 1: are very much involved in this trying to win better

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Speaker 1: terms from Nippon. Where are we in this process right now?

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Speaker 4: Yeah, it is another step in what seems to be

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Speaker 4: already a very long process, right And the steel workers.

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Speaker 7: Just had their first meeting with Nippon.

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Speaker 4: Steel, which is supposed to be the beginning of talks

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Speaker 4: or discussions or maybe eventually outright negotiations as to Nippon

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Speaker 4: Steel taking over the LA labor agreement of the steel workers.

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Speaker 4: The steel workers themselves can't block this deal, but they

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Speaker 4: do hold a lot of political sway. And the political sway,

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Speaker 4: of course is, as you said, Joe Biden's support of unions,

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Speaker 4: in particular the steel workers. And we get this comment today,

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Speaker 4: or we get this reporting today that the President is

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Speaker 4: preparing to make a statement that would show that he

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Speaker 4: has some concerns about the deal to the Prime Minister

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Speaker 4: of Japan.

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Speaker 3: I'm curious whether investors really want this deal to go

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Speaker 3: through at the moment, given all the scrutiny and a

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Speaker 3: lot of the anngs that the centers around it.

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Speaker 6: And it's a little surprising.

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Speaker 3: I guess that there is this much in the US

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Speaker 3: so We've had Japanese companies buying American companies in the past,

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Speaker 3: but is the reason that US deal is US steal

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Speaker 3: and then it has this long sort of heartland history.

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Speaker 7: Yeah, exactly.

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Speaker 4: It is a company that everybody knows, even though it

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Speaker 4: hasn't been the dominant name that it once was, you know,

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Speaker 4: I mean, the last time the United States Steel was

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Speaker 4: the largest steelmaker in the United States was you know,

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Speaker 4: around the year two thousand and the last time it was.

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Speaker 7: One of the most important companies in the world.

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Speaker 4: Was back when you know, people's parents were either young

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Speaker 4: people or just starting out in college, depending on their age. Like,

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Speaker 4: this is a name that everybody knows, but probably people

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Speaker 4: haven't followed in a very long time. And that's why

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Speaker 4: we're here, right. It still stands for something in the

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Speaker 4: eyes of readers. I don't know if in the eyes

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Speaker 4: of investors it stands for more than a takeover target, right,

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Speaker 4: And that's really how we have this kind of weird

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Speaker 4: dichotomy of iconic name. But it's also being bought for

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Speaker 4: a reason. It went through a lot of trouble in

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Speaker 4: the twenty tens. At one point, many analysts thought this

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Speaker 4: company might go bankrupt they made some good moves. It

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Speaker 4: made them attractive and that's where they are today. And

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Speaker 4: it just so happens that a Japanese buyer wants to

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Speaker 4: get in on the deal and made an incredible offer, right,

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Speaker 4: I mean, they offered fifty five dollars a share for

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Speaker 4: einteen point one billion dollars. And all of that leads

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Speaker 4: to one wild politics story because it's twenty twenty four.

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Speaker 1: So we've talked about the union and the impending election,

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Speaker 1: but there's also a Scifius review here and the grounds

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Speaker 1: of national security. Is there a case to be made

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Speaker 1: that this deal needs to be blocked under kind of

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Speaker 1: national security concerns?

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Speaker 4: Well, ultimately it will be up to the various agencies

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Speaker 4: within the executive branch to make a decision if they

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Speaker 4: think that's the case. Some of the reporting that my

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Speaker 4: colleague Josh Wingrove and I had back not too long

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Speaker 4: ago was that the administration had some concerns about connections

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Speaker 4: that Nippon Steel has with China. In particular, they have

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Speaker 4: nine facilities inside China that produced three point six billion

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Speaker 4: tons billion excuse me, three point six million tons of

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Speaker 4: value added steel products. It's actually not that much it's

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Speaker 4: just a fraction of their total production, and on the

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Speaker 4: scale of US production.

