May 2024
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?HOW CHINA MADE A DIFFERENCE THIS MONTH
“REORGANIZED CHAOS”
On May 14, 2024, President Biden announced plans to impose new tariff increases on $18 billion worth of Chinese imports under section 301 of the Trade Act of 1974. The U.S. aims to significantly raise tariffs on a dozen strategic products from China, targeting industries where Chinese companies have out-innovated U.S. brands or surpassed American production capacity. These industries include electric vehicles, battery components, facemasks, and medical syringes.
Section 301 authorizes a US President to take tariff actions to address Chinese trade practices like government subsidies and overcapacity. This mechanism allows the US to bypass WTO rules using Section 301. Trump extensively utilized this section to address trade issues with China.
Before becoming President, Biden criticized Trump’s 2018 tariff strategy, arguing it would harm American consumers and farmers more than it pressured China to change its trade practices. However, as we approach a heated campaign between Biden and Trump, both are keen to demonstrate their toughness on China, leading to further trade tensions.
This protectionist policy aims to prevent cheaper, better, and greener Chinese products from reaching US consumers and hospitals. The actual impact on Chinese exports may be minimal, as Chinese EVs and batteries are scarcely sold in the US. Other products on the list, such as medical gloves, facemasks, or needles, have profit margins high enough for Chinese manufacturers to absorb the tariffs. Given the daily import of $1.55 billion in Chinese products into the US, the partial economic effects on $18 billion worth of products are unlikely to significantly impact the China-US trade balance.
The greater risk is that the US and China are heading towards a full-blown economic war that could escalate into a global geopolitical conflict. Europe's response is crucial. If Europe decides to impose 25-30% tariffs on EVs this summer following an anti-subsidy investigation started in October 2023, China’s rising trade tensions with the US could quickly extend to Europe as well.
In my book "Can We Trust China?", I argue that Brussels will likely prioritize saving jobs and companies in the automotive industry over accelerating a clean energy transition with Chinese products. The EU doesn't seem overly concerned about retaliation from China, which has so far been relatively restrained. This might be a calculated risk as I trust Beijing will continue to target a handful of symbolic US and EU brands to make their point, not to fuel the trade war. But it surely must cause sleepless nights for CEOs of companies like Boeing, GM, BMW or BASF.
China’s masterplan is not to stoke the trade conflict, but to reprioritize more on high-tech product exports towards the Global South while importing oil, gas, minerals, and agricultural products from that region. Nations in the Global South, with fewer high-tech companies and jobs to protect than Europe or the US, will welcome China’s investment in building up their high-tech capabilities, and embrace China’s more affordable high-tech consumer products.
Xi Jinping's recent speech at the Ministerial Meeting of the China-Arab States Cooperation Forum (CASCF) in Beijing underscores China's plan to shift high-tech trade and innovation collaboration to the Global South. With the new tariffs imposed by Biden, China has reached a pivotal point in its ambitious plan to co-create a new world order: “to work with the Arab Side (read: every nation of the Global South) to jointly champion an equal and orderly multipolar world and a universally beneficial and inclusive economic globalization, and set a model of South-South cooperation on global governance.” – Xi Jinping.
Protectionist measures from the US and EU against China will only escalate trade tensions, disrupt global supply chains, negatively impact EU and US consumers, and force Chinese companies to redirect their focus towards more friendly markets in the Global South. This marks a “point of no return” towards gradual de-globalization with China in the Global North (termed "de-risking") and accelerated re-globalization with China in the Global South.
In the future, we may find ourselves wondering how Chinese high-tech brands managed to become the preferred brands in major growth markets outside the West. While EU and the US may retain some old jobs, they risk losing most new markets, inadvertently aiding China's strategic growth.
Bipolarization is becoming the new normal in geopolitics, ideologies, security, technology, and trade. Global institutions such as the WTO, World Bank, IMF, OECD, International Criminal Court, UN, and G20 are losing their influence, failing to dissuade members from following or opposing the costly and risky path set by the US. Every nation is starting to make their own choices more independently.
This shift towards bipolarity threatens to harm the global economy and increase danger. Twelve years under the Trump and Biden presidencies will have reshaped the world order into a new realm of reorganized chaos, where order prevails within the Northern and Southern hemispheres, but not between them. ?
