WEBVTT - Xi Has Embraced China’s Tech Titans Once Again. Will It Last?

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>On the eve of every Lunar New Year, hundreds of

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<v Speaker 2>millions of Chinese all tune in to watch one live show,

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<v Speaker 2>the Spring Festival Gallup. The Gala is an extravaganza. It

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<v Speaker 2>often features the biggest celebrities in China and internationally. Stars

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<v Speaker 2>like Jackie Chan and Celine Dion have taken the stage

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<v Speaker 2>in previous years, but this year one performance stood out

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<v Speaker 2>for a very different reason.

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<v Speaker 3>All of a sudden, you have these sort of six

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<v Speaker 3>feet tall, black dancey robots dressed in bright red traditional

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<v Speaker 3>Chinese vest, spinning handkerchiefs with both armed.

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<v Speaker 2>Lucille lu is a Bloomberg reporter covering China's economy and

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<v Speaker 2>politics based in Beijing.

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<v Speaker 3>The way they moved, of course, just felt bizarre or

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<v Speaker 3>it was just weird, but it was definitely a very

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<v Speaker 3>memorable performance.

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<v Speaker 2>The humanoid robots are made by a Chinese startup called

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<v Speaker 2>Unitary Robotics, and the performance was directed by one of

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<v Speaker 2>the best in China, jug Yimo, who is behind the

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<v Speaker 2>opening and closing ceremonies of the two thousand and eight

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<v Speaker 2>Beijing Olympics. And Lucille says this performance seemed to be

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<v Speaker 2>more than just a festive celebration.

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<v Speaker 3>The New Year's Gala is supposed to reflect social trends,

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<v Speaker 3>but it's also a way to show some guesses at

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<v Speaker 3>the government agenda or priorities, and this performance I think

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<v Speaker 3>was the first time, of course, for the Year of

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<v Speaker 3>the Snake, that showed that the Chinese government is perhaps

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<v Speaker 3>warming to its tech giants.

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<v Speaker 2>It seems significant because China's tech giants have been sidelined

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<v Speaker 2>since twenty twenty when China's President Shijinping cracked down on

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<v Speaker 2>the tech industry, and putting the robots center stage felt

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<v Speaker 2>like the beginning of a reconciliation of sorts. And then

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<v Speaker 2>last week she did something that made a lot of

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<v Speaker 2>China watchers think that the tech comeback is.

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<v Speaker 1>Real, thinking she'd see Hotel.

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<v Speaker 3>President c basically sat down with many of the biggest

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<v Speaker 3>names in Chinese business over the past decade. So there

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<v Speaker 3>was Jack Ma from Ali Baba, Huawei founder Jin Jim

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<v Speaker 3>Fei byd but also newcomers to the scene like the

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<v Speaker 3>founder of Unitree Robotics that made those robots in the

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<v Speaker 3>Spring Gala, and also Deep Seek and I think in

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<v Speaker 3>many ways you know it looked like he was assembling

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<v Speaker 3>the Avengers team on stage.

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<v Speaker 2>Welcome to the Big Take Asia from Bloomberg News. I'm wanh.

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<v Speaker 2>Every week we take you inside some of the world's

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<v Speaker 2>biggest and most powerful economies and the markets, tycoons and

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<v Speaker 2>businesses that drive this ever shifting region. Today on the

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<v Speaker 2>show China's Big Tech Coming Back in from the Cold?

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<v Speaker 2>What does it mean for China's tech industry and its

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<v Speaker 2>rivals in the US. To understand how big a deal

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<v Speaker 2>it is to see China's president cozying up with tech

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<v Speaker 2>company CEOs, we have to go back to November twenty twenty.

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<v Speaker 2>That's when Beijing pulled the plug on the initial public

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<v Speaker 2>offering of ant Group, just two days before what would

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<v Speaker 2>have been the biggest IPO of all time.

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<v Speaker 3>I just remember those days in the newsroom because there

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<v Speaker 3>was so much disbelief over this eleventh hour hauld of

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<v Speaker 3>the world's biggest IPO. Jack Maa's ANT Group was set

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<v Speaker 3>to raise thirty five billion dollars in Shanghai in Hong

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<v Speaker 3>Kong and really cement his status as the richest man

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<v Speaker 3>in China. Before this IPO, Jack Maa gives a speech

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<v Speaker 3>accusing regulators of focusing too much on risk and stifling innovation.

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<v Speaker 3>And shortly after we know he's called Beijing, and before

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<v Speaker 3>you know it, this IPO is suspended and authorities are

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<v Speaker 3>saying that they have belatedly discovered all these shortcomings that

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<v Speaker 3>basically required and overhauled the company.