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Speaker 7: That's nothing.

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Speaker 4: But the fact that they still seem to be looking

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Speaker 4: at that does raise questions, I think, to various people

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Speaker 4: who have been watching this as to whether or not

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Speaker 4: the SIFIUS will determine that there is a national security problem.

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Speaker 7: It's impossible to sell at this point.

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Speaker 4: They still have to go through the entire investigation process, Treasury,

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Speaker 4: Defense Department, and Commerce Department.

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Speaker 7: They all need to weigh in on this thing, and

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Speaker 7: ultimately it could be.

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Speaker 4: This is some reporting that I had a couple of

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Speaker 4: weekends ago that it might not necessarily be a national

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Speaker 4: security issue from a defense standpoint, but this rising economic

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Speaker 4: national security issue that we all became aware of during

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Speaker 4: the Trump administration, right, and that is, if the administration

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Speaker 4: feels like the loss of some steel mills from US

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Speaker 4: Steel and the loss of steel jobs with those US

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Speaker 4: steel plans poses some sort of economic security issue, then

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Speaker 4: you know, they might raise that as a reason that

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Speaker 4: the steal not necessarily.

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Speaker 7: It's blocked, but that there have to be some changes.

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Speaker 4: It's unclear what that might be, but we did have

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Speaker 4: one expert say, you know, it could be that Sophia

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Speaker 4: says to nip On, Hey, you know you have to

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Speaker 4: make some promises to keep these new open or to

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Speaker 4: keep these jobs because it is a national security concern.

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Speaker 4: But again that's so far in the future, it's unclear

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Speaker 4: if those are even the things that are being discussed.

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Speaker 1: Joe, thanks very much. It's always a pleasure. Jodo, Bloomberg

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Speaker 1: Metals and Mining reporter.

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Speaker 3: All right, joining us now in our studios here in

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Speaker 3: Hong Kong to talk about Chinese tech and policy going forward,

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Speaker 3: the NPC meetings and a whole lot more is Sarah

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Speaker 3: jen who is Bloomberg's China technology reporter. I just was

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Speaker 3: very interested, Sarah, in reading through your notes when you

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Speaker 3: came back, about how lots of delegates would trot out

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Speaker 3: the phrase new productive forces, but then when you would

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Speaker 3: try to get details on how this would actually allow

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Speaker 3: China to compete with the United States on AI, they

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Speaker 3: would say something like I haven't gotten into.

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Speaker 6: That yet and then scurry off to something else.

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Speaker 3: How frustrating was it for you in terms of getting

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Speaker 3: real information from the delegates.

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Speaker 5: Yes, exactly.

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Speaker 8: So this phrase that you mentioned, new productive forces, that's

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Speaker 8: really the latest buzzword that we've been hearing from Chozing

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Speaker 8: Pain and from the central government, and so that's obviously

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Speaker 8: what us as reporters wanted to know more about, right

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Speaker 8: so a lot of us were trying to ask some

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Speaker 8: of the NPC, which is the National People's Congress, the

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Speaker 8: National Legislature delegates and also delegates to this centralized advisory

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Speaker 8: body to the government at the Great Hall of the

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Speaker 8: People in.

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Speaker 5: Beijing about this phrase.

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Speaker 8: It's the first time that they were holding these annual

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Speaker 8: party meetings after COVID, so we were hoping to get

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Speaker 8: more access. We were able to be there in person

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Speaker 8: this time compared to last year in the year before,

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Speaker 8: but unfortunately people were not that willing to talk to us.

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Speaker 8: They would say, oh, you know, this phrase is really important,

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Speaker 8: we need to focus on it. But when you ask

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Speaker 8: them what it actually means in tangible terms, that's something

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Speaker 8: that was a lot.

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Speaker 5: Harder for people to spell out, or less willing for them.

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Speaker 3: To spell out.

