Jian Lian on China's Industrial Policy and Global Strategy – #99

So in The US, the companies can the rich people and the companies control the government. In China, the government controls the rich people and the companies. Regulated.

I should say regulated. Yeah. You know, In Chinese history, have lots of such story. If you threaten our regions or threaten the emperor, you don't have good results. That is common knowledge in China.

So you're rich people doing your job, doing your job properly. And it's fair that you not only enrich yourself, but also promoting locally, at least your hometown. So that is basically the requirement.

Welcome to Manifold. My guest today is John Lian. He is with us from Beijing, China. Lian is a policy analyst with a background in investment banking and also in venture capital. He has written widely on Chinese development, the Chinese development model.

And I am looking forward to having this conversation with him in this special moment where The US and China are really at a a very, very intense moment of competition. So, Lian, welcome to the show.

Hello, Steve. Great to be here. Yeah.

Thanks. So we were just chatting before we started recording, and you mentioned that you're a Beida or Beijing University graduate. Maybe you can tell us a little bit about your early life and what you thought life was going to be like in college and then how it developed after that.

Okay. So actually, I entered Peking University, Beijing University. Actually, was number two best university in China through very fierce university entrance examination. I am twenty third in my province, Fujian province, which you know, just based in Taiwan. At that time, it was 2001.

And I originally wanted to study biology because at that time, know, it's a genetic mapping periods become very popular. However, I was forced to enter the school economics because of entrance examinations, small difference. I become an economic, how to say economic theory, fan. Actually, developed my own economic theory in university. I got seven years in big university.

And when I come to the work markets, it was on the eve of global financial crisis. So actually I witnessed the broke out of global financial crisis. Actually, was in Lehman Brothers three months at a time in the 2007. And then in 2008, I entered the industry first three years in Africa. And actually I keep strong academic ties with Peking University, including particularly on 2008, I could say a dramatic period because on that year in the China's strategy circle, China, how to say, China school, there is called Zhongguo Xue by China school rise up exactly on the 2008 or early two thousand and nine.

And I experienced it and I am actually a member. I have at that time the youngest member of it. And then there is an industry party going up. That is it's not the government sponsored movements. It's totally how to say internet firstly grow up in internet circle.

Actually, it appears around 2003, 2005, among the BBS in China forum, okay? And then it growed up and came into reality and truly it got sponsorship privately, not from government again, I should say. So we found some kinds of patriotic in China, patriotic in Western, maybe common relationalistic circle. And then in 2012, some media platform appeared and also, we have our new Chinese leadership. So then I think that the two way joined together gradually, gradually.

And then, in recent, I would say, fifteen years I witnessed, including some implementation of the National China School and also industry party policy in real policies and also they represented the enterprises, which you now believe it.

Can I interrupt you a little bit? So I I have to slow you down for my listeners who are not completely familiar with all the things you're discussing.

So Okay.

First, let me go back to I think you said something very interesting. You said you were twenty third in the Gaokao for the entire province of Fujian. Is that what you said? Yeah.

I am I mean, I'm ranking at twenty third. So there are seventy seventy thousand students participate in that examination for science, the science major, because you have an arts major. So arts major 20,000. We have 70,003 to one. And I'm twenty third among 70,000.

Right. So let me ask you. I think you said you wanted to study genomics, but if you had scored higher, like yeah. If you had been 20 instead of 23, they would have let you study genomics.

Yeah. If I'm 22 or 21, I will be in the school of, life science.

Wow. So you ended up, but unfortunately, well, fortunately for us, you ended up in economics. Is that right?

Maybe, maybe. Maybe because I don't think I could do more things as I choose, continue to be major in economics.

Yeah. I mean, I don't know if you know this, but I actually work in, I mean, I'm a physicist, but I do some work in computational genomics and I've actually found two in that field. So it's funny that you that's that's what you wanted to study in in high school. I actually got into that field right around around 2010, so about the time you were in school, I think. Okay.

So now you mentioned two different viewpoints or movements on China maybe political economy is the right way to describe it. So one of them is the industrial party, and the the earlier one that you mentioned is the what did you call it? The China National

movement? Was the Not exactly that. Call it the China school. So China School is is more more like a theory or or philosophy or history and arts. But it's strongly related to industry party.

The industry party is mainly related to science and industry policy, engineer, and what kinds of enterprises that we should support. For example, why is it called BYD? Okay, so BYD is a typical example of rise up in recent fifteen years of China's success. So industry parties support him, support this company, and China's school also support him. They just support him from a different perspective, but they are strongly linking each other.

So if you are talking about different camps, I should say it's more like a Western school. You know, in China's 1980s, intellectuals are more influenced in the Western world because at that time it's more high or dominant in economy. And also on industrial policy or economics, that is another school which is competing. You can call it the liberalist, economic liberalist in China. I'm pure liberalist.

However, Indus Party is also encouraging innovation. So, you know, it's not like he is more like a statist, so he's anti innovation because I messaged theory explanation to polarization in many of the discussion. But no, actually, industry party also favors innovation, but it's talking about what kinds of innovation. For me, for example, I'm strongly pro innovation and I actually support many, many of the entrepreneurs. And actually, I can tell you most of them come from private, not in state owned companies.

Some very innovative people from state owned company may not be able to leave there and come out and sell their own company. I strongly support it. But I do think I'm a member of industry party, and I do support some of our industry policy. I know which industry policy works, which doesn't, because I'm also personally experienced also. So that is, when a two school I mentioned, actually the same similar group of people.

They are they even overlap with each other.

Okay. But maybe let me focus on the industrial policy sorry, the industrial party, because I discussed this a little bit with a previous guest, Kyle Chan, who's a Chinese American at Princeton. And at least by the way, everything I say to you is probably more from a kind of American perspective. So

feel free correct,

yeah, feel free to correct anything I say, which is inaccurate or you know? I I realized, like, I only have the an outsider's perspective about what really happened in China, say, in the last twenty years. So there's this perspective that in the twenty tens, there there was a a real rise of Internet companies. But there's a perception that kind of technology building apps, websites, ecommerce is not a kind of deep technology. It's not a real industrial base for the full development country.