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<v Speaker 2>I mean that was shocking to both the world but

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<v Speaker 2>also to all of these Chinese internet companies too, right.

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<v Speaker 3>Yeah, absolutely, I mean looking back, that really marked the

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<v Speaker 3>start of the series of crackdowns on the tech sector,

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<v Speaker 3>primarily in the name of reigning and monopolies. And when

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<v Speaker 3>it was all over, it had wiped something over a

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<v Speaker 3>trillion dollars from the market value of some of China's

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<v Speaker 3>biggest tech firms. You know, we saw these very large

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<v Speaker 3>finds being handed to the likes of and ten Cent

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<v Speaker 3>DD and meanwhile state media is writing these editorials slamming

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<v Speaker 3>these internet companies for their preoccupation with growing traffic, you know,

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<v Speaker 3>at the expense of real scientific innovation. So it was

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<v Speaker 3>a tough time to be a tech company, especially in

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<v Speaker 3>the internet sector.

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<v Speaker 2>Lucille, what was behind the tech crackdown in the first place.

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<v Speaker 3>Yeah, there was certainly a sense that these companies had

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<v Speaker 3>grown too powerful, too influential. They had amassed millions of users,

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<v Speaker 3>and they gained influence over you know, every aspect of

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<v Speaker 3>daily life in China. So the outside powers of these

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<v Speaker 3>tech mocuals was being increasingly perceived as this threat to

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<v Speaker 3>political and also financial stability, so as being perceived by

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<v Speaker 3>investors as a message from the top that money needed

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<v Speaker 3>to align with China's national strategies, rather than the tech

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<v Speaker 3>companies doing what was most financially beneficial to them.

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<v Speaker 2>Lucille says Beijing's crackdown on the excesses of the tech

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<v Speaker 2>sector and private business also brought about a cultural shift

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<v Speaker 2>in China. It was no longer glorious to be rich,

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<v Speaker 2>and with that sentiment running high, business moguls like jackmw

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<v Speaker 2>retreated from the public. GUYE.

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<v Speaker 3>Jack Law was such an outspoken entrepreneur and suddenly basically

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<v Speaker 3>he'd gone quiet, And the next thing we heard from him,

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<v Speaker 3>he was at a golf course, you know, basically taking

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<v Speaker 3>a backseat to operating the company. So it was a

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<v Speaker 3>very sudden change for a lot of these tech companies

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<v Speaker 3>and these tech moguls.

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<v Speaker 2>And during the years following the crackdown in twenty twenty,

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<v Speaker 2>Chinese tech companies found themselves struggling with a challenging regulatory environs,

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<v Speaker 2>not just at home but also abroad.

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<v Speaker 3>They were also facing these blacklist sanctions from the US

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<v Speaker 3>because there was the trade war, and then the Biden

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<v Speaker 3>administration continued a lot of those policies. A lot of

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<v Speaker 3>these companies didn't come out unscathed. We saw DD and

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<v Speaker 3>really at a fraction of their valuation at their height.

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<v Speaker 3>So it was very difficult for these companies, but they

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<v Speaker 3>found a way to grow and survive, and so some

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<v Speaker 3>of them managed even in this restrictive environment to develop

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<v Speaker 3>new technology and make new breakthroughs.

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<v Speaker 2>Are there any companies that did well during this period

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<v Speaker 2>that stand out for you?

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<v Speaker 3>There were the old national champions, for example, like Huawei.

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<v Speaker 3>Huawei was blacklisted by the US on security concerns, but

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<v Speaker 3>it did double down to R and D BYD is

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<v Speaker 3>definitely an example of a company that's made waves overseas.

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<v Speaker 3>It's going head to head with Tesla in terms of

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<v Speaker 3>revenues and sales with its much more affordable evs.

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<v Speaker 2>Then there's the AI company deep Seek. It gave the

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<v Speaker 2>world a real surprise when it showed the event. Is

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<v Speaker 2>Chinese tech companies can achieve even with US curbs on

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<v Speaker 2>critical chips.

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<v Speaker 3>Deep Seak was an example of what can come out

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<v Speaker 3>of these restrictions. It was because of that limited number

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<v Speaker 3>of chips that they had access to that forced the

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<v Speaker 3>team to find ways to get more used from the

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<v Speaker 3>chips they had, and that was a defining factor and

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<v Speaker 3>how they were able to drive down costs.

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<v Speaker 2>And then fast forward to last week when President she

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<v Speaker 2>held a meeting with all of the big names in tech.

