China Biz Talk - Baiguan Radio

Welcome to Episode 35 of Baiguan Radio. Today, Robert had another chat with Johnny of East8’s Newsletter again to talk about several important issues including:[01:00] Anti-involution campaign: a new policy paradigm[14:00] Childbirth subsidies[19:25] The new mega project in TibetCurate Transcript: Key Viewpoints and InsightsThe Anti-"Neijuan" (Anti-Involution) Campaign: A New Policy Paradigm[00:01 - 00:03]China is experiencing an unprecedented shift in economic policy with the emergence of "anti-neijuan" (anti-involution) as a major government focus. The term "neijuan," originally internet slang describing excessive competition that leads to squeezed margins and deflationary spirals, has now made its way into top-level policy documents and become a key governmental priority.This campaign is visible across multiple industries. In the solar and steel sectors, authorities are actively addressing overcapacity issues. The food delivery market provides a particularly striking example: major e-commerce platforms like Alibaba and JD.com recently engaged in an intense subsidy war to compete with the dominant player Meituan. Just days before the podcast recording, these platforms issued what the hosts describe as almost a "truce," agreeing to pause their subsidy war. As Robert notes, "it's as if there's an invisible hand behind all of these, just pushing the spirit of anti-neijuan from all corners," which he calls "pretty unprecedented."Central vs. Local Government Dynamics Drive the Problem[00:04 - 00:06]Johnny provides crucial context explaining that the over-competition problem stems from misaligned incentives between central and local governments. He points to President Xi's rare direct criticism, noting that "whenever local governments started to invest right now, it's always AI, electric vehicles, or data centers." This represents unusual transparency from top leadership about policy coordination failures.The root cause lies in local officials' promotion incentives. Johnny explains that "in the past, different local governments, their officials trying to get promoted or considered the KPI to be related to these industries that are hot such as AI, EV, and et cetera. And so it's very natural for them to expand the capacity locally to develop these industries." Meanwhile, "the central government has very little oversight or industrial policymaking to actually persuade some of the provinces not to get into these industries."Johnny emphasizes that individual companies aren't the villains here: "The companies are just doing what they could to compete in the market... these individual actors are acting very rationally. It's only because the government is not doing the right policymaking in the past, and now they're trying to make up for it."Implementation Challenges: The Prisoner's Dilemma Problem[00:07 - 00:10]The transition from a production-focused to a balanced economic model faces significant structural challenges. Robert observes this represents a fundamental shift for China, coming "from an era of scarcity, so everything is scarce, so it's better just to produce more. But then there's danger in that."Johnny identifies the core implementation challenge using game theory: local governments face a prisoner's dilemma where "if you are the only actor that cuts in this game and the other provinces continues to produce, then you are the one to lose." This creates a coordination problem requiring "a centrally coordinated effort trying to limit the amount of production for all the provinces in order to make this work."The EV industry exemplifies these difficulties, with Johnny noting "the damage is already done. There's just been too many EV manufacturers in China, and the over-capacity issue is just gonna stay on for quite a while. Once the market competition started, you cannot turn it off." Different industries present varying levels of complexity - while food delivery involves only "three to four actors," making coordination more feasible, the EV sector is "much, much more complicated in terms of trying to slow down the production or limit the overall capacity."Market Response and Investment Outlook[00:11 - 00:14]The anti-competition campaign has generated positive market sentiment, with capital markets experiencing what Robert describes as a "mini bull market" because "anti-neijuan, anti neijuan is great for capital holders." However, Johnny provides a measured perspective on market prospects.While acknowledging that "the overall index has been up 30%" in Hong Kong markets this year, Johnny notes this comes "from a very low base." He expresses cautious optimism: "I wouldn't call it like it's gonna go down right now. I just also don't think so. I think it's gonna stay at the current level, maybe up a little bit, maybe down a little bit to the end of this year."For sustained market growth, Johnny believes "you do need to have some more policymaking," pointing to recent birth subsidies as an example of the type of demand-stimulating policies needed.Birth Subsidies: A Demand-Side Policy Shift[00:14 - 00:19]The government has introduced a new birth subsidy program providing 3,600 RMB annually per child, which Johnny considers "quite significant" because it represents "a blanket subsidy" rather than previous policies that only covered second or third children. This universal coverage means "a lot of families getting subsidized" including those who "just have one kid and initially they're not getting covered in this scheme."While the amount may seem modest - Robert notes that "for people in the bigger cities, it actually doesn't mean anything, but maybe in the smaller places it actually means a lot" - Johnny sees it as "just a start" with potential for local government competition to enhance benefits. He anticipates "some local measures taken out just to promote their individual localities further" and suggests "longer maternity leave or even paternity leave for families" as more impactful future measures.The Tibet Hydropower Project: Technological and Geopolitical Significance[00:19 - 00:26]The announcement of a 1.2 trillion RMB hydropower project in southern Tibet represents both technological achievement and strategic positioning. The project, designed to produce three times the energy of the Three Gorges Dam and equivalent to "almost about 20% of the power production in China," will create a new state-owned enterprise specifically for its management.Johnny explains the project serves dual purposes in "the race for productivity" including "data centers and AI" which are "heavily conditioned upon if you have enough electricity to power these," while also addressing "geopolitical reasons" in a region with "territorial dispute between China and India." By placing major economic projects there, China demonstrates it's "very determined to at least be involved in this matter."Robert highlights the technological breakthrough this represents, explaining that unlike traditional dams, the project will involve "boring into the mountains" with "several gigantic tunnels" to create underground waterfalls for power generation. He notes that China only recently achieved technological independence in tunnel boring machines, which are expensive, single-use equipment that "have to be scrapped" after each project. This represents "one of the many technologies that China have obtained and perfected over the last few years, which make this kind of project possible." This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

For a curated, reader-friendly transcript, read here.Highlights[00:56] US-China "truce" and the aftermath[09:31] Roll-back of Biden's AI Diffusion with warning letters against China[19:28] China and Latin America are getting closer[24:59] The new rules encouraging M&A activities This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

[01:16] US-China trade talks[08:06] US-UK trade deal and rewiring of global trade systems[09:39] India-Pakistan air combat and the role of Chinese weapons[16:45] Victory Day parade in Moscow[19:38] New stimulus policies in China[25:40] CIA’s promotion video[29:36] April’s surprisingly good trade data This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

[01:23] China’s openness to talk about tariffs[12:18] Top leadership on AI[19:24] “Five-Year Plan” as China’s industry policy and the upcoming 15th FYP[27:01] China lifted sanctions on the EU’s MEPs, paving the way for a bigger China-EU deal?[31:05] Labor Day holiday crowds This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

Welcome to a new collaboration episode between Baiguan, Zichen Wang of Pekingnology and Johnny Zou of East8’s Newsletter. It has been several weeks now since we shared our thoughts on the important events of the past week. In this episode, we cover: [00:41] Robert’s experience of publishing an opinion piece on the New York Times discussing China’s resolve in the trade war.[06:32] Significance of China halting Boeing deliveries[8:08] Jensen Huang’s China visit: Is it a slap on Trump’s face, or is Jensen actually the “go-between”?[17:13] Bloomberg’s story about China’s willingness to talk, with certain preconditions. How true is that?[19:14] Reshuffling of top China’s trade negotiator: what does it mean?[21:00] The end of “high-sea fishing”?[29:05] Xi’s Southeast Asia visit This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

Welcome to another collaboration episode between Baiguan, Pekingnology’s Zichen Wang and East8’s Johnny Zou. Highlights[3:30] Did Trump plan for all of this?[12:42] Optimism about China-EU relationship[21:06] Pessimism about China-EU relationship[23:10] Will China see Trump’s “electronic exemption” as a chance to soften its stance?[27:13] Who in the Trump team can actually call the Chinese side now?[30:31] The hope for China’s domestic demand policies[35:11] What’s the right policy to boost domestic demand?[39:58] Where does the money to boost domestic demand come from?[47:01] Are Chinese assets in the US in danger of confiscation? This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

This week, Zichen Wang of Pekingnology and I are joined by Johnny Zou, a leading Hong Kong-based venture capitalist who also writes at East8’s Newsletter (#97 rising business Substack right now, previously known as MJ Finance). We discussed last week's most important news item: Trump’s tariff war and its implications for China.Highlights[00:46] Tariff, first impressions[09:46] Is the US underestimating China?[15:00] How would middle-powers from Japan to Vietnam respond?[22:44] Will China have closer integration with the rest of the world or more trade friction?[29:27] Investment strategy post-Liberation day[35:48] How will this affect China’s domestic demand[40:02] SCMP’s science reporting[40:54] Johnny: We shouldn’t ignore RCEP, which could be important for this tariff war This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

Hi everyone, welcome to another collaboration episode between Pekingnology and Baiguan.Quick notice: we heard some complaints about the audio quality of our previous episodes recently, and so we have made special efforts to improve the experience this time. We hope you enjoy it better!Summary[00:52] Xi met global CEOs[04:25] What’s more serious for foreign businesses in China, organic domestic competition or the alleged policy discrimination?[10:00] Some Western firms (such as top consulting firms) are facing pressure at home to do business with China[12:06] There is also discrimination against local businesses, benefiting the foreign businesses.[15:22] Bo’ao and the discussion to increase pension payments for farmers[21:12] Trump's tariffs on all auto imports and their indirect impact on China[25:20] SOE automaker consolidation policy, as a counter-argument against the idea that China’s EV sector was successful mainly because of government support[27:48] The US is doing it wrong when it comes to supporting its own auto industry[30:57] IShowSpeed[36:23] A great book by Zhou Bo, a former Senior Colonel of the PLA, making a case for peace and for China to get rid of the mindset of victimhood. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

Hi everyone, welcome to another collaboration episode between Pekingnology and Baiguan. Quick notice: we heard some complaints about the audio quality of our episodes recently, and so we have made special efforts to improve the experience this time. We hope you enjoy it better! In this episode, you will hear about:[01:32] Zichen Wang’s observations during his study at Princeton[04:40] The ongoing controversy regarding CK Hutchison’s Panama ports sale [20:16] New top-level policy on boosting domestic demand[27:03] China Development Forum[29:16] Will Xi and Trump meet soon? This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe

Timeline[00:56] Two Sessions[03:31] Birth subsidies[06:33] 1-trillion-yuan state VC fund[11:33] China’s new tariff on US agriculture[17:32] Trump’s impact on stock market confidence[19:47] Significance of TSMC’s $100b investment in the US And a small announcement here. I have started a new newsletter called Paid Sub, where I will discuss China’s market intelligence, Data-as-a-Service, professional knowledge and paid content industry in China - basically the industry I work for and have dedicated my life to. It will be an interesting industry publication if you are also working in our industry.In the first article just published today, I discussed the main difference between China and the West in our industry: This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.baiguan.news/subscribe