And Yeah. Lately, a lot of American thinkers, intellectuals have encountered the industrial party in China, which advocates more for things like manufacturing

Yeah.

Building real things. Something called industrial maximalism saying that Mhmm. There's no such thing as oversupply in China. China should just continue developing its manufacturing capability, until it, you know, maybe even eventually dominates the whole world in many different verticals. But I think what you were saying at the beginning is maybe the early evolution of that industrial party view did not come from the government.

It came from people

Yeah.

Talking to each other on the Chinese Internet, even going back to something called BBS, which for Americans is kind of just like a chat chat forum.

People Yeah. Chat forum. Yes.

Chat forum. But as we all know, in the Internet age, a lot of intellectual stuff comes from there, not necessarily from the government or from universities. And so there were some early theorizing about what is the best development path for China, and that an industrial party is a particular view on how it should work. And your book, you wrote a book which was published, I think, 2016, but you had been writing it the years before that. The book is called the truth about capital, capital markets, and the Internet.

And some aspects of your book are really anticipating or endorsing some of the views of the industrial party. So do I do I have the the rough picture right of what you were talking about?

Yes. Exactly.

Okay. So let's talk about imagine there's a debate going on in the twenty tens in China. Mhmm. And on one side, you have people like Jack Ma or people who are really pro Internet. They're really pro Western perspective.

I think you mentioned this. They they tend they tended to think everything that came from the West was good. Economic liberalism was good. The Internet was good. And Yeah.

Maybe they weren't that interested in China manufacturing things or making things physically. Talk a little bit about the the the debate between those two different positions in China in the twenty tens.

Okay. So let me start a little bit of a history earlier than that. That is from the 1980, 1990, early nineteen nineties and Yeah. February. So I should say that China government because you say energy party is mainly from actually the fourth society, not from government.

And I should mention a little bit about the government because I think that is a mystery or myth of American discussion with China. So, Chinese government also men, so let's just all human men. So traditionally, we have some tradition, which was thinking good by today's industry party is that, so the counterparty, in America, maybe a negative word, but in China is positive word because there is principle working for people. So if you're thinking for people, you're thinking about production, you're thinking about making people obsessed with some necessity. So there is a real economy tradition in Chinese policy, real economy, today, that real economy in this world has a natural political legitimacy in the political discussion.

So this is a traditional government. However, since 1980s, there's reform opening up. So we absorbed lots of concept from the West and including the government in the Jiang Zemin period and Hu Jinnah period. Okay. The government even standing, including the officials to train in Singapore and Germany and maybe Harvard and Columbia University or something.

So once a time, similar to the Jack Ma theory or thinking style thinking is prevailing also in China. So once a time, for example, in the summer of the day, very, very heated publicized semiconductor policy. Basically Chinese government gave up the support of domestic Chinese semiconductor industry. So basically, I think this low point actually was in 1990s, 2000, basically 2000, the 2011, how to say Chinese government's perspective. But there is genes behind it on supporting real economy and the factory.

So it would just wait time to revive it. And because of the Western influence, the Chinese government also used the same thing as e commerce, okay, it represents the advanced technology and so on. So internet was also actually supported in, for example, 1990s, late 1990s. In that kind of Jiang Zemin's late period discussion about technology is all related to IT, sometimes referring biology. So it's very similar to United States thinking.

I call this actually Silicon Valley technology definition hegemony. It's actually not good, actually, though. So this will direct more resources, policy resources through the internet companies, making IT super platforms. That is what you'll witness today. We both have super platforms in China, in America, even in other countries.

Okay. However, that's so that is the reaction movements from the PBS. Then they did it from industry party. They say that we should focus not only on IT, we should also pay attention to manufacturing because I should say on 1990s and early twenty first century, China's rise actually mainly related to manufacturing because of the globalization. So an industry base, the manufacturing base is moving to China.

Many industries, all of industries, moving to China. Although China is domestic, not only driven by export, but also ourselves, infrastructure building, urbanization, there is lots of, for example, steel companies. Steel was thinking to be so called traditional industry in many of the countries. In China, the government definition used to be. However, we know that steel have different steel.

We have special steel. We have super steel. So there's lots of technology also on this piece. So industry party emphasize on this, that we should pay attention to this. And the question is that how to formalize these continued technology innovation in these fields?

There's no such discussion in the West because the West had entered deindustrialization foreign globalization process, particularly in the 1990s and accelerated in the twenty first century. So discussion is in China. So that is industry party and the genes, some genes are transitioning governments and they intersect with each other. And then forming a systematic view of what China policy should be. By the way, I just add one, one, yeah.

Finish one

thought. Finish your thought.

Okay, finish your thought.

So on the Chinese government tradition, there's a very, very important, very, very important elements on one industry, electricity. So China is, you know, because we have a, used to have a prime minister called Li Peng, you know, he's educated in Soviet Union, so he's an expert on electricity. So in the 1990s, when the West de industrialization, you know, Des Moines, the hydro dams, China is strengthening it. We have Three Gorges. So Three Gorges approach is very important to continue this tradition in China.

So we become the very important country, actually absorb all the knowledge from USI, from Europe, from Soviet Union, from Japan here. And then we, you know, refine it and promote it to, for example, our state grid. And this supports China's surge on new energy and also new energy vehicles. And also today's AI is a huge power consumption. And while at the same time, the stagnation of that same period in The States, forming up stucco for the development of the lease area.

So yeah.

Great. So, actually, let me put up Mark there bookmark. We'll come back and talk about the electricity grid in China because I I think this is an important topic. But coming back to the political economy and the the ideas that are circulating in China, I think you said so the industrial party really has its origins in the people outside the government. Yeah.

People riding on the Internet. But I think you said the government has I didn't catch the word you used. Did you say genes? The the government itself.

