Foreign visits to China soar over 200 % as tourists flock to Chinese New Year celebrations.
Microsoft's CEO freezes the Chinese AI model DeepSeek calling it real innovation and all -good news.
China has built a multibillion -dollar EV industry.
How is it reshaping the global auto market?
Welcome to Road Today, the Spring Festival edition.
I'm good Ana in Beijing.
To listen to this episode again or to catch up on previous episodes, you can download our podcast by searching Road Today.
Foreigners are flocking to China to experience the festive spring festival atmosphere firsthand.
hand. Chinese online travel service Trip .com says inbound travel orders from foreign tourists have surged by over 200 percent during the festival.
To talk more on this and China's spring festival holiday column, let's have Professor Liu Baoqiang, director of the Center for International Business Ethics at the University of International Business and Economics.
Professor, we've seen a massive surge in foreign visitors to China during this spring festival.
travel. Over 200 % more travel bookings.
What do you think is drawing so many international tourists to experience this holiday here?
First, there has been a pent -up demand due to the long tail effect of the pandemic.
And now, there was more of the convenience provided by free visa connectivity, and particularly by the direct flight, and also, with a cost reduction of flying Air China, then the big travel experience taking Chinese bullet trains.
So this can really provide a big attraction.
The other is that we notice a new trend that many foreigners visit China, they also do their live -streaming and to show their personal experience and to compare the different experiences over the past travels into China.
So this also gave them a lot of traffic for them to spread at the Chinese culture and elevates their own image.
Well, the other issue is that many creative products are being created for traveling in terms of the entertainment and by utilizing of the digital economy, by attracting more of the segmented audience into particular cultural relics.
That can also serve a quite appalling effect for foreigners to visit China.
China's visa -free policy has been expanding, and we are seeing more visitors getting a first -hand look at real China, often quite different from what's portrayed in their home media.
Then from this perspective, what impact do you think this has on how Chinese culture or today's Chinese understood globally.
This is really part or parcel of Chinese large open -door policy also by the Chinese central government to provide people -to -people exchange opportunities.
And more of those visitors are granted with a free visa to travel conveniently into China.
That shows trust -building process between those visitors and the China as a whole.
It also shows that China plays great emphasis on promoting not only tourism, but also the Chinese culture on a global basis.
Many foreigners still feel that China is an oriental myth, and the more intriguing part is that why ancient China can really turn out such a new look within only a few decades.
So that's some sort of mystery they really want to discover the solution behind it.
And the other is that China is not having abundant supply of all the global resources from fruits to any type of convenience that they might provide.
They can travel more freely and without any type of restrictions.
Very basically, traveling in China, everyone says, is the safest part in the world.
So this is really the precondition.
And not to mention more of the cultural attractions, and also new interpretation.
And with all the new innovation, with the modern technologies.
And also, we see that Chinese people's outlook is also very different.
They wear differently, They eat differently and they also show a strong sense of national pride.
So that's something that can be shared with a great positive sentiment with all the foreigners." Professor is not just the foreign tourists.
According to authorities, China is expecting a record -breaking 9 billion trips during this year's spring festival travel rush, up 7 percent from last year.
What does this tell us about the growth of China's holiday economy, and what's really fueling this trend?
Well, we still carry on the Chinese traditional culture by family gathering however and wherever they are.
This is also directly a contributor to the Chinese conception.
One is that the travel is getting more orderly and more convenient.
We do not really see a big frustration for many people to book their tickets.
The other is that more of the variety in supply, you know, from the Spanish ham to Argentina cherry and to French wine.
So everything is ready.
So therefore, they have a good reason to spend the money.
And also, you know, broadly speaking, there's rising income among the Chinese middle class, although some of them feel difficulties and they are getting more rational.
But the culture is there to bring more of the spending.
I think more significantly, the government is really, you know, flooring out the nearly 1 billion RMB to support the conception, particularly for the younger generations to replace their mobile phones, to get direct coupon, to buy new iPads, you know, for house renovation.