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Speaker 1: When I think of the business world in China, there

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Speaker 1: are kind of two strands. There's the private sector and

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Speaker 1: then there's kind of the state and state owned enterprises.

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Speaker 1: And when you hear that term new productive forces, does

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Speaker 1: it apply equally to kind of both camps, or does

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Speaker 1: it you more toward kind of the state sponsored enterprise.

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Speaker 8: I think, based on some of the conversations we were

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Speaker 8: able to have when we cornered some of these delegates,

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Speaker 8: the way that people describe it is a combination of

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Speaker 8: sort of cutting edge tech innovation on AI and chips,

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Speaker 8: and then on building talent a big base of tech talent,

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Speaker 8: and then education.

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Speaker 5: So these three sort of.

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Speaker 8: Main areas, and obviously you know state owned enterprises, the

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Speaker 8: sort of state backed tech sectors, those are the most

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Speaker 8: important parts We've seen over the last few years. Beijing

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Speaker 8: really cracking down on the internet industry, but they're still

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Speaker 8: very supportive.

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Speaker 5: Of the tech sector.

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Speaker 8: And by tech they mean AI, chips, like these hard

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Speaker 8: tech things that you mentioned, science and tech research that

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Speaker 8: can help, you know, elevate their overall tech level and

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Speaker 8: bring them closer to where the US is.

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Speaker 3: Well, And there's a little bit of muscle coming because

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Speaker 3: they talked about a ten percent increase in the budget

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Speaker 3: for science and technology. It's not a small number fifty

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Speaker 3: one point six billion dollars that could make a difference.

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Speaker 3: And I'm curious what you heard from some of the

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Speaker 3: delegates that you spoke to about how that money might

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Speaker 3: be deployed exactly.

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Speaker 5: That's right.

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Speaker 8: There is this ten percent increase, and actually when you

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Speaker 8: see the level of spending on science and tech research

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Speaker 8: over the last few years is at the highest level

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Speaker 8: in the last five or six years, especially because of

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Speaker 8: a small dip during COVID.

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Speaker 5: We don't know exactly how.

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Speaker 8: It will be deployed yet, but they say that the

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Speaker 8: focus will be on basic research, and so that just

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Speaker 8: plays into this whole idea that the central government is

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Speaker 8: really focused on promoting national championship, national champions state owned enterprises,

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Speaker 8: and the fundamental underlying research like in things like quantum

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Speaker 8: computing and chips that can help to lead to homegrown

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Speaker 8: scientific breakthroughs and give them this tech self reliance.

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Speaker 5: That they're going for.

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Speaker 1: Yeah, I think the elephant in the room the US

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Speaker 1: export controls on the most advanced semiconductor making equipment, right,

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Speaker 1: I mean, is put pressure on Dutch companies, on Japanese

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Speaker 1: firms as well to try to prevent China from accessing

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Speaker 1: the most sophisticated types of equipment. I hear what you're

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Speaker 1: saying in terms of R and D, but I think

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Speaker 1: a reasonable market watcher, someone who has a kind of

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Speaker 1: a relatively modest sense of expertise in the chip industry

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Speaker 1: knows that it's this is a year's long slog that

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Speaker 1: it's going to take to China to try to catch

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Speaker 1: up in the absence of access to those technologies.

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Speaker 8: Yeah, I think you're totally right. I think that's the

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Speaker 8: issue right now. Everyone knows that you need a huge

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Speaker 8: amount of capital in order to create some of these

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Speaker 8: tech innovations that they need to catch up on the

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Speaker 8: chip side, especially when the US is mulling further chip sanctions.

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Speaker 8: And so that's why we saw things like this so

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Speaker 8: called big fund. It's the state backed fund where they're

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Speaker 8: trying to raise money from state on enterprises and local

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Speaker 8: governments to just pour that into chip making in particular

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Speaker 8: because they know how difficult and how capital intensive this

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Speaker 8: venture will be.