Because the tradition tradition, embedded the tradition on this.

Yes. So within the communist ideas in the government, there's an idea of there are ideas about material production producing the basic goods that people need. And so there there there's there's some continuous emphasis on that kind of thing going back all the way to the origins of, like, modernization and things like that.

Yeah. Yes. Yes. Yeah.

But I wanna ask you. So the the the western caricature, the cartoon picture that we have of how the Chinese society decides what to do is that it's all top down coming from the government. And the government decides, and then that's that's what society does. But for these particular policies that the industrial party, supported during these years, was it just a coincidence that the government decided to do what the industrial party proposed, or was there some complicated interaction between voices outside the government and voices inside the government that ultimately led to the policy. So maybe you can give some color on how it worked.

Okay. Okay. So just give you an example, which is now you focus, semiconductor. Okay. So how semiconductor boom was started taking place in China?

Before 2012, because at that time, I'm already industry analyst, I have a very strong impression that China's semiconductor is very poor, in the poor state, because of lack of enough funding before 2012. There's only how is it, there's state project, which is not enough. And actually, most important at times, there's no venture capital. Invest in China, invest in semiconductors, they all invest on the internet like Jack Ma, okay, like Baidu, okay, like Tencent, okay. And things change because one member of the industry party, actually, he's a de facto member of industry party.

He's electrical engineering master, I think. And later he got PhD in The United States, not on EE, but on sociology. He writes a advice paper with 10,000 Chinese words, we call it, okay, 10,000 Chinese words on semiconductor development. And his classmate happened to be a lower rank official in the MIIT, Industry Information Technology. And he's my friend, this writer is my friend.

Okay, he is a very, very, Hong Kong kind of palace between the science, engineer, and policy. He's super smart people. He's the number one people in his high school examination, and he has responsibility. So he write this paper. And then he hand it to our Deputy Prime Minister at the time, who used to be the head of the NDRC, which is God's plan, Chinese version of Zobe God's plan.

So he adopted, his idea was adopted. So later, I think in your area, you may heard of, China has a market fund on semiconductor with a very, very big money. And this big market firstly was investing to the fans, SMIC, And review it, revolutionized it from Taiwanese people, because SMIC actually founded Taiwanese people. And so that is the result of interaction between the non government people, belong to the idea of industrial party and recommend it, and political crazy system makers, China has such an official who is smart to listen to such advice and then make it reality. But actually, you know, I I won't a good small group of us want to be the consultant for MegaFun actually originally on 2014.

So, okay, so that is 3030. So so that is your example to give you example.

Yeah. Yeah. Let me so let me recap that again for the listeners. So you personally know someone who is a has a background in EE but also in social science. And this person is an intellectual, not part of the government, actually.

Right?

Yes. Yeah.

But he convinced some not the highest ranking official, right, but but somewhat senior official that China should put some emphasis on building its semiconductor capability. And this this eventually led to what we call here the the big fund. Yes.

I think it launched. Yeah. Okay.

And so this would have been in the 2010s, right? This is

It happens on 2012. The first year on year zero of our national leader Xi come to power. And it was adopted on 2013 and it was launched in 2014.

Got it. Okay. So it's an example of the influence of actual thinkers. I mean, when when someone writes a 10,000 word policy paper

and Yeah.

But there's someone in government who's smart enough to understand it and Yeah. Becomes implemented. It's an example of decision making in China not being top down. Right? It's, you know, different parts of society are participating, right, in in determining Yes.

What the national strategies are gonna be.

Yes.

Now I think if for the people who really wanted to westernize China, liberals, people who really trusted The United States, right, as kind of the big brother, you know, the friendly big brother of China, they might have said, oh, we don't need semiconductors. We can just buy our semiconductors.

Yeah. You're right. Exactly. Right. Exactly.

So yeah.

Position that China's in now where it controls all of its major supply chains. Right? Almost every major supply chain. Like, except for NVIDIA and ASML, you know, the you know, maybe ASML is the most important one except for some very rare exceptions. In 2025, China kind of controls all its supply chains.

But it didn't have to be that way. If people if people were willing to be codependent on the West, then they wouldn't necessarily build all of that, domestic supply chain. Right? So was that a explicit policy? How did that become an explicit policy in China that China should control all of its major supply chains?

I just say that it's not kinds of China intent in, you know, from the beginning that China has, you know, a very clear initiative to control globally is for China. It's basically it's forming when we will start to do it because China, yes, Chinese are very efficient and energetic. So when we started to want something, for example, when we adopt the strategy of developing electric vehicle, And then finally, we find that with the pause that basically Germany and Japan in many perspective. So they got nervous. Such argument used to start with the national economic safety.

Even I can tell you that EV strategy is not related to climate change topic at the beginning. BYD is a reason for developing its EV in, for example, 2003, 2004 is not related to climate change. It's related to get rid of the oil dependency overseas. Because China has lots of coal, we can generate electricity. Okay, of course, the hydropower can also generate electricity.

So in this way, China's transport system, besides the rail, okay, roads, the vehicles could use EV strategy to get independent from the oil dependence. So many of the, I mean, of the topic we discussed today is not at the beginning, it's not like what you imagined. It's for another reason. This reason, I should say, is a very natural reason for a super large country like China. So, you know, today, sometimes I can understand United States, some market people are arguing that we should also have guarantee of basic industrial base.

Russian people are also talking about reason to resign. I understand it. The question is that what extent and what strategy you can use to adopt.

So would you say at some point though, perhaps in response to US sanctions in the last five or seven years, the Chinese did develop an explicit view that they should control their key supply chains be because those supply chains might be cut off by The United States. Like, that become an explicit component of strategy in recent years?

So in this way, there is no positive feedback for China's self innovation. Some is catching up, some is not catching up, some is for another panel's development strategy, technology, very unique. But Huawei's strategy is not supported. However, in 2018, US actions, I say goods. So in this way that we're making a big purchase domestically, so it started as positive feedback.

I should say this become consensus in China now. Yes.