CHINESE INNOVATION NEWS – MAY 2024
1. China rolls out ‘Chat Xi PT’ large language model based on Xi Jinping Thought – or not?
2. China finds anti-ageing component that can be extracted from bodily fluids to extend life
3. By 2042, CATL will no longer need to mine new mineral materials
4. China creates US$47.5 billion semiconductor self-sufficiency Big Fund III
5. Chinese scientists create world’s fastest vision chip for autonomous cars,…
6. Huawei patent reveals 3nm-class process technology plans
7. Chinese scientists achieve quantum breakthrough
8. China Generative AI updates April 2024
(Click the links in titles below to read a larger news article on each topic)
I am starting with a story that was reported by various English-language newspapers claiming that China is launching its very own Xi Jinping AI chatbot, “Chat Xi PT.” If the South China Morning Post writes about it, I could not resist but read it instantly, as I often use SCMP as a source for this newsletter about the state of AI in China.
I was overcome with an insatiable curiosity to know how dystopian this would be. The Financial Times called the application “China’s latest answer to OpenAI” and notes that “Beijing’s latest attempt to control how artificial intelligence informs Chinese internet users has been rolled out as a chatbot trained on the thoughts of President Xi Jinping.” Wow!
I was truly terrified that a television or radio channel in Belgium would call on me to comment on air about “Chat Xi PT.” Luckily, shortly after, China expert Manya Koetse wrote a sensible response in her biweekly publication Whatsonweibo . I can definitely recommend subscribing to it if you want to stay updated on what Chinese people are discussing on Chinese social media.
Manya’s research unveiled that this so-called, supposed “Chat Xi PT” application is nothing like what the clickbait title suggests. The application is not primarily centered around Xi Jinping Thought but rather emphasizes Cyberspace Administration and digital governance. It is no rival to ChatGPT as it caters to a specific group of users engaged in specialized research or operating within certain knowledge fields. The application primarily showcases the Modernization of Cyberspace Authorities and there is really nothing “new” about the application. It is based on existing LLMs and functions as a tool for navigating databases and information in the AI era.
As Manya Koetse concludes: “There is no such thing as Chat Xi PT!”
Imagine living to be 130 years old – would you be interested? If it meant staying in good health, most of us would eagerly sign up.
Back in December , I wrote about a hydrogen therapy developed by Chinese researchers that could potentially reverse age-related changes in the body. Now, Chinese scientists have made another breakthrough: they've identified an anti-aging component in the blood of young mice. In their study, the longest-living mouse reached up to 1,266 days, which is comparable to 120-130 human years. Male mice, typically living up to 840 days, were given weekly injections of this blood component. The results were striking – a 22.7 percent increase in lifespan to a median of 1,031 days. Additionally, these injections improved age-related declines in the hippocampus, muscles, heart, testes, and bones.
The idea that blood exchange therapy might reverse aging has been debated for decades, raising ethical questions and safety concerns, particularly from the FDA regarding young plasma infusions. However, the lead scientist of this seven-year study, Chen Xi, suggests that if developed, this treatment would likely be in drug form rather than direct plasma exchange. Chen emphasized that this research is just the beginning. Many questions remain, such as identifying the specific cells that produce the small extracellular vesicles (sEVs) responsible for increased lifespan in mice.
Considering these advancements, one might wonder how China plans to address its huge demographic aging issues if its population starts living longer, healthier lives.
China often faces criticism for its mining practices in Africa and other regions. Mining is indeed a challenging industry, and China engaged in it aggressively when Western countries were more hesitant. However, as minerals for batteries have become the 'new gold rush' essential for combating climate change, China gained an early lead advantage.
Contemporary Amperex Technology Co. Ltd. (CATL) is now the world's largest producer of electric vehicle (EV) batteries, holding a 37.4% share of the global EV battery market. While CATL is not the largest miner, its CEO, Robin Zheng, is committed to working with sustainable and responsible supply chain stakeholders. His efforts are positively transforming the world and the planet.
At the World Economic Forum in January 2024, Zheng highlighted that China leads in battery recycling technologies. This advancement is crucial for addressing battery material shortages, as the demand for critical materials might increase fivefold over the next decade.
CATL currently has the capacity to recycle up to 99.6% of precious metals such as nickel, cobalt, and manganese, and up to 91% of lithium, surpassing Europe's recycling capacity of 70 to 80%. Last year, CATL recycled 100,000 tonnes of waste batteries through its subsidiary, Brump, to create 13,000 tonnes of lithium carbonate. By 2042, Zheng believes China will no longer need to mine new mineral materials due to its mature battery recycling market.
I agree with Robin Zheng that the geopolitical blame game regarding China's battery and EV overcapacity is counterproductive. If we are serious about combating climate change, we should welcome China's EV manufacturing capabilities and appreciate CATL's willingness to share its technologies and help overseas carmakers address their battery shortages.