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<v Speaker 3>We just talked about and more we shall Kwami show faith.

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<v Speaker 3>This was a tightly choreographed pro business rally. You had

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<v Speaker 3>ten set sell me Wil, Semi Conductor, Huawei, just the

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<v Speaker 3>biggest names in China tech. But very importantly Jackmaw was there.

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<v Speaker 3>So when we asked investors what would it take to

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<v Speaker 3>regain confidence in the Chinese market, people would literally say

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<v Speaker 3>President c would need to sit down with Jackmaw. And

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<v Speaker 3>now it was really happening.

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<v Speaker 2>It's interesting why is Jack ma so pivotal for tech

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<v Speaker 2>and why did people really want to see that kind

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<v Speaker 2>of meeting between she and Maw.

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<v Speaker 3>Yeah, I think because he was such a poster child

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<v Speaker 3>at the tech crackdown. There's certainly a lot of symbolism

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<v Speaker 3>in se willing to meet with Jack Ma again and

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<v Speaker 3>bring him out from the cold, put back in the

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<v Speaker 3>good graces. And I think that sent a strong message

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<v Speaker 3>in the Chinese bureaucracy to lower levels that perhaps there

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<v Speaker 3>is a slightly different attitude now coming out of Beijing

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<v Speaker 3>towards its private sector.

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<v Speaker 2>She's sentiment shift towards China's big tech Is it for

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<v Speaker 2>real or is it just for show? That's after the break.

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<v Speaker 2>President Shi Jinping's high profile meeting with China's top entrepreneurs

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<v Speaker 2>last week wasn't the first ever. In twenty eighteen, at

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<v Speaker 2>the beginning of Donald Trump's first trade war, she chaired

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<v Speaker 2>a similar conference with leaders in the private sector, and

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<v Speaker 2>at that meeting, he expressed unwavering support for the growth

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<v Speaker 2>of private businesses. But the meeting was largely seen as symbolic.

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<v Speaker 2>We asked Katherine Thorbeck, a Bloomberg opinion columnist covering Asia tech,

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<v Speaker 2>to join our conversation with Lucille Liu. Catherine, this looks

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<v Speaker 2>like a real U turn by presidence. She he really

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<v Speaker 2>seems to have it in for Chinese tech companies now

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<v Speaker 2>they're all friendly. What's different this time around?

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<v Speaker 1>I think a lot has changed for the Chinese tech sectors,

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<v Speaker 1>and most of it hasn't been good. The US has

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<v Speaker 1>really put in sort of new efforts to hold back

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<v Speaker 1>Chinese tech sector this time, whether that's export controls, hip restrictions.

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<v Speaker 1>So chinae tech sectors coming out of those headwinds.

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<v Speaker 2>Lucille, you're on the ground there. What changes have you seen?

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<v Speaker 3>Yeah, I mean a lot has happened in the intervening years.

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<v Speaker 3>You know, there was the COVID lockdown of property crisis

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<v Speaker 3>that's still ongoing. You know, demographic challenge unges, and you

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<v Speaker 3>know a sluggish economy where consumer sentiment is still weak.

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<v Speaker 3>So Presidency knows he needs to boost confidence and send

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<v Speaker 3>the signal for the bureaucracy that China needs to support

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<v Speaker 3>its private firms and especially in the tech sector. And

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<v Speaker 3>by Bloomberg Economic calculations, the high tech industry contributed to

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<v Speaker 3>fifteen percent of GDP last year and it's set to

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<v Speaker 3>overtake the housing sector in twenty twenty six.

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<v Speaker 2>So very very important to China's success and certainly economic

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<v Speaker 2>well being, especially as it tries to write the economy.

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<v Speaker 3>Yeah, that's absolutely right.

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<v Speaker 2>So the Chinese government has been scrutinizing the tech sector

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<v Speaker 2>in the last couple of years, particularly the tech giants

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<v Speaker 2>that perhaps are seen is too powerful by the party,

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<v Speaker 2>But now here it is extending an olive branch. Lucille,

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<v Speaker 2>do you sense that the tech companies are really buying

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<v Speaker 2>it this time or are they skeptical? Yeah?

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<v Speaker 3>I think that that moment the meeting, it seems to

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<v Speaker 3>really capture this moment where it's private or tech interests

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<v Speaker 3>and maybe the party's own interests align and where See

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<v Speaker 3>thinks the tech sector do something for them, and of

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<v Speaker 3>course the tech sector is more than happy to benefit

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<v Speaker 3>from state support. It's a point in the relationship where

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<v Speaker 3>I think there are some common interests, but of course

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<v Speaker 3>we've seen in the past the interests often diverge.