Okay. But consensus because of US actions, because of US sanctions?

I was just saying that The US, for example, Biden is cheap to act at. Yes. It's. Yes.

So I think you and I are in agreement. My perception is that a lot of the Chinese companies prior to these sanctions would prefer just to use the existing suppliers. Why why should you risk why should you risk your FAP, the efficiency or the yield of your FAP on some local product when you can just buy the product from Japan or Germany or

For example, Japan. South Korea.

Mhmm. Right. But when forced to do that, then it created a it it aligned the interests. It solved the coordination problem amongst all these Chinese companies. They realized, like, we have to work together.

Otherwise, you know, The US can just cut us all off. So Yeah. That's something that most Americans to this day, even most American think tank analysts and economists don't understand this point. They they don't understand the counter factual is Yeah. China Chinese companies still prefer to use Western suppliers, and they don't prefer using the company just down the street

from them.

And and but now all that

yeah. Go ahead. Yeah, I emphasize that actually two points emerging from such, know, how to say, the feedback cycle. Firstly, is that China more and more confident because, well, you just let China try, Chinese try. There's lots of patents, you know, I, for example, myself was twenty third in the 70,000, you know, children, okay?

So this positive fact showing that China could innovate on many things, not only catching up, but also from another development routes, technology routes. So this logic appear in more and more fees in the past ten years. So those arguments now say, you know, we can buy from our side. Algorithm is slowing down, it's going down. Okay, That's first thing.

Second thing is that, I would say that compared with China, the problem for the West industry network is that the German and Japan supply chain key players, they are aging. Because for these two countries, for example, semiconductor, they use a lot of very specific biochemicals, okay? They need some very, very high precision machine components, machining. However, you should know that these industries never go off into capital investment in the West. They are just usually family run or some departments in the big company in Germany or Japan.

Some is called hidden chompans. But hidden chompans, unfortunately, never got support from venture capital from The United States. And Japan, they don't have much venture capital. In China, in very, very sharp contrast, you know, semiconductor went very popular in the last ten years. So in this industry, there are lots of hidden champion nature companies, positions.

They also got venture capital. So this is very different. So because there is no incentive in the Western network, so entrepreneurs for these hidden champions in Japan, they're Asian, they are, I was told they usually 60s, I mean, in their 60s or 70s, so they will retire and their descendant never want to inheritance. However, in contrast in China, we are not we are people in 40s, 30s, 50s, in 20s to do the same similar job or even newer job. So that systematic evolution in China is much, much accelerated.

Actually, on this year, on spring of Shanghai, spring two thousand and five, I attended semicon two thousand and five, and it has become the largest exhibition for the semiconductor hardware and chemicals and all these hardware inputs. So that is a fluke of China's emphasis, even on battery capital, we emphasize hard technology. So at least this change was taking place in 2017, 2018, because this term, tech was innovated by someone from the CAS system. I know people actually, exactly. So I witnessed the rise of heart attack.

Personally, I don't think it's enough. I think it should be adjusted to be more efficient. But I should say that the development of heart attack, its achievements is beyond my expectation back in 2015. And I'm honestly, I'm very satisfied with the the current result we see. But I think there's more room to to do because more innovation people in China is worth supporting.

So that is my basic thing.

Okay. You good. You raised a bunch of points that I wanna drill down into. So one, you mentioned the human capital issue that a lot of these, I think you called them hidden hidden champions in Japan. Yeah.

These are key companies in the supply chain. They're maybe not glamorous in starting Yes. With venture capital. But the people staffing those companies and with the key know how knowledge are getting close to retirement or even past retirement age

and age. Yes.

The the strongest Chinese companies, the the people leading the teams are 20, 30, 40 years old. So they have Yeah. Eight more decades left of run-in in their own career. And I that's apparent to me as well. When I go to China and I there are so many young world class scientists and technologists.

It's very different from what you what hap you know, the situation in the West. So so the demographic problem, I think, at least for the next twenty years, is actually on to China's advantage. China has a better human capital situation for the next twenty years. Their their human capital is actually gonna continue to increase, over the next twenty years. So, so you mentioned that.

Now you said the performance, the idea to emphasize hard tech or hard science in China, you could maybe even trace it to a particular individual in the Chinese Academy of Sciences. May maybe say something more about. Yeah, go ahead.

Well, this tag in China called Ying Keji, okay, it's a term coined by really a scientist in CIS system called the Mele. So he's a doctor, his PhD on photonics, I think. So he was a PhD in Photonics Machine Institute of CIS system. And you know, that institute was located in Xi'an. Xi'an is a very special city.

It's not a first tier city, but it's an Asian capital of China, and it's also the industry, one of the most important industry cluster in 1950s when Soviets aided China's industrialization. But in the 1990s, even the early 2000s, I think it says it's a you could call it grace. It's just that no one paid attention to it. So there's lots of including the military industry, including the research there. However, don't want support from the Chinese governments in 1990s.

So the pay is low and so on. Of course, no venture capital would go there. And then the CIA system, they got some of their own invention. They think that it was some kinds of investment. So they go to Shanghai and Beijing to look for investment venture capital and zero, you know, that that happened, I was told in 2010.

And then he go back to Xi'an and say, why don't we set up our own venture capital? So they go to the cold producing area of Shanxi province, which is quite relatively rich at that time. They go to Yan'an, okay, they go to Yulin, so they collect the money from those private intermediates and invested in all projects. And they also said that Angel funds in the tender, principal instead. And then what happens is that they just catch up with our new leadership.

So lay achievements starting up achievement in two years got attention from our top governments. And then our national leader, when he visits, inspect Sanxi province, he visited this institute and he's saying that this is a good model. And then this gets supports firstly for Xi'an city government and then Xi Jinping provincial government. And later, actually, I participated, contributed a little bit. I contributed, I think, 300,000,000 Chinese yuan fund of

fund

investment to Lei Etiofang from Beijing City Garden. So in the year of 2015, after year of 2015, with the start rise of megafund and semiconductor, there is a wave of national venture capital. So this hot tech technology's definition and its promotion got recognition for central government. So it started a hot technology investment booming in China. So every local government could.