领英推荐
I highly recommend watching Robin Zheng's speech at WEF24, where he discusses the importance of global cooperation to decarbonize the planet and the role of CATL in providing recycling technology worldwide.
Additionally, an interesting related article discusses a study by Chinese scientists who have developed a 'water battery' that can hold much more energy than lithium cells and is safer. Embracing Chinese battery innovation is crucial for our collective progress.
China has intensified its efforts to achieve self-sufficiency in the semiconductor industry by establishing its largest-ever chip investment fund. The third phase of the China Integrated Circuit Industry Investment Fund, commonly known as the "Big Fund," was launched in May with a registered capital of 344 billion yuan (US$47.5 billion). This fund is comparable in size to the US$53 billion in incentives provided by the Chips and Science Act enacted by President Biden in 2022.
The original Big Fund was launched in 2014 and has been Beijing's primary investment vehicle to support the semiconductor industry. Initially, the Big Fund raised US$21.8 billion in 2014, followed by an additional US$29 billion in 2019, and now US$47.5 billion in 2024. Despite its significant contributions, the program has been marred by corruption scandals and has faced criticism for its lack of accountability and inefficiencies driven by political motivations.
Zhang Xin, the current president of the Big Fund, has emphasized transparency and effective investment as key priorities, indicating a shift towards better governance practices. While inefficiencies and politically motivated allocations are common in large-scale funding, whether in the US or China, the establishment of Big Fund III demonstrates China's commitment to enhancing its semiconductor self-sufficiency.
Researchers at Tsinghua University in Beijing have announced the development of the world’s first brain-inspired vision chip, named Tianmouc, which could have extensive applications in autonomous vehicles and defense. This groundbreaking chip boasts a record-breaking image processing speed, achieving high-speed sensing of up to 10,000 frames per second, a dynamic range of 130 decibels, and exceptional spatial resolution.
The chip reduces data flow by 90% compared to traditional high-speed imaging chips and consumes less power. It strikes a balance between speed and dynamic performance in vision chips and introduces a novel computational method distinct from existing machine vision strategies. This method mimics the human visual system's dual pathway, enabling decision-making without complete clarity. It analyzes visual information along two pathways: one for cognition and another for rapid response.
Tianmouc has achieved a delay of just 0.1 milliseconds in autonomous driving, which is only 1/300th of the 30-millisecond delay experienced with traditional cameras. This innovation could position China to lead in the new era of large-scale self-driving technology.
Earlier this year, when Huawei and SMIC patented self-aligned quadruple patterning (SAQP) lithography methods to produce advanced microchips, many assumed they were focusing on 5nm-class fabrication processes. However, it appears their ambitions extend further, as Huawei is now aiming to use quadruple patterning for 3nm-class manufacturing technology as well.
SAQP works by repeatedly etching lines on silicon wafers to increase transistor density, reduce power consumption, and enhance performance. Experts suggest that while SAQP may enable China to produce 5nm-class chips, extreme ultraviolet (EUV) lithography machines will be crucial for maintaining long-term competitiveness beyond these nodes. Unfortunately, Huawei and SMIC do not have access to advanced EUV lithography tools like those from ASML.
The use of quadruple patterning for 3nm-class nodes was unexpected by industry experts. The main challenge will be achieving high yields, and although the cost per 5nm or 3nm chip using SAQP is likely to be higher, making it less feasible for commercial devices, the method is essential for China's progress in semiconductor technology.
Interestingly, a year ago, very few semiconductor experts believed that Huawei could develop 7nm chips without EUV technology from ASML. Yet, they achieved this milestone, and the industry was again taken by surprise in March when Huawei announced the production of 5nm chips. It will be fascinating to see how experts react now that Huawei is matching the most advanced 3nm chips currently produced primarily by TSMC in Taiwan. How did Huawei and SMIC manage to leap three generations in just nine months, a process that usually takes decades?
In May, Chinese researchers achieved the fractional quantum anomalous Hall state using photons. This state, first discovered in 1981, typically involves the behavior of electrons in a special material under a strong magnetic field. Traditionally, studying the Hall effect required stringent experimental conditions, such as extremely low temperatures and high-purity materials. This new approach, however, uses photons instead of electrons, thus overcoming these limitations.