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Speaker 3: So in some ways you wonder you know how to

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Speaker 3: achieve that goal because some of it is the economic muscle,

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Speaker 3: the money poured into R and D. Some of it

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Speaker 3: is just the innovation, the ingenuity, and you need a

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Speaker 3: bit of freedom for that. So that's something that perhaps

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Speaker 3: China could use some progress on. But then if you

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Speaker 3: look at many companies like bay Do they have achieved

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Speaker 3: some great successes.

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Speaker 6: Even in AI.

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Speaker 3: And if you look at a company like ten Cent

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Speaker 3: and ali Baba, in many ways they went past American

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Speaker 3: companies in their development on the Internet in the past,

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Speaker 3: so it's not completely out of the question.

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Speaker 5: Yeah, that's absolutely true.

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Speaker 8: I think what tech experts and people in the industry

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Speaker 8: will say is that China is often better at the

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Speaker 8: US in terms of things like application Like the things

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Speaker 8: that you mentioned on the internet sector. We've seen Tencent

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Speaker 8: with we chat and Ali Baba with alipay. All of

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Speaker 8: these sort of tech in application level things are things

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Speaker 8: that China is very good at. When it comes to

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Speaker 8: actually innovating at a fundamental level, though, that's a different story.

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Speaker 6: You need freedom for that, don't you.

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Speaker 8: That's true, and that's why in generative AI net right now,

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Speaker 8: we're talking a little bit about how some of the

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Speaker 8: restrictions on the content side and you know government regular

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Speaker 8: you know oversight over some of these companies is sort.

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Speaker 5: Of inhibiting the free wheeling.

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Speaker 8: Innovation you might need or that we're seeing in the

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Speaker 8: US and Silicon Valley to sort of just go all

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Speaker 8: in on generative AI because with some of these guardrails

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Speaker 8: in place, it's harder to get to the training level

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Speaker 8: that you need to create.

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Speaker 5: You know, a real rival to Open AI in China.

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Speaker 1: Big story today in the US is this house build

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Speaker 1: that passed to ban TikTok in the US unless the

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Speaker 1: owners in China that being bitedance cells. We know that

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Speaker 1: the leadership in China has been opposed to that notion.

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Speaker 1: I'm wondering, though, can you imagine a world where TikTok

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Speaker 1: becomes a bargaining chip to try to get access to

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Speaker 1: the things that it would like to have from the

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Speaker 1: US in exchange for an agreement to kind of offload

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Speaker 1: this asset and allow an American company to own it entirely.

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Speaker 8: I do think stranger things have happened, but this would

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Speaker 8: be you know, who would bring things to a completely

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Speaker 8: unprecedented level to have a you know what's in name

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Speaker 8: a private company used as a bargaining chip in this way.

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Speaker 8: I mean, we saw this sort of happen with Huawei,

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Speaker 8: but to use TikTok and data that the Chinese government

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Speaker 8: has said is sensitive and they do not want to

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Speaker 8: be exported to have that kind of algorithm. Technology uses

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Speaker 8: a bargaining chip to get chips from the US.

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Speaker 5: I feel like that would be at the moment, it

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Speaker 5: still seems quite unlikely.

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Speaker 3: Can you give me twenty five seconds on China looking

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Speaker 3: at an AI assistant for neurosurgeons for neurosurgeons. Yes, that's

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Speaker 3: something we don't have enough time. Actually, I think what

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Speaker 3: we'll do is save that for for the next time.

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Speaker 3: Just looking at that story. That one of the things

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Speaker 3: that you need to know today in a piece that

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Speaker 3: appeared on the Bloomberg Terminal. We'll get to that in

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Speaker 3: another session with Sarah. Sarah Jang here with us from

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Speaker 3: Bloomberg China Technology.

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Speaker 1: This has been the Bloomberg Daybreak Asia podcast, bringing you

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Speaker 1: the stories making news and moving markets in the Asia Pacific.

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Speaker 1: and always on Bloomberg Radio, the Bloomberg Terminal, and the

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