Local government is a very, very important economic engine in Chinese system. So they also tried the thrones of Angel Capital after 2015. So these hard tech movements absorb lots of such investment flow and then invest in those projects, they favor. So that is how this study. However, from my point of view, they are no hard tech enough.

That is related to one, I should say that Silicon Valley technology definition had gamma. Because Silicon Valley has a power to define which is technology, which is not. And they will lead to the resources allocation. However, many of the area they invest is some kind of hype type. For example, I actually just give example.

For example, I think that organic chemistry is very important and this would not pay attention to for decades in the West. Of course, in China, we are just production, but the new innovation in this area is reported. However, the Silicon Valley will define that, for example, synthetic biology is very popular, is sexy. So they just invest in synthetic biology. However, synthetic biology's production costs might be numerous times than the, you know, the goods, organic chemistry methods.

So for the heart attack movement, day which I'm not satisfied is that they still invest in lots following the Silicon Valley defined sexy area. Now it's clearly defined, have a concept that, okay, this area is very important. It's a strategy needed by our country, even for the human clients, the development is very important, so we should invest in that. No. So that is, they started this concept, but not good enough, but that is the process of a hard movement.

And related to the hard type movement promotion, so what we witness is that a regulation on the super IT platform, because at least in the late twenty ten, there is obviously signals that these IT platforms is producing monopoly. So I know that some many Western observers are confusing why our leader Xi Jinping was so harsh. You know, Jack Ma on Alibaba, including our leader, Reverend Tengson, on the year of twenty nineteen, twenty twenty. For example, there is top of IPO of the ARM Financial because we have realized that. If you only develop IT, you will only release to monopoly power on the e commerce and also the e finance.

So actually China is not so friendly in the consumer loans or activities through the IT. So the fintech is not very popular or even legitimized in China because China, including we have a harsh limits on crypto mining activity. We we actually stop it. So all these community, actually, there are many Chinese, but now they live overseas. So that is, you know, the phenomenon took place in after 2015.

Yeah.

So the the western version of the story is that, when Xi took power, he stupidly cracked down on people like Jack Ma, and he caused a kind of winter or depression for the most innovative Internet entrepreneurs, venture capitalists, financiers, fintech people. Many of these people left China or just took their money and ran.

Mhmm.

I think now only now people are realizing the flip side of that story is that lots of really important hard tech. Hard tech which allows China to actually control lots of key supply chains in the world, in the global economy Yeah. Were developed instead of those monopolistic Internet platforms. And the and the platform the monopolies were kind of held under control, by Xi. Yeah.

I think only just now are Western intellectuals or economic analysts coming to this realization? Whereas just a few years ago, the story was just China is a basket case now. Xi has ruined innovation in China. They were actually quite happy about this because they thought, oh, China will never catch up. And and now there's not there's very little venture capital in China, etcetera, etcetera.

So but I think people in the industrial party realize this ultimately is a victory for Chinese development, not not actually was not a bad set of policies from Xi. Is that fair?

Yeah. Well, I just say that, of course, there are different opinions in Chinese society. So some, I should say, some Chinese, including entrepreneur class, they have a similar view as you mentioned about, But usually, those entrepreneurs are not from especially high level manufacturing, it's maybe related from, for example, real estate sector, from the service sector, they might have similar They were treated Jack Ma as superheroes. However, Jack Ma was never only superhero in Chinese society. They are two sides of it, including the views on Tencent, Alibaba, and also, by the way, on TikTok, on Biden, awesome user.

That's different opinions. I can deal directly because Biden's founder is, you know, he comes from the same hometown from me. So when he's on TikTok, our hometown, middle school circle, we have a word. We say this app may have coins because, honestly speaking, it makes people addicted. So that the Internet development, the app development in China, we admit that it make people convenient in life.

Definitely, that is his job, his achievement. We thank him. However, we we have very early, we see the potential danger of monopolies in control. So China actually adopts, I should say, why they adopt the policy pre early preventing other risks? So if you look at the situation in in Russia, for example, I want my Russian friends that you should take care of those super APP because you will their business actually will very quickly go into the consumer loans.

By the way, they don't give the product company loans over. They only solely rely on consumer loans. And sometimes we will come into predatory loans. So, know, the people who was assassinated, Charlie Kirk, he was complaining about the predating loans phenomenon in The United States. In China, we have to do the earnings.

I always say that, why Charlie Gegan or, you know, Ke Kaoze, you go to China to see, you know, you criticize every day, you treat us as anime, but actually YouTube learned from this. We have early predict all of this and prevent all of this. So today Alibaba and Unfinancial was under control. It's kind of become a public welfare platform. So you should not earn super high profits through loans, consumer loans, but you provide universal accessible financial service to the ordinary people.

So that is a perfect, I would say, perfect integration with socialists and also Confucius, you know, Chinese traditions, Confucius' idea with modern So so so so that is my idea. Yeah.

I think the simplified way of expressing this is to say that in The United States, companies are allowed to become all powerful. And eventually, the companies control the government because the way our political system works Yeah. To rise to the top, you need to raise a lot of money. And you raise that money from billionaires and oligarchs and big companies. And so it's very tough to break up a monopoly even if it's an obvious monopoly because that company by that time has so much influence in government.

So in The US, the companies con the rich people and the companies control the government. In China, the government controls the rich people and the companies. Regulated.

I should say regulated. In Chinese history, we have lots of such story. If you threaten our regimes or threaten the emperor, you don't have good results. That is common knowledge in China. So you're rich people doing your job, doing your job properly.

And it's best that you not only enrich yourself, but also promoting locally, at least your hometown. So that is basic requirement. Got it.

So let's come back to we're I'm still unpacking. You said so many interesting things, like, ten minutes ago. I still wanna come back and unpack some. So Mhmm. Is it 2015, we had the made in China 2025 plan.

Yeah. That's right. Yeah. And you said you're more than satisfied with the rate of success that maybe 70% of the main goals in that document have actually been achieved. You and in fact Yeah.

Looking forward from 2015, you would have been, you know, very, very happy if they told you, hey. 70% of these goals are gonna be achieved. And I in fact, I think in your book, you actually anticipated a lot of the priorities of made in China 2025. So maybe just talk about that. So what for my listeners who aren't that familiar with the document, what are the main goals that were in made in China 2025?

What are the things they on and what are the things that they still need to work on?

So the Made in China 2025, they have a seven or eight, I don't remember, goals, industry goals, specific industry goals. So some of them are widely known today as such a new energy vehicle. It is most widely known, okay, BYD is the ATL, battery producer. And then it's new energy, and then it's so called liberal concept from Germany, even United States, that smart manufacturing is actually, don't like the word, okay? It's too hard, okay?

But for example, robotics, and actually something which had very usually ignored, machine tools, heavy machines, new materials, new materials including chemistry, organic chemistry, and also steel, metal, okay. And then of course, medicine, they call advanced medicine, medical machines, and well, there may be others, okay, I don't remember, but basically it's such a, of course, the rail technology, for example, high speed railways and components and so on. So this story actually started earlier than that. Some area of them has early launch demand, for example, speed rail. So that is a story that happened ten years ago, earlier in 2015, Brent, 2005.

At that time, our Ministry of Railway, Minister of Railway launched this and of course, firstly, it's integration of overseas technology. And then we integrated. And actually, by the way, it is very similar to what happens in electricity technology. That's because China is the only country who has huge investment on infrastructure in the railway network, just like the electric network before. So all the technology brought to China.

And then there's also a Chinese cadence of solve it and reinvent it. I think that the first area which Mark become the milestone is wave technology. And then almost at the same time, but a little slower, it's new energy vehicle. But let me tell you, it's not a story that starts smoothly from beginning to end. No, it's with the more you.

So actually for me, I followed BYD since 2007, 2008, 2007, 2008. So I personally witnessed how dramatic rise by how difficult and how many difficulties of stopping you get to overcome and the more you overcomes from this period. So in my heart, said one fund would have found WID as truly industry hero. And what happens on the I think this is a landmark achievements for 2025, maybe in 2025, is that in that year, there is a new mega fund founded similar to the semiconductor mega fund, which is at the fund I worked for once for five years. And it was formally run, put into operation in 2016, but the manual investment was decided in 2015.

So two of them, very, very important investment, one to VYD, one to CAPL. So that become a turning point for the China's EV industry chain, because before that, there's lots of dispute or arguments against it, whether they are fake or whether they are true. VYD was including its product, including its product, for example, they have E6 in 2011. That is the first Truly EV, which put into separation by BYD. And later on, there is Qing, first generation Qing.

I should say that first generation is not so beautiful. It's quite ugly. However so at a key point, when BYD is short of cash, that nation felt stopping. And then he raised the judgment of rent. And that time, BYD is already IPO, it's a populistic company.

The nation of venture capital just entered by I become the 10% leading investor among additional sale of the shares. And that's additional shares making CNY 15,000,000,000 to BYD. And the national venture capital took 10% of it. Because if there is no such national VC, say, I haven't first put this about this, and that time, this additional share sale with no buy. So you enter the industry at a critical moment.

And that is, I mean, the turning point, and you see that after local governments jumping and jumping in just like semiconductor story. And EVs develop faster than semiconductor because, honestly speaking, the industry trend of EVs simpler than semiconductor or than traditional car. So actually, I focus there could be a new cluster of EV industry, I mean, for upper three, forming in China. I have this feeling around 2017 and later I see, oh, truly, different company in Virgin, even on the one side, I treated the height topic, that is, you know, the self driving. So there is lots of, for example, laser, you know, components, and it used to be very expensive.

Today is super cheap today. So that is newest case of how China industry likes everything. Industry, mean, to, you know, very, very cheap and affordable industry components that could be used and achieve something, some function. And then for others area, I just give example of robotics and machine tool. So actually, at that time, I was a little unsatisfied because I think that machine tool is very important, but at the beginning, including the national investment capital, they are actually also dominant by the high value of Silicon Valley.

So at first, they pay very attention, little attention to machine tool. And Chinese machine tool industry used to be in very harsh situation over the year of 2015, actually. So this is in transition from state owned enterprises to private enterprises. So today, China's emergence, booming machine tool industry is all private, it's all private, very contrast to Western imagination. And robotics, it needs the key here is actually the key component, for example, the accelerator heat, you know.

So the robotics needs mechanical components, and that's manufacturing, it's pretty high precision, you know, griddling and cutting and all of these things. So China's good experience that we pay attention to these components. We have lots of several candidates who invest among our it's usually not in Beijing or Shanghai, it's at least in a suburb of Shanghai or even in Suzhou, in Wuxi, in Changzhou, Jiangsu, or Zhejiang province, or even in the land province. So you can find these Chinese new generation hidden champions there, and these national venture capital and provincial supported venture capital investment lists in the principal hard tax company support. And that's the support emergence of high precision machining and robotics, and machine tools research how the Renaissance, industrial Renaissance.

And on the medicine, I should say that it's a more complicated topic because there's two schools. One is that Chinese medicine, have positions in the new landscape. One, the other is, you know, not from political, but from science view that, okay, we should follow the Western medicine idea. For the innovation medicine definitely is almost 100% Western medicine. So they usually PhD come back from USA and Europe and come back and try to find the innovation medicine company, startup, and then got investment.

This become a hype fever, fever in the year of 2015, 2021. It got lots of money. And personally, I'm observing this, how to say, community, and I actually, I participate with some of the investment case here. However, I have my own view, but the results, to be pretty simple here, is that China's, on this end, this is actually a very high area in Silicon Valley. China also achieved success.