According to the researchers: “The fractional quantum Hall state is akin to turning light into an incompressible liquid. This represents a completely new manifestation of the quantum matter state. The design involves placing a single photon into a photon box, which the Chinese scientists have named 'Plasmonium.' This box confines a photon and prevents a second photon from entering once the first one is confined. Essentially, photons can be used to repel each other like electrons. This method allows for a more tangible and observable study of the fractional Hall state, and it can be used as a basic unit to expand and create more and different quantum states that do not naturally exist. By using it as a unit, they can develop more practical, fault-tolerant topological quantum computing for the future.”
8. China Generative AI updates of May 2024
In a podcast from the Flemish Television network (VRT), I shared my perspective on China's evolution in AI and Generative AI. I discussed how China views AI not merely as a tool for efficiency or cost reduction but as a strategic initiative to upgrade its industries. The goal is to position itself as a smart solution provider across numerous sectors for the global south and beyond.
Zhipu AI, one of China’s leading emerging generative artificial intelligence (AI) start-ups, began developing its own text-to-video large language model (LLM) before OpenAI showcased video clips created by Sora in February. They now aim to release "high-quality text-to-video tools" comparable to Sora, with plans to launch as early as this year.
NVIDIA’s H20 is currently the most closely watched chip, being the most powerful NVIDIA product sold in China. Interestingly, the chip is being sold at discounts exceeding 10% compared to Huawei’s Ascend 910B, which outperforms the H20 in several key metrics.
Huawei’s self-developed 910B Ascend chips have rapidly proliferated across various industries in China through “AI boxes” – all-in-one machines that integrate AI chips, industry-specific algorithms, and pre-trained large AI models. The Ascend ecosystem boasts 40 hardware partners, 1,600 software partners, and 2,900 AI application solutions.
Tencent launched Yuanbao, an AI assistant built on its Hunyuan large language model (LLM). Yuanbao can analyze and summarize documents, provide questions and answers, and generate texts and images, similar to the functions of OpenAI’s ChatGPT.
Bytedance’s top AI expert Yang Hongxia has left the LLM R&D team to start preparing for her own AI projects. Separately, Fu Ruiji, a tech leader at Kuaishou’s Knowledge Graph and LLM projects, has also departed from the firm to prepare for an AI start-up project.
Alibaba Cloud announced a 97 percent price reduction on its Qwen-Long large language model (LLM). Baidu’s LLMs are now available free of charge for all enterprise users. ByteDance’s Doubao LLMs will be priced 99.3 percent lower than the industry average for business users. iFlytek has made some versions of its SparkDesk LLM free or five times cheaper than similar products from competitors. Additionally, Tencent’s Hunyuan-lite model is available for free.
Baidu’s Robin Li observed that in the US and Europe, the focus is on developing cutting-edge foundation models. In China, although there are also hundreds of foundation models, the conversation is increasingly shifting towards identifying the super app for the AI age, or determining what the killer app or AI-native app will be.
I highly recommend watching this 16.5-minute video to understand the differences between China and the US, explained by Jen Zhu Scott and Kai-Fu Lee. In simple terms, China is leading in application development, unmatched by others. Former Google China CEO Kai-Fu Lee announced his new LLM, Yi-large, which compares to ChatGPT-4 in performance. Remarkably, he noted that a year ago, their LLM was eight years behind ChatGPT, and now it has caught up. He also mentioned that China’s shortage of GPUs has driven its AI companies to create more efficient, smaller LLMs with the best user experience. I particularly appreciate Jen Zhu’s insight on the future of LLMs and China’s 'smaller is safer' approach compared to OpenAI’s 'bigger is better' philosophy: 'You don’t get to Mars by building larger and larger buildings.' With the cost of inference dropping tenfold each year, the proliferation of GPUs, models, agents, and apps running at different scales will be key to the development of AI applications.
If you know of any other breaking China innovation news from May 2024 that I missed, do let me know so I can add it in next month’s newsletter!
STAY TUNED!
Speaker Geopolitical Strategy, Economy, Energy Transition, Europa Draait Door, Podcast NPO Radio 1, Boekestijn en de Wijk radioprogramma en podcast bij BNR, Associate Professor UU/UCU IR, VO ABP, AIV, RvT HS Leiden
5 个月Great articles Pascal!
Subject matter expert in HPLC, CMC, and pharm analysis. PhD in analytical chemistry. Author of bestseller HPLC book and 130 articles.
5 个月Pl correct $18 trillion to $18 billion
*给领导辅导改变管理。*中外商业文化指导
5 个月Makes quite some interesting reading
TUM MBA, China, Strategy, Technical Compliance
5 个月Thank you Pascal!