So the subsidies can be also be entitled.
So this can really invigorate their purchasing the morale and then the peer influence is also there to stimulate their collective consumption.
The building on that, as you said, we've seen cities like Hongzhou roll out billings in subsidies for trading programs, sparking a boom in consumption this holiday season.
than beyond just the boosting holiday shopping.
Do you think these policies are actually driving innovation and helping upgrade industries?
Well, yes, because all supply are really driven by demand when you have a stronger buying power and also when you have more of the consumers that are able to choose and pick, the suppliers will be able to respond because of the high competition among the large number of players, We noticed that the Chinese vehicles have improved a great deal in a matter of a few years, simply because the consumer demand, government policy support, and also the competition because you will be able to stand out with more of the response to consumers' demand, not only with the quality of the product per se, but also with a whole
package of service that you can be able to deliver.
So, definitely, the buying power is really the ultimate power that is there to push for innovation and to push for companies to sharpen their competitive edge." Speaking of holiday trends, the Spring Festival box office has been on fire.
The first day alone hit a record -breaking 1 .7 billion won, and the total, including pre -selling, has already surpassed 4 billion.
Professor Didu or your family catch a movie this holiday season?
And what do you make of this numbers?
And what does it say about the role of fumes in China's holiday economy today?
Well, we are getting old and receive so many young kids around, students, you know, the niece and nephews and grandsons, et cetera.
So we have to serve as the host.
But we are really delighted to see that the box rate has been going on pretty fast.
One is that on the consumer side, they are building more of a test.
instead of a ghost somewhere, simply whining and dining or go somewhere and take a picture and go, so they now seek for deeper experience and look for something that's more educational.
So movie going is one of it and the other would be traveling into the cultural relics, you know, for children's to learn something about China, and the third is that there is also a rising pension audience that is going on for something that is there to depict the Chinese Asian myth or to depict the Chinese cultural features and traits are also getting more attractive to the Chinese moviegoers or the tourists over different sites.
So, thanks also to the internet that they also provide more prior knowledge before they go.
Another thanks go to the internet decided because they are able to share their watching experience and their feeling out of the movie or all of particular visit with their friend circles so this can really create a dynamic fashion for people to further entrench their positive experience.
mmm professor beyond movies let's delve further on the intangible cultural heritage themed celebrations in China this year like temple fairs lantern festivals, and traditional performances.
They have already taken off this year, so how do you see this trend shaping China's cultural industry today, and how can we tap even more into the economic potential and of festivals like the Spring Festival?
Well, when the NGO coefficient is trending where people have additional income for entertainment, and also now with rising education level among the people, So they would like to get more of the test with knowledge, with personal experience.
Different localities are taken advantage of such a side of the trend, where they build more of the stories into the old Chinese legacies.
And this is something that they can really drive deep through literature, through history books.
The whole package of service are also being made available.
So therefore, people are really seeking a more holistic experience.
They are getting more creative using more of the different lighting, different digital one, and a more interactive artificial robots to attract people.
Combining with all the tradition, with all the experience, and with all the cultural elements, so they are to seek more invigoration into their not only local economy, but also their local IP to attract more tourism, investments and trading opportunities.
Thanks, Professor, for your insightful analysis.
That was Professor Liu Baochong, director of the center for international business ethics at University of International Business and Economics.
Microsoft CEO, Setiya Nadella, has praised DeepSeek, the Chinese AI model that has done the tech industry, calling it real innovation and all good news.
Nadella made comments during the U .S.
software giant's quarterly earnings call on Wednesday, as the company began offering DeepSeek R1, a reasoning model that reviews its thought process, to users on its cloud platform.
Earlier, Microsoft, a major investor in OpenAI, has launched a probe accusing Chinese AI developers to obtain data output from OpenAI without authorization.
But neither OpenAI nor Microsoft offered evidence.
Meanwhile reports show DeepSeek has faced massive brute forces attacks from U .S.
IP addresses since January 3, peaking on Monday and Tuesday.
So for more on this, joining us on the line is Ainer Tengen, Senior Fellow at Taihui Institute.
Thanks for joining us, Ainer.
Pleasure to be here.
Ainer, Microsoft CEO praised DeepSeek for his real innovation and call it good news.
What specific tech breakthroughs set Deep seek apart from its competitors and what unique strengths have earned it such a high Recognition in your opinion.
Okay, so there's something you have to understand about the differences between the US model and what China has done The US model was based on proprietary systems and software and it was this idea that we will develop these AI systems and then people will rent and time from us, and from that it's basically a subscription.
And they spend tens of billions of dollars.
Well, the Chinese system, instead of doing that, they used open software that's available on an open platform basis, and they created an AI system, or I should say, five AI systems because it's not just deep seek.
There's quite a few already in there.
They created it on an open platform and they've done it for much, much less.
In DeepSeek's case, it was less than $6 million.
Compare that to the tens of billions of dollars that had been spent by Microsoft and OpenAI and all the rest of them.
And it's quite interesting to see Microsoft is offering DeepSeek R1 on its cloud platform while also investigating whether it used OpenAI's data without permission.
That's quite a contradiction, right?
What do you think is the real motivation behind this seemingly contradictory approach?
Well, there's a lot of ego involved, I mean, and also money.
Remember, when DeepSeek was announced, and people understood what it was, the American stock markets lost 1 .4 trillion dollars in one day, and a lot of that was with Nvidia because they had these advanced chips that everyone assumed that you'd have to buy in order to do AI.
Well, the Chinese system uses chips that are much, much less expensive, and they've actually configured them to work better and faster.
So the question is why do you need Nvidia chips, which is why they lost $500 billion in a day.
In terms of how this affects these different systems, yes.
I mean, China has the better system.
It's obviously clear that no one's going to pay a subscription fee for a system that doesn't work as well as something that is totally free.
That part of the issue is over, but there's also this ego issue.
There is always this assumption that America has the brainpower, even though it's based on Indian and Chinese scientists, to create innovations, and that we're the king of innovations and that no one can equal us.
The fact that China has done this in such a revolutionary way has really shaken the confidence of people.
And even these big entities admit that China has pulled off what they did not.
They didn't see it coming.
And the response is, oh, let's go back to China cheated, or China stole, whatever.
this is an exchange it's kind of ironic because open AI basically has been scraping data from other platforms and they've been accused of that so for them to turn around and say that oh China got this from you know our systems or something like that it's not true they they can certainly probably looked at the kind of algorithms and what kind of content was coming out of it but since this is proprietary data.
The idea that they somehow snuck in and stole open AI's data and then use it to train their own language model, which was part of their AI, is kind of ridiculous.
If there had been a breach of that sort, there would have, of course, been all sorts of outcry and things like that.
But in America there is this sense, this egotistical sense that everything good comes in, you know, and smart comes from America, that we're dominant.
And this is, as I said, shaking people's confidence in their egos.
Let's delve into the accusations on the Chinese AI developer further here.
OpenAI claims to have evidence that DeepSeek used these services to train AI models but has yet to provide and improve without solid evidence.
Could this kind of accusation harm the AI industry as a whole?
And what's its impact on China's AI startups?
Well, I'm certain it'll be used by the U .S.
Congress to say that we don't want open AI to be used in America, but it's going to be very hard to stop.
Open AI is, you know, they're not taking on the United States.
They're simply trying to earn money.
This is a private company that is trying to build a better mouse trap, and they did.
And this is just sour grapes.
If they had any evidence, they would be pushing it forward.
Lawyers would be running to the law courts and the politician would be screaming at the top of their lungs, but even without evidence, like TikTok and also Huawei, it's not going to stop the political process from trying to intercede.
But here's the problem.
Because it's free and you can download it, it's too late.
The idea behind DeepSeek isn't that you have to send your data to the US.
You can download a version, you can create a closed system, add your own data, and then bingo, you have your own things.
It's pointless, there's nothing that can be done.
The genie is out of the bottle, as I said, this open software standard is now shown to be the better way of doing it, more efficient, less costly.
And the market will vote with its feet.
And it doesn't really matter what a high does or says.
They either adjust or they will disappear.
Ainer, it seems that the US government is already politicizing this issue, with President Trump's nominee for commerce, the secretary calling DeepSeeks technology, quote unquote, stolen.
Do you think this will lead to further restrictions on Chinese AI firms in Western markets?
Well of course, that will be as I said.
But as I said in my other answer it doesn't really matter, the genie is out of the bag.
You can just simply get a VPN download of 1 of 5, I mean this is DeepSeek is not the only one, Alibaba has come out and said hey we have an even better one so if you can download these systems and start building applications for them.
There's nothing that the U .S.
government can do, or if they do do it, you can put it through third -party countries.
There's so many different ways.
Technology, like culture and many other things, is like water.
It always finds a way through a system.
This is what the U .S.
Congress is angry about after thumping its chest and saying we're number one and we're going to make America great again.
All the efforts they made to sideline China to contain it have actually driven China to be much more innovative and to come up with products and processes which are surpassing the US.
I mean, you can go back, there was an interesting article in in October from Bloomberg where they They were saying, the 13 critical industries that they were tracking, China was ahead in five.
They were number one in five of them.
But now you fast forward and it's been three or four months from October, and all of a sudden you see the momentum shifting dramatically.
And now China's ahead in probably about seven of those 13 areas.
And as I said, the momentum is there because China is catching up in terms of its own chip development.
They recently announced that they're, they're DRAM technology, although a couple of years behind HighNex and Samsung, this is the memory that you use, you know, active memory that you use in computers, very important that, you know, they're pushing ahead.
And, you know, originally if you went back a few years ago, they would said, Oh, you you know, China's, you know, seven, eight years behind us.
They'll never catch up because we're sprinting ahead and all of a sudden China is where it is.
And you add this to, you know, new electric vehicles, you know, green power, whether it's solar or wind or nuclear.
China's racing ahead with fusion.
They now have their own fusion reactor, which is creating positive net energy and they're gonna build one that's going to be five times the size of that of their test model in order to show that they can make this commercially viable.
There's so many areas where China is pushing ahead.
Now people say, well, why?
You know, they said you, you guys were saying, oh, they're cheating.
Well, actually it's not cheating.
What they did is 10 years ago, they had a vision, they had a 2025 plan and it was to push these types of industries.
Now, these are private companies who are doing it, but the Chinese government was in terms of investment in basic technology was in fact helping the same way that the U .S.
and Europe does. But the difference is that 10 years of consistent planning and support has yielded tremendous results.
And these private companies are now racing ahead.
They don't need Chinese subsidies, they're competing against each other.
And as we have seen in the past, when they do that things get cheaper and better.
Ainer, one last question over the past a few days, while the Chinese public has been celebrating the Chinese New Year, reports say a silent war is going on with DeepSeek being targeted by a large -scale cyber attack from U .S.
hackers. This attack peaked on Monday and Tuesday starting from January 3rd.
So what's your take on this?
Is colony to war over the top?
Or does it show just how intense the AI battle has become.
First off, the U .S.
last year spent $135 billion on disinformation and, you know, information collection, spying, whatever you want to call it.
And a large part of that was, you know, based on these kind of electronic warfare.
there. So the idea that individual hackers are trying to attack an open platform development is nonsense.
Hackers love that. They generally attack proprietary systems because they believe that those are against their interests and the public's interest.
So I would bet dollars to donuts that this is being instigated by the U .S.
government and in attempt to, you know, dent, you know, this golden halo that has appeared around these companies, especially Deep Seek.
I mean, it's just, it's bad sportsmanship.
You would think that the US would follow the initial lead of what Microsoft and said, well, