Is DeepSeek a “real innovation”? Microsoft CEO thinks so—But what’s behind the AI tensions?
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Foreign visits to China soar over 200% as tourists flock to Chinese New Year celebrations.

Microsoft CEO praises the Chinese AI model DeepSeek, calling it "real innovation" and "all good news." And China has built a multi-billion-dollar EV industry. How is it reshaping the global auto market? Welcome to Road Today, the Spring Festival edition. I'm Guiana in Beijing. To listen to this episode again or to catch up on previous episodes, you can download our podcast by searching Road Today.

Foreigners are flocking to China to experience the festive spring festival atmosphere firsthand. Chinese online travel service Trip.com says inbound travel orders from foreign tourists have surged by over 200% during the festival. To talk more on this and China's spring festival holiday economy, let's have Professor Liu Baocheng, director of the Center for International Business Ethics at the University of International Business and Economics.

Professor, we've seen a massive surge in foreign visitors to China during this spring festival, over 200% more travel bookings. What do you think is drawing so many international tourists to experience this holiday here?

First, there has been a pent-up demand due to the long-tail effect of the pandemic. Now, with more of the convenience provided by free visa connectivity and particularly by the direct flight, and also with the cost reduction of flying Air China, then the big travel experience, taking Chinese bullet trains,

So this can really provide a big attraction. The other is that we noticed a new trend that many foreigners visit China. They also do their live streaming to show their personal experience and to compare the different experiences over the past travels into China. So this also gave them a lot of traffic for them to spread the Chinese culture and elevate their own image.

Well, the other issue is that many creative products are being created for traveling in terms of the entertainment, by utilizing of the digital economy, by attracting more of the segmented audience into particular cultural relics. That can also serve quite a pulling effect for foreigners to visit China.

As you mentioned, China's visa-free policy has been expanding and we are seeing more visitors getting a first-hand look at the real China, often quite different from what's portrayed in their home media. Then from this perspective, what impact do you think this has on how Chinese culture or today's China is understood globally? This is really part and parcel of Chinese large open-door policy, also by the

the Chinese central government to provide people exchange opportunities and more of those visitors are granted with a free visa

to travel conveniently into China. That shows trust-building process between those visitors and China as a whole. It also shows that China places great emphasis on promoting not only tourism, but also the Chinese culture on a global basis. Many foreigners still feel that China is an oriental myth.

And the more intriguing part is that why ancient China can really turn out such a new look within only a few decades. So that's some sort of mystery. They really want to discover the solution behind it.

And the other is that China is now having abundant supply of all the global resources from fruits to any type of convenience that they might provide. They can travel more freely.

and without any type of restrictions. Very basically, traveling in China, everyone says it's the safest part in the world. So this is really the precondition, and not to mention more of the cultural attractions and also new interpretations. And with all the new innovation with the modern technologies,

And also we see that the Chinese people's outlook is also very different. They wear differently, they eat differently, and they also show a strong sense of national pride. So that's something that can be shared with a great positive sentiment with all the foreigners.

Professor, it's not just the foreign tourists. According to authorities, China is expecting a record-breaking 9 billion trips during this year's Spring Festival travel rush, up 7% from last year. What does this tell us about the growth of China's holiday economy? And what's really fueling this trend? Well, we still carry on the Chinese traditional culture by family gathering, however and wherever they are.

This is also directly a contributor to the Chinese conception. One is that the travel is getting more orderly and more convenient. We do not really see a big frustration for many people to book their tickets. The other is that more of the variety in supply, you know, from the Spanish ham to Argentina cherry and to French wine. So everything is ready. So therefore, they have a good reason to spend.

the money. And also, broadly speaking, there's rising income among the Chinese middle class, although some of them feel difficulties and they are getting more rational. But the culture is there to spur more of the spending. I think more significantly, the government is really factoring out the

nearly 1 billion RMB to support the conception, particularly for younger generations to replace their mobile phones, to get direct coupon, to buy new iPads, you know, for house the renovation. So the subsidies can be also be entitled. So this can really invigorate their purchasing the

morale and then the peer influence is also there to stimulate their collective consumption. Then building on that, as you said, we've seen cities like Hangzhou roll out billings in subsidies for trading programs, sparking a boom in consumption this holiday season. Then beyond just boosting holiday shopping, do you think these policies are actually driving innovation and helping upgrade industries? Well,

Well, yes, because all supply are really driven by demand. And when you have a stronger buying power and also when you have more of the consumers that are able to choose and pick, the suppliers will be able to respond because of the high competition among

among the large number of players, we noticed that the Chinese EV vehicles has improved a great deal in a matter of few years, simply because the consumer demand, government policy support, also the competition, because you will be able to stand out, you know, with more of the response to consumers' demand, not only with the quality of the product per se, but also with the whole package of service that you can be able to deliver. So definitely the

Buying power is really the ultimate power that is there to push for innovation and to push for companies to sharpen their competitive edge.

Speaking of holiday trends, the Spring Festival box office has been on fire. The first day alone hit a record-breaking 1.7 billion yuan, and the total, including pre-sales, has already surpassed 4 billion. Professor, did you or your family catch a movie this holiday season? And what do you make of these numbers? And what does it say about the role of fumes in China's holiday economy today?

Well, we are getting old and receive so many young kids around, students, you know, the niece and nephews and grandsons, etc. So we have to serve as the host. But we are really delighted to see that the box rate has been going on pretty fast. One is that on the consumer side, they are building more of a taste instead of going somewhere and simply waiting.

dining or go somewhere and take a picture and go. So they now seek for deeper experience and look for something that's more educational. So movie going is one of it, and the other would be traveling into the cultural relics, you know, for children to learn something about China. And the third is that there is also a rising patriotism that is going on for something that is there to

to depict the Chinese Asian myths, to depict the Chinese cultural features and traits are also getting more attractive to the Chinese moviegoers or the tourists over different sites.

So thanks also to the internet that they also provide more prior knowledge before they go. Another thanks go to the internet is that because they are able to share their watching experience and their feeling

out of the movie or out of a particular visit with their friend circles. So this can really create a dynamic fashion for people to further entrench their positive experience. Professor, beyond movies, let's delve further on the intangible cultural heritage-themed celebrations in China this year like temple fairs.

lantern festivals and traditional performances, they have already taken off this year. So how do you see these trends shaping China's cultural industry today? And how can we tap even more into the economic potential of festivals like the Spring Festival?

Well, when the annual coefficient is changing where people have additional income for entertainment and also now with rising education level among the people, so they would like to get more of the taste with knowledge, with personal experience.

Different localities are taking advantage of such sort of trend where they build more of the stories into the old Chinese legacies. And this is something that they can really drive deep through literature, through history books.

The whole package of service are also being made available. So therefore, people are really seeking a more holistic experience. They are getting more creative, using more of the different lighting, different digital one and more interactive artificial robots to attract people.

you know, combining with all the tradition, with all the experience and with all the cultural elements. So they are to seek more invigoration into their not only local economy, but also their local IP to attract more tourism, investments and trading opportunities.

Thanks, Professor, for your insightful analysis. That was Professor Liu Baocheng, Director of the Center for International Business Ethics at University of International Business and Economics,

Microsoft CEO Satya Nadella has praised DeepSeek, the Chinese AI model that stunned the tech industry, calling it "real innovation and all good news." Nadella made the comments during the U.S. software giant's quarterly earnings call on Wednesday, as the company began offering DeepSeek R1, a reasoning model that reveals its thought process to users on its cloud platform.

Earlier, Microsoft, a major investor in OpenAI, has launched a probe accusing Chinese AI developer obtain data output from OpenAI without authorization. But neither OpenAI nor Microsoft offered evidence. Meanwhile, reports show DeepSeq has faced a massive brute forces attack from US IP addresses since January 3, peaking on Monday and Tuesday.

So for more on this, joining us on the line is Einar Tengen, senior fellow at Taihe Institute. Thanks for joining us, Einar. Pleasure to be here.

I know Microsoft CEO praised DeepSeek for its real innovation and called it "good news." What specific tech breakthroughs set DeepSeek apart from its competitors? And what unique strengths have earned it such a high recognition, in your opinion? Okay. So there's something you have to understand about the differences between the US model and what China has done. The US model was based on proprietary systems and software.

And it was this idea that we will develop these AI systems and then people will rent the time from us. And from that, it's basically a subscription. And they spent tens of billions of dollars. Well, the Chinese system, instead of doing that, they used open software that's available on an open platform basis. And they created an AI system or I should say five AI systems because it's not just deep seek.

There's quite a few already in there. They created on an open platform and they've done it for much, much less. In DeepSeek's case, it was less than $6 million. Compare that to the tens of billions of dollars that have been spent by Microsoft and OpenAI and all the rest of them.

I know it's quite interesting to see Microsoft is offering DeepSeq R1 on its cloud platform while also investigating whether it used OpenAI's data without permission. That's quite a contradiction, right? What do you think is the real motivation behind this seemingly contradictory approach?

Well, there's a lot of ego involved, I mean, and also money. Remember, when DeepSeek was announced and people understood what it was, the American stock markets lost $1.4 trillion in one day. And a lot of that was with Nvidia because they had these advanced chips that everyone assumed that you'd have to buy in order to do AI.

Well, the Chinese system uses chips that are much, much less expensive, and they've actually configured them to work better and faster. So the question is, why do you need NVIDIA chips, which is why they lost $500 billion in a day?

In terms of how this affects these different systems, yes, I mean, China has the better system. It's obviously clear that no one's going to pay a subscription fee for a system that doesn't work as well as something that is totally free.

So that part of the issue is over. But there's also this ego issue. There is always this assumption that America has the brainpower, even though it's based on Indian and Chinese scientists, to create innovations and that we're the king of innovations and that no one can equal us. The fact that China has done this

in such a revolutionary way has really shaken confidence of people. And, you know, even these big entities admit that China has pulled off what they did not. They didn't see it coming. And, you know, the response is, oh, let's go back to China cheated or China stole.

Whatever. This is an ink. And it's kind of ironic because open AI basically has been scraping data from other platforms and they've been accused. So for them to turn around and say that, oh, China got this from, you know, our systems or something like that. It's not true. They can certainly probably looked at the kind of algorithms and what kind of content was coming out of it.

But since this is proprietary data, the idea that they somehow snuck in and stole OpenAI's data and then used it to train their own large language model, which was part of their AI, is kind of ridiculous. If there had been a breach of that sort, there would have, of course, been all sorts of outcry and things like that. But in America, there is this sense, this egotistical sense that everything good comes and smart comes from America, that we're dominant.

And this is, as I said, shaking people's confidence and their egos. Let's delve into the accusations on the Chinese AI developer further here. OpenAI claims to have evidence that DeepSeq uses these services to train AI models, but has yet to provide any proof. Without solid evidence, could this kind of accusation harm the AI industry as a whole? And what is its impact on China's AI startups?

Well, I'm certain it'll be used by the U.S. Congress to say that we don't want open AI to be used in America. But it's going to be very hard to stop. Open AI, you know, they're not taking on the United States. They're simply trying to earn money. This is a private company that is trying to build a better mousetrap. And they did.

And this is just sour grapes. If they had any evidence, they would be pushing it forward. They would be lawyers would be running to the law courts and the politician would be screaming at the top of their lungs. But even without evidence, just like TikTok and also Huawei, it's not going to stop the political process from trying to intercede. But here's the problem. Because it's free and you can download it, it's too late.

The idea behind DeepSeek isn't that you have to send your data to the US. You can download a version. You can create a closed system, add your own data, and then bingo, you have your own things. This is...

It's pointless. There's nothing that can be done. The genie is out of the bottle. As I said, open, you know, this open software standard is now shown to be the better way of doing it more efficient, less costly. And, you know, the market will vote with its feet. And, you know,

It doesn't really matter what OpenAI does or says. They either adjust or they will disappear. Aynur, it seems that the US government is already politicizing this issue with President Trump's nominee for Commerce Secretary calling DeepSix technology "stolen." Do you think this will lead to further restrictions on Chinese AI firms in Western markets? Well, of course.

That will be, as I said, but as I said in my other answer, it doesn't really matter. The genie is out of the bag. You can just simply get a VPN, download a, you know, one of five. I mean, this is deep seek is not the only one. Alibaba has come out and said, hey, we have an even better one.

So if you can download these systems and start building applications for them, I mean, there's nothing that the U.S. government can do. Or if they do do it, you can put it through third party countries. There's so many different ways. Technology, like culture and many other things, is like water. It always finds a way. Yeah.

through a system. And this is what is really, you know, the US Congress is angry about after thumping its chest and saying we're number one and we're going to make America great again. All the efforts they made to sideline China, to contain it, have actually driven China to be much more innovative and to come up with products and processes which are surpassing the US.

I mean, you can go back. There was an interesting article in October from Bloomberg where they were saying of the 13 critical industries that they were tracking, China was ahead in five. They were number one in five of them.

But now you fast forward and, you know, it's been three, four months from October, and all of a sudden you see the momentum shifting dramatically. And now China's ahead in probably about seven of those 13 areas.

And as I said, the momentum is there because China's catching up in terms of its own chip development. They recently announced that their DRAM technology, although a couple of years behind Hynix and Samsung, this is the memory that you use, you know, active memory that you use in computers, very important that, you know, they're pushing ahead. And, you

And, you know, originally, if you went back a few years ago, they would have said, oh, you know, China's, you know, seven, eight years behind us. They'll never catch up because we're sprinting ahead. And all of a sudden, China is where it is. And you add this to, you know, new electric vehicles, you know, green power, whether it's solar or wind or nuclear. China's racing ahead with fusion. They now have their own power.

fusion reactor, which is creating positive net energy. And they're going to build one that's going to be five times the size of that of their test model in order to show that they can make this commercially viable. There's so many areas where China is pushing ahead. Now, people say, well, why? You know, you ask Congress, oh, they're cheating. Well, actually, it's not cheating. What they did is 10 years ago, they had a vision. They had a 2025 plan.

and it was to push these types of industries. Now, these are private companies who are doing it, but the Chinese government was, in terms of investment in basic technology, was in fact helping the same way that the US and Europe does. But the difference is that

10 years of consistent planning and support has yielded tremendous results. And these private companies are now racing ahead. They don't need Chinese subsidies. They're competing against each other. And as we have seen in the past, when they do that, things get cheaper and better.

One last question. Over the past few days, while the Chinese public has been celebrating the Chinese New Year, reports say a silent war is going on with deep-sea being targeted by a large-scale cyber attack from U.S. hackers.

This attack peaked on Monday and Tuesday, starting from January 3rd. So what's your take on this? Is calling it a war over the top, or does it show just how intense the AI battle has become? First off, the US last year spent $135 billion on disinformation and, you know,

information collection, spying, whatever you want to call it. And a large part of that was, you know, based on these kind of electronic warfare. So the idea that individual hackers are trying to attack an open platform development is nonsense.

Hackers love that. They generally attack proprietary systems because they believe that those are against their interests and the public's interests. So I would bet dollars to donuts that this is being instigated by the U.S. government in an attempt to dent

you know, this golden halo that has appeared around these companies, especially DeepSeek. I mean, it's just, it's bad sportsmanship. You would think that the U.S. would follow the initial lead of what Microsoft and said, well, well done, you know, we need to do better. They kind of said that, but at the same time, they're unleashing this kind of electronic warfare. And that's what it is. It's sabotage when you're

when you're out there trying to take down a company because it did something better than you. This is what we call the Tonya Harding defense. She was a limpid skater who was friends with Christine Namaguchi, who was her competitor. And she decided that she was so afraid that Christine would win that she had her boyfriend and some other people attempt to break her legs.

prior to the olympics and this is exactly what the us is doing they say we don't want to compete we don't need to compete uh what we need to do is to uh hobble our competition to make sure that they can't compete against us and that just doesn't work it's not a long-term plan you can you cannot uh do this to the entire world and uh that's what happened i mean think about it um

All around the world right now, they realize that they can download a free program and start building applications. And this is going to be extremely appealing to countries throughout the global south who have different cultures, different needs, different systems. And they're going to embrace this. And the U.S. knows this. And they're trying anything in their power to just, you know,

cast some shade or to make it look like Chinese systems are unreliable. But as I said, it's just not DeepSeek. There are four other major Chinese platforms who are putting out AIs that are better and cheaper than the US variants. Thank you, Einar, for your keen insights. That was Einar Tengen, Senior Fellow at Taihe Institute. This is World Today. We'll be back.

Welcome back to World Today, the Spring Festival edition. I'm Ge'anna in Beijing. With years of thoughtful government planning coupled with entrepreneurial spirit and a commitment to achieving carbon neutrality, China has built up an EV industry worth of billions of dollars.

In 2023, China surpassed Japan to become the world's largest auto exporter. What have the Chinese government and enterprises done right to bring up this booming industry? How's the rise of Chinese EVs reshaping the global auto industry? My colleague Ding Hong recently engaged in a conversation with Josie Lee, associate professor of economics and finance at

at University of Macau, Warwick Powell, adjunct professor at Queensland University of Technology and a senior fellow of Taihe Institute, and Chen Jiahe, chief investment officer of Novenark Technologies.

Jia He, to start with you, according to data from China Passenger Car Association, China exported more than 5.8 million cars from January to November in 2024, a 23% increase.

EV exports in these 11 months totaled more than 1.8 million. The Philippines, Belgium, and Thailand are some of the top export destinations for Chinese EVs. So in your observation, will China's car exports, especially exports of EVs, continue to grow in the near future?

Yeah, it looks like it's very certain because currently China is having an automobile industry that is growing very fast. The country will producing the huge amount of automobile in the world. And one of the major things why Chinese cars became so popular in the global market is basically because we got a very strong competition within China. I mean, if you come over to China's automobile industry and you talk to people,

Everyone is talking about competition every day. People are trying to innovate with better products, better designs and reducing the price and the cost as well, increasing the quality. So it's a huge amount of competition in China's automobile industry. Actually, as an investor, I've been investing in some of the firms. It's a very

headache thing for me to pick out the companies because you're facing so huge competition among these companies and it's very difficult for you to figure out who is going to win because so many companies are working so hard, they're investing so much money. So this kind of huge competition produced one of the best export products in the global automobile industry and that explains why many of the Chinese automobiles are so welcomed in the global market and looking into the future, I think this trend is continuing.

So, since you talk about the domestic competition here, Jiahe, a follow-up in that regard. In your observation, do you think they are benign competition or vicious competition? Actually, when we talk about vicious competition, there is a terminology popular nowadays called "neijuan" or "involution", right? That's something I think Chinese authorities are trying to address in the tech industry.

Yeah, definitely. You're talking about the right point. Currently, if you look at industries in China, different industries have got different levels of competition. If you look at airline companies, because it's basically dominated by three large airline companies, and they've got a certain kind of cooperation between them. So the competition in China's airline industry is not that serious. But if you look at

automobile industry is probably one of the most serious place for China's business competition to be. And China's authority has actually realized that and called them to reduce the degree of competition and bring to a more logical level. I mean, you're

It looks like in the automobile industry, many companies are rushing in. And finally, it turns out that not many companies are making profits. And this is not the right thing. We want competition, but we don't want competition to go to the level that every company is kind of not making profit or even losing money from year to year. And definitely this competition can't continue like this forever. So, yes, I mean, the competition is actually a bit too much in China's automobile industry and probably in the

well, five years from now, we see this degree of competition will be reduced by some extent. But in the meantime, they are also positive in the sense that they make the whole Chinese EV industry more competitive, globally speaking, I guess. That's the point you are trying to make, you were trying to make earlier. So, Wawick, going to you, can you put your fingers on some of the key factors that might determine China's EV export trends in the near future?

Just going back on some of the earlier comments, I think it's worth bearing in mind that intense competition has a natural tendency toward squeezing profit margins. This is a typical pattern in market-based systems.

And what tends to happen is that firms then seek to respond in a number of ways. One is, of course, by investing in continual product and process innovation in the hopes of creating a product that enables them to capture above average profits or securing cost reductions in

via process innovations. The second way in which firms often respond is, well, in a broad market sense, is via a process of mergers and acquisitions where the marketplace itself consolidates, which naturally then reduces the extent of the intensity of the competition between firms. And lastly, firms can often seek to secure opportunities

regulatory-based rent-seeking opportunities, which again provide means by which firms can secure above average profits. Now, all of these are well-understood dynamics within intensely competitive markets.

market-based system. So I don't think that there's anything particularly untoward at all about the nature of the Chinese EV industry. Insofar its ability to continue to be globally competitive, we're looking at a number of things. One is obviously the effects of domestic competition on product innovation and

pricing. The secondly, of course, is a need to understand what it is that enables the pricing to be so tight. How is it that the costs of Chinese manufactured EVs have reached a point where they are

half the cost if not even cheaper than alternatives being developed and manufactured by non-Chinese firms. And we need to understand this from the point of view of the overall ecosystem as a whole and a manufacturing ecosystem requires a combination of

hardware, technologies, capital goods, automated systems, together with the right kinds of software, by which I mean the human skills and capacities needed to operate these design-intensive systems.

The last point that I will make here is that much of the competitive dynamics also comes down to Chinese leadership in the battery space. Much of the cost in contemporary EVs is actually in batteries and the ability to deliver batteries with longer periods of usability and greater travel ranges for a given unit cost.

is going to be absolutely fundamental to the ongoing competitive dynamics of EVs, both domestically and also internationally. So, Zhou Sili, going to you, let's look back a little bit. China's policy support has partially contributed to the rise of the country's EV industry. That's something many people acknowledge.

I think things can date back to China's 12th five-year plan from 2011 to 2015. More specifically, in the year 2012, China's State Council issued a document specifically outlining the government's strategy for developing new energy vehicles.

So what do you make of the domestic factors paving the way to China's commitment in this field? And why did China believe at the time that it needed this new emerging industry? Yeah, that's a very good question. Just let me use the recent debate from Elon Musk and Taylor Swift's paradigm from the Tom's who is author of The Water is Flat.

But I quoted in a flip ways. So I think China has a lot of time to lift up more Elon Musk styles of the entrepreneur with bring for more homemade manufacturer who can make a big stuff that we can export more things, but

import less from the rest of the world. While in the Western, almost America, they would use their time to lend more Taylor Swift to spend more money on entertainment, consumer goods, which is made abroad. But of course, they make more offering to the financial service to emerging markets like China.

So I guess China is what you call the "nei juan" - it's not afraid of this kind of competition. Even these competitions are a little bit - a lot of the cost-driven stuff.

But in eyes of Chinese government, there is no foreign firms or domestic firms. As long as you can produce goods in China, we can enjoy the same kind of the government support and financial subsidiaries. So when I have a time, first time interview in one of the media in about May 10, 2018, Tesla opened its first factory in Shanghai.

I said Tesla cannot lose China because at times Tesla is in trouble. They are heavily shot by those Wall Street financial analysts. But I also predict China can bring multiple Teslas in following years, given its production powers. So at that time, Elon Musk is at best one of the American manufacturing, most Chinese

entrepreneur fear, but also respect. So we learn a lot from Elon Musk and also long before we learn a lot from Steven Jobs. So you are good at making zero to one. But in China, a lot of entrepreneur, they are very good at going from two to 100.

So that's why we can neutralize domestic champions like BYD, NIO, Xiaopeng, and Xiaomi, etc. So, Jiahe, going back to you, what is your observation regarding this from 0 to 1 and then from 2 to 100, these points raised by Dr. Zhou earlier?

Well, if you look at industries, most of the industries would say it's not from zero to one. It's very difficult for you to start something from zero to one. I mean, especially nowadays after the industrial revolution has been going on for hundreds

few hundred years in the world. Most of the technologies and stuff have been developed by someone and some economy and some businesses. So I think for 99% of the businesses in the world, we are talking about you are trying to, you know, move from one to a hundred or from even 10 to a thousand. So that's the business of most of the businesses in the world. I mean, we are working on something that's called zero to one, for example, quantum computing.

Currently, quantum computing is not used worldwide in any businesses or whatever. We're still using the very traditional computer chips. But if you look at computer chips, they have been developed in the 1960s or 1970s. So that's the period of what we call from zero to one.

But at that time, we didn't have much business application for computer chips at all. But later on, when the world economy went into 1980s and 1990s, this industry is built upon the scientific research that was conducted a few decades ago. So for businesses in the world, I think it's for 99% of the time,

especially in the world today where technology is spreading across different countries. We're not keeping much secrets to ourselves. Most of the businesses in the world, what we are working on is from one to a hundred. So we're trying to improve our products with more efficiency, better quality, better advertisement, better to fit the appetite of consumers, all sorts of things. So Wallach, apart from domestic factors,

What do you make of the economic or even strategic factors outside China in the international community at the time that somehow also prompted China to step up the efforts in the EV industry?

Look, I think the early 2010s was a very interesting period because what it brought together was a number of different factors. One of those factors from a global point of view, and I think your question touches upon this, is from a geostrategic or a geopolitical perspective, the Obama administration explicitly made its pivot to Asia.

And it was also recognized at the time by the Chinese government that China was likely to enter into a period of substantially slower economic growth compared to the economic growth rates that were achieved in the 2000s. So I think that that's the broad backdrop to all of this.

The other important thing, and it's a much more localized factor, in and around 2011, 2012, as no doubt most of you and your listeners would recall, Chinese cities were well known for high levels of air pollution. And there was substantial public concern about the persistence of pollution and therefore the need to do something about it.

Many policies were implemented at the time to manage the use of the internal combustion engine vehicles in the large cities through things like controls of number plates and which number plates could drive on particular days, etc., etc. But there was ultimately a recognition that a key part of cleanliness

of cleaning up the air situation of large cities required a move away from dependence on internal combustion engines for urban transport. And this is exactly what's happened ever since. The move towards electrification of transport also supports a broader geopolitical consideration, which goes to this question of energy sovereignty.

China itself is a significant importer of crude oil and crude oil-based products.

and reducing dependence upon that, particularly for domestic transportation, through the development of its electric vehicle industry was and remains an important element of enhancing the nation's energy sovereignty. This, incidentally, is one of the reasons why EVs are also incredibly popular around the world, particularly for countries in the developing world,

the global south, for whom exposure to international crude oil and related markets is a substantial risk. And it's something that they struggle with from a foreign exchange and a foreign reserves point of view. So these are some of the dynamics that have been at work over the course of the last 10 years that I think are shaping the

the EV market both domestically and of course internationally. The evolution in the world? Sure, sure, sure. It's very interesting. So I agree with Warwick that kind of the things

For oil, I mean, the energy strategy for the competition or the safety reasons, that is one of the most important ways why the EV market has grown so dramatically, even in Asia and also in China here.

So I guess also because an electronic vehicle, that kind of things, is the biggest part for the manufacturers as well. So actually Chinese government are very keen on manufacturing, not like

for the service. So we have a lot of strategy to boost the productions and also the global value chains domestically. So we have a very different views on the kind of the values that defined by those Westerns.

But to be honest, the oil strategy has been a lot of concerns by those by that time of the Chinese governors because they are afraid of geopolitical tensions, resource competitions or certain kind of things on the oil imports. So by early 2010, China was very heavily dependent on these oil products.

So, thanks for the EVs, we have been the oil price, the crude oil price around the $70 in the future market. But I'm not sure whether it will be a good news to other emerging market as well, because not much market like Chinese market, they have so many kind of the electronic vehicle cars and get benefits from that.

So and also for this kind of the opportunities, Chinese government saw these opportunities to leapfrog of these long term established players in this automobile auto car market and set the global standards. That was the next steps. But how fast and how persistent it will be, I'm not sure, because they always also rely on the raw materials such as the other kind of the

center things in battery supply chains. The Chinese government are very key on this. So, Jiahao, going back to you, in the years since China outlined its goals in terms of nurturing the EV industry, what do you think Chinese corporations like BYD, just one example, have done right to become one of the leading players globally in this industry?

Well, it's many things that China's companies have been doing quite right in promoting the new energy vehicle industry. One of the very important things is that China is a very large market and economic scale means that automobile companies can easily find enough consumers in this place. And China has got a huge amount of engineers. We got

you know, millions and millions of university graduates every year. They studied very good about engineering, scientific things. So they provided, these universities actually provided the best, one of the best groups of engineers in the world to Chinese companies. And with these human talents, we'll be able to produce the products that are, you know, outstanding in the global market. And the competition has also brought a lot of good products.

And also China's government has been dominating this transferring to new energy vehicle. There has been a lot of reasons behind this. I mean, for example, like Mr. Zhou has just said, it's about the oil and energy thing, because China

we import about 70% of the oil by ourselves. So developing the traditional cars is not the best strategy for the country, but using new energy vehicles, especially electrical cars, is one of the best things for the energy structure of the country. And another thing is that because the new energy vehicle is also very helpful to containing the pollution, especially the air pollution, which is very beneficial to China as well. So all these things adding together, especially with the talent of

millions and millions of engineers, Chinese automobile companies have been able to produce these very wonderful products.

The training of talents in China is relatively more cost-benefit, I guess, or cost-effective in the sense that we can train these engineering graduates with a much lower cost compared to, say, universities based in advanced economies. But that's another issue. So, Dr. Zhou Sili, China surpassed Japan and it became the largest auto exporter in 2023.

What do you think are the appeals of those China-made autos in the global market? Yeah, this is true to be a milestone for Chinese cars. So in old times, we actually respect a lot of Japanese car makers because we import a lot of cars actually starting from, I cannot remember, but in old days, we import a lot of cars from Japanese car makers.

So I guess we just suppress them using very different techniques, because if we just follow the strategies, we can never be win-win about it. So this is kind of the milestones for Chinese cars. So we abandon some kind of energy, we abandon traditional kind of the styles, but we try to make it more kind of the cars in different ways. That's one thing.

On the other side, we also restructure the global supply chains because car makers, they use very heavily on these suppliers. They have thousands of suppliers to have the different kind of

parts and to assembling it differently. So in that sense, we actually make the manufacturing to be more resilient to the global shocks. And also these are the kind of stronger dealer networks which make it very strong.

But still, I think we also face the same kind of issues when Japanese car makers had been faced 20 years ago, maybe 30 years ago. We have trade wars between other geopolitical tensions with other markets as well, because you have competitive advantage for Chinese auto-made cars. So you are selling at cheap prices. So many markets will be accused about you are dumping the market.

So we actually, we can learn from our early experience from those Japanese cars when they first entered into the U.S. market or in the European market. Hmm. Wawakipawo, going back to you, now,

Based on some of these points elaborated by Dr. Joseph Li, some people actually have cautioned that compared to Japan's auto industry, China's auto industry is still far from advanced, especially when we talk about, say, the level of overseas production and manufacturing. What is your take on this?

Yeah, look, I think it's important to put the global footprint into some context. There is, of course, a lot of talk about China's EV export prowess and the fact that it has achieved the kinds of numbers that it has achieved. But the reality is that the overwhelming majority of Chinese EV manufacturing has been absorbed by the domestic market.

Between 2021 and 2023, so this is when Chinese EVs really began to become something that people noticed. So in those four years, the percentage of total output that was absorbed domestically hovered between 75% and 85%. In other words, between 15% and 25%.

was exported year to date the percentage of output absorbed domestically has grown to about 90 so the overwhelming majority of chinese made evs is for the domestic market so that's something that we need to always bear in mind this is not an industry that has grown on the back of export markets it is not an industry that is actually export dependent

This industry makes its bread and butter revenues and profits by servicing the highly competitive and growing domestic consumption base.

Now, the lesson learned from what's happened historically as firms went overseas, particularly the Japanese firms into the United States, and know that your listeners can imagine or recall the violence that took place outside Japanese motor vehicle factories in America.

where politicians and people would stand on top of Japanese cars and bash them with baseball bats and those sorts of things. Of course, those sorts of memories create concerns and important lessons.

One of those lessons is that there is, wherever possible, an opportunity for China and Chinese EV firms to become exporters of capital. So rather than manufacture everything in China and then export it to other markets,

There is a need and an opportunity for these firms to establish factories and assembly plants elsewhere in the world. And that is exactly what they are doing. We have, for example, BYD in Hungary. We have Cherry in Spain through a joint venture where they've reactivated a dormant Nissan factory.

Of course, BYD is establishing facilities in Thailand, Malaysia, South America. So I think one of the key lessons here is to take capacity into other markets of the world. One, it reduces supply chain related logistics and transport costs. And also at the same time, it

it brings other benefits to the partner countries. And those benefits, of course, include local value adding and the utilization and training of local staff.

And that brings us to the end of our Spring Festival edition of World Today. I'm Ge'Anna and it's been a joy sharing this special series with you. And thank you so much for joining us throughout the holiday season. We'll be back with more updates and insights from around the world in our regular programs. Wishing you all a prosperous and joyful year ahead.