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<v Speaker 1>Yeah, I would agree. I think it's going to be

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<v Speaker 1>really hard for people to not see this as a

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<v Speaker 1>bit of a publicity stunt. If this isn't followed up

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<v Speaker 1>by actual sort of policy changes, it's hard to tell

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<v Speaker 1>if this gesture of goodwill will be sustainable or if

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<v Speaker 1>it's more ephemeral, and I have a feeling it might

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<v Speaker 1>not last. You know, I don't see she ultimately being

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<v Speaker 1>okay with these private sector leaders having so much power

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<v Speaker 1>and threatening his political grip. So I think we will

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<v Speaker 1>have to see if this is followed up by actual

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<v Speaker 1>policy changes. At the same time, there though, I think

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<v Speaker 1>she would be wise to sort of recognize that most

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<v Speaker 1>of the best innovations that have come out of China

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<v Speaker 1>have really come from the private sector. They haven't really

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<v Speaker 1>come from his sort of state owned in state enterprises.

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<v Speaker 2>And you've got innovations like Deepseek's ai chatbot that recently

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<v Speaker 2>caught global investors by surprise. Let me change the perspective

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<v Speaker 2>a little here and ask you why do you think

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<v Speaker 2>the US keeps getting surprised by Chinese tech.

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<v Speaker 1>I think some of it is language barriers and cultural

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<v Speaker 1>barriers and few foreign reporters actually in China, and separate

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<v Speaker 1>social media ecosystems. But I also think that there's some

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<v Speaker 1>entrenched biases in the US and in Silicon Valley when

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<v Speaker 1>it comes to China, and there's definitely a bit of

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<v Speaker 1>sort of sinophobia. And I think, you know, US tech

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<v Speaker 1>leaders paint themselves as the only people that can really

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<v Speaker 1>predict future trends and see the future. They've always had

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<v Speaker 1>this presumed lead over Chinese tech, and so I think

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<v Speaker 1>that there's a lot of barriers that the US has

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<v Speaker 1>to really understand in China, and I think that it's

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<v Speaker 1>important for Silicon Valley to sort of break those down,

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<v Speaker 1>otherwise they will keep being surprised.

0:12:51.240 --> 0:12:54.640
<v Speaker 2>You called them the US tech rolagarchy in a recent column.

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<v Speaker 2>Can you explain that to us? So?

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<v Speaker 1>I do have to give credit to my editor for

0:12:58.760 --> 0:13:00.920
<v Speaker 1>adding that in, but it is it's just so applicable

0:13:00.960 --> 0:13:03.320
<v Speaker 1>to this moment we're seeing in US tech right now,

0:13:03.360 --> 0:13:07.560
<v Speaker 1>where these tech billionaires, these very powerful business leaders have

0:13:07.720 --> 0:13:10.200
<v Speaker 1>just been positioning themselves and trying to get very close

0:13:10.240 --> 0:13:13.160
<v Speaker 1>to the Trump administration, and that's just been giving them

0:13:13.200 --> 0:13:14.959
<v Speaker 1>even more power and more influence.

0:13:15.679 --> 0:13:19.080
<v Speaker 2>And at Donald Trump's inauguration in January, he was surrounded

0:13:19.080 --> 0:13:21.760
<v Speaker 2>by all of these tech titans. You had Mark Zuckerberg,

0:13:21.960 --> 0:13:25.679
<v Speaker 2>Jeff Bezos, Tim Cook, and of course Elon Musk. Do

0:13:25.720 --> 0:13:29.640
<v Speaker 2>you see any similarities between this US tech roly garchy

0:13:29.720 --> 0:13:31.640
<v Speaker 2>and what happened with the recent meeting in China.

0:13:32.040 --> 0:13:35.080
<v Speaker 1>It does seem like she responded to Trump showing up

0:13:35.080 --> 0:13:37.520
<v Speaker 1>with his tech leaders to show that he also has

0:13:37.559 --> 0:13:39.560
<v Speaker 1>this sort of the port and he also has some

0:13:39.760 --> 0:13:42.920
<v Speaker 1>very powerful tech players in his ecosystem. But at the

0:13:42.920 --> 0:13:45.440
<v Speaker 1>same time, I don't think that he would allow them

0:13:45.480 --> 0:13:48.280
<v Speaker 1>to have the same kind of power and political influence

0:13:48.320 --> 0:13:50.120
<v Speaker 1>that they're having in the US right now.