As you know that many big pharmas in the West is now buying IPs from Chinese startup, a bio star. However, China also have another group of health and healthcare called industrial weapons or health weapons on Chinese medicine oriented molecules. I'm also very familiar with the case. This area basically also satisfied the expectation in 2015, or beyond that. And another thing I emphasize is a cluster effect.

It's that industrial network cluster effect. This cluster will strengthen the results of achievements. For example, semiconductors, it really got beyond my expectation is because of this cluster effect. Maybe the research there is not the best talent. However, lots of people coming here and lots of new graduate from the correspondent nature coming, and that surely accelerated the R and D and also industrialization.

I think the biggest up stock over today, for example, in Silicon Valley today, there is another group of people who support division by Peter Thiel, okay, right wing accelerations. They have a similar emphasis, you know, on heart attack. Of course, they've always used military tech to become, you know, unreal and so on, to doing similar things. However, I think the biggest challenge for them is they don't have enough industrialization basis, particular industry network and cluster they don't have. And this cluster network is definitely in China.

In Yangtze River Delta, in Pearl River Delta, and also other areas, which the Western doesn't know. We know many cluster in the Innerland Province in China producing all those.

Good. Let me ask you two questions coming back to the state grid. So this traditional emphasis in China on developing its electrical capabilities. My impression is that in China, they've mastered ultra high voltage transmission, long range transmission.

Mhmm.

And the the stereotype or the I think the impression a lot of people have in the West is that solar is hype because of the intermittency problem, because the the sun is only shining some number of hours, and the grids here cannot handle this. You you have to build enough failover capacity so that when the sun is not shining or the wind is not blowing, you can turn on all this other generation. My impression is that because the grid is more advanced in China, they can reliably shift power around the whole country from Yeah. Very sunny Northwest regions to the Eastern Seaboard. So can you talk about what the general impression is within China about the future of solar and other renewable energies and how it interacts with the grid?

Firstly, let me talk a little bit about the development of state grids. Okay. It's actually not only technology development, also it is a key development strategy making process. There's also disputes. Mali is also integrated with some ideological bias.

So that ultra high voltage technology was decided by one super strong man in the state grid development, it's called the Liu Zhenya. Then Liu was called China's, you know, electric network emperor. He ruled this company, super company from the year, early twenty first century, when State Street was legally formed because it's a reform, result of reform of China's remittance of electricity. And then Rudi, I remember till 2014 or 2015. So Liu Zhenya personally decided that ultra high voltage should be adopted because of ideology.

In electricity technology area, they also have ideology. So ultra voltage technology was thinking to pro centralize. They also pro decentralized. So China's way is that because Liu Zhenyai is historically deciding the pathway, the different pathway to adopt this. But at the same time, we also adopted flexible transmission technology, and that become complementary to each other.

Basically, it's like this. I'm not a corporate expert, my imagine is like this, because that's for the new energy, yes, it's intermittent, it's usually interrupted by clowns, not only at night, night they shift the character, they need some kinds of strong greed to solve the impact of this change. So I think ultra voltage technology provides response for this network. And flexible, you know, in this big network, we could build up lots of energy reserve facility, not only chemical, but also hydro, you know. And then the flexible we're adding up some flexible transmission technology, so this becomes a super strong network.

And remember, the ultra voltage technology development and also the infrastructure development of our grid happened before the super surge of new energy installation in China. And that took place, I think, in 2007, 2008. And then it started massive building up already before 2015. And China, by the way, I should say that, Shuang is, in our view, that is truly speaking like an idiot because he's saying that China is not installing wind power. Well, we have lots of wind power.

If you could fly to China, you could see from a plant, you can see a lot of solar panels like sea or lake or oceans and also, you know, the wind power is started here, here, here, here. And that's actually start a theory, I think, after 2012. For wind power, it's even early, it's 2007, 2006, already building up. And solar is after 2011, 2012. And later, it's even further accelerated, think, during the COVID periods.

Because in COVID periods, are lots of new energy infrastructure installation in China. Every roof of the factories, every roof of buildings, even residential buildings, and not only like by this, but also, for example, the hills and mountains in the Southwestern China and also that's the Northwestern China, it's all covered by the solar panels. So China produced, China installed, actually, let me tell you, I want to push the overseas to global South countries. That is why I was doing the cooperating with our friendly countries. So that is the solar energy story.

But what I want to add is one thing is that the topic related to climate change topic. I know that you also interview some people in The United States on this topic. And also, you know that in MAGA, in the so called conservative, there is argument against this. My attitude is being both. So perhaps you have never seen a person who supports new energy and new energy vehicle, including solar, wind and BYD and Tesla, of course, I also support that.

But at the same time, I doubt about the climate change theory. I doubt about climate change theory. I don't think that it's true science. In this point, I'm a great Yeah.

Yeah. You and I you and I think the same. I support all of these new energy technologies, but I also think the climate models are not nearly as good as what the scientists who work on

this planet.

So there's huge uncertainty about what's gonna happen. If we don't solve the climate problem, we don't really know what's gonna happen. But I support all these technologies, actually. I think just purely on economics. I mean, if you have a highly functional state grid like the one in China, the cheapest way for them to add energy is actually solar and some of these renewable

Yeah.

Technology. Yeah. It just on purely economic grounds, it's gonna win, I think.

It is cost is now very low, even lower than coal power station. And actually, we even have to remind Russia that you have to prepare early because maybe we are no longer, firstly, your oil and data, though your gas may be not so. That's chemistry, chemistry, it doesn't absorb these raw materials. Otherwise for energy use, we don't need that.

Yeah, Exactly. The gas might be used not for energy, but as input into, production of

Chemistry. Yeah.

Okay. Another question for you. And if if this is not an area of your expertise or you don't have any special knowledge, you can just skip it. But when will China get EUV, extreme ultraviolet lithography? What rumors are you hearing about domestic EUV?