0:13:50.880 --> 0:13:54.360
<v Speaker 2>Right and certainly Silicon Valley and Washington d C. Are

0:13:54.400 --> 0:13:58.000
<v Speaker 2>worried about China's tech over national security and other issues.

0:13:58.280 --> 0:14:00.960
<v Speaker 2>So now you've got these Chinese tech companies appearing to

0:14:01.000 --> 0:14:03.440
<v Speaker 2>be back in the good graces with President Shi Jinping

0:14:03.679 --> 0:14:06.280
<v Speaker 2>and on the rise in China, but there's still somewhat

0:14:06.320 --> 0:14:07.679
<v Speaker 2>second string to American firms.

0:14:07.760 --> 0:14:08.760
<v Speaker 1>Right What are the.

0:14:08.720 --> 0:14:11.640
<v Speaker 2>Biggest challenges for Chinese tech companies as they try to

0:14:11.679 --> 0:14:12.560
<v Speaker 2>close that gap.

0:14:13.040 --> 0:14:16.000
<v Speaker 1>I think that we've learned from the TikTok saga, which

0:14:16.000 --> 0:14:18.800
<v Speaker 1>has just raged on for years, that at this point

0:14:19.040 --> 0:14:23.080
<v Speaker 1>Washington and US lawmakers really see any sort of consumer

0:14:23.120 --> 0:14:25.400
<v Speaker 1>facing tech product coming out of China as a potential

0:14:25.480 --> 0:14:29.160
<v Speaker 1>national security threat. They see any Chinese tech company is

0:14:29.200 --> 0:14:32.240
<v Speaker 1>potentially connected to the government, their success is a vouch

0:14:32.280 --> 0:14:35.480
<v Speaker 1>for their political system, and you know, threat to democracy everywhere.

0:14:36.120 --> 0:14:38.840
<v Speaker 1>And I think whether or not that's true, I think

0:14:38.880 --> 0:14:42.160
<v Speaker 1>we'll still see these Chinese tech companies producing these innovations,

0:14:42.760 --> 0:14:44.400
<v Speaker 1>and I do think, you know, if they want to

0:14:44.400 --> 0:14:46.000
<v Speaker 1>find a way to grow in the US market. That's

0:14:46.040 --> 0:14:48.760
<v Speaker 1>going to be a real challenge ahead, and I don't

0:14:48.760 --> 0:14:50.800
<v Speaker 1>think any of them, as we've seen from TikTok, have

0:14:50.880 --> 0:14:52.000
<v Speaker 1>really figured that out yet.

0:14:52.440 --> 0:14:55.240
<v Speaker 3>I think the political wines in daging are always a factor.

0:14:55.480 --> 0:14:57.840
<v Speaker 3>We've seen them swing. There's been a lot of whiplash

0:14:57.920 --> 0:14:59.800
<v Speaker 3>in the industry where things have gone one way and

0:14:59.840 --> 0:15:02.760
<v Speaker 3>then the other. So I think very reasonably for a

0:15:02.760 --> 0:15:05.560
<v Speaker 3>lot of these tech firms, there is still questions over

0:15:05.840 --> 0:15:15.360
<v Speaker 3>sort of Beijing's commitment to continue to to support them.

0:15:15.720 --> 0:15:18.440
<v Speaker 2>This is The Big Take Asia from Bloomberg News. I'm

0:15:18.480 --> 0:15:22.040
<v Speaker 2>wan Ha. This episode was produced by Young Young, Naomi

0:15:22.520 --> 0:15:25.440
<v Speaker 2>and Jessica Beck. It was edited by Patty Hirsch, Daniel

0:15:25.440 --> 0:15:28.400
<v Speaker 2>ten Kate, and Jenny Marsh. It was fact checked by

0:15:28.440 --> 0:15:31.800
<v Speaker 2>Naomi and Young, mixed by Amer Salton, and sound designed

0:15:31.800 --> 0:15:35.680
<v Speaker 2>by Jessica. Our senior producer is Naomi Shaven. Our senior

0:15:35.760 --> 0:15:40.120
<v Speaker 2>editor is Elizabeth Ponzo. Our executive producer is Nicole Beemster Bower.

0:15:40.280 --> 0:15:43.600
<v Speaker 2>Sage Bowman is Bloomberg's head of Podcasts. If you like

0:15:43.680 --> 0:15:46.440
<v Speaker 2>this episode, make sure to subscribe and review The Big

0:15:46.480 --> 0:15:49.760
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<v Speaker 2>people find the show. Thanks for listening, See you next time.