Well, I should say that's a that is a very specific, for example, milestone in the semiconductor development and many politicians and analysts in the West is focused on this. Well, my attitude is that just following my experience of the momentum it has gotten. Actually, for semiconductor, I'm not worried about it up to 2019 because even earlier in 2019, when many people still doubt about that, principally China's graphic machine, whether we can achieve that. If you invest some money and with the Chinese patent tool, you've got something. Because for example, AMN, Netherlands companies wise, is also not magic.

It is a rise, it's sound very top talent. Sometimes the top talent has the idea and is implementing something in net development on the list of graph machine tools, some Taiwanese, you know, patents, okay, emerge. All these ideas should be done. But many of such milestone, I mean, this very specific niche area, such innovation is, how to say, engineering level. So China doesn't have any problem of engineering level innovation.

And because there's so many, you know, talents, cluster here, I say just give chance to those, especially younger generation who has some idea and let him try. And then as a sister, you get this evolution very fast. So I'm not worried about this. In 2019, I think that is basically no problem. And by the way, I have say that on 2022, there is Biden administration's CHIP Act.

So we think that this market is also making a wrong way because they are focused on advanced processing. And now they have got realized that. I say that ordinary level processing is also very important because most of the chips, including our related to our daily life, including automobile, does not mean that, for example, seven nanometers, they don't need that. So we're not worried. And then for your question on this, simple answer is that I'm not worried about it.

Just Huawei leading to that and so on. Okay. And you could get results. Yeah.

Got it. Okay. Well, we've been on well over an hour. Let me let me finish up by letting you make some predictions. So what is gonna happen in terms of Chinese economic or technological development or in the competition between The US and China that will surprise Western analysts?

What what's a surprising prediction that you believe in?

Because of the trends, how does it define what is high technology, what's not? So they ignore many of us fact of what China is good at and China dominant world today. For example, they're concerned about real earth issue. Let me tell you, I think there's 100 real earths area. Actually, if China won't, and China leadership knows about it, at least 100 Trump's candidates area, we can have impact on The United States.

So I think that China is basically a house of sight, on the way of quickly development, and also including making some new areas, totally new areas of technology development. And that's, in general, I think The United States should know more about, understand more about China, particularly those MAGA people. I mean, for example, Tycho Carlson, she should not focus on the so called, his rumor that Lisa Zhuo Gang, The United States, she come to China to see what is happening and learn from something that you can study, learn from here. And then go back to think about renineralization. That is the area we didn't touch much about today.

I think United States still have some chance on there, but study from some simple area, basically my thinking. And also for me, personally, what I promote here, that is China's goal, we should consider, because I think globalization is over. At this point, I'm very similar to other people. So on China side, I'm thinking about China's strategy, so we build global south. We should build up Chinese, including our economic financial circle here, economy circle, and making them to industry, not maybe at least development, okay?

They can never achieve what China has achieved on industry now because China is a super large country, but they can join this network, join this circle, and then I should say artificial market could be created and those imagination of oversupply in China. So because of logic today in many of the including the MAGA elite is that we just waste time. And then we could get suffocate, this Chinese industry, making it not able to export. Well, I just say that don't expect too much on that. So the Western consumer market is the gods of Chinese industry.

We could invent its own markets in global stocks if And it also in China, actually, China's living standard is also quite modern if you come to China. So that is our size promotion. Okay.

Do you think the Trump administration learned through this tariff process that they actually cannot win a tariff war against China? Do you think they realize that now?

I think they realize a little bit, but still they have hope on the tariff strategy. But on my opinion, tariff strategy totally uses. We have 100 early real earths area to implement if he again runs tariff war.

Yeah. Okay. Final question. Ten years from now, if I put a million dollars into the Chinese stock market, in ten years, will I will I outperform the S and P 500?

Well, that is I think that is only area which I would say probably not, because that is related to how to say that the different national strategy. Of course, China today also pay attention to the, how to say, the positive side on Chinese stock market. For example, some companies, including I believe BYD, still have lots of potential to grow. If you're thinking about financial return, if Chinese yuan not appreciate against that stock, I mean, could you keep the exchange rate stable or 6%? By the way, I think that is not good because actually that is a result by some pro Western financial elite in Chinese Central But I have say that America's stock market performed so well because it's kinds of, not actually conspiracy, but everybody's pushing United States stock market go up, up, up, forever.

However, for example, really communist support The USA stock market is not good. So the same, for example, even a company which is much smaller than Chinese counterparts, he's enjoying very, very high valuation in U. S. Stock market. So if you are printing money or creating currency to raise up the stock market and by the way, that is still relying on U.

S. Dollar still as a hegemonic currency globally. How can China play on that on stock market? So but in China's side, in Hong Kong, our ruler side is that it's maybe net number one important. Okay, we could make Chinese stock market reasonable growing up.

And some of the good companies, for example, BYD or Cambrian or some of these companies, SMIC, they could grow up and maybe new companies grow up. And not only on this high value, but also, for example, on real economy, on special steel, on chemistry, we could have a similar good job done on companies, but we don't pursue that seven sisters in The United States, okay? That is unhealthy actually. That widens the society's wealth gap, Okay? So that is not the good things.

They're only making the oligarchs richer and richer in United States. So that is basically my theory on this.

Okay. But you didn't answer my question. So you have a million dollars and you have to either put it into an index for the Chinese market or the S and P 500, and your children are gonna get the benefit of the returns. Which

That is from your point of my criticism. My suggestion there, the for the if you want to invest in China, just invest on a Chinese very trustful company like BYD. You just put 100% on BYD. I think that's a good choice, not on A, index share, Okay. Because I know it is just it's just fluctuating something like this.

You know? I I have two big positions in Chinese equities. One is BYD and the other one is Alibaba. I

both Alibaba. Okay.

Both have done well for me in the last couple of years.

So Okay. Alright. Yeah. Yeah.

John Lian, thank you so much for your time. I'm sure my audience enjoyed hearing from you. Hopefully we'll have you back on the show again sometime in the future.

I'm looking forward also to discuss other topic in future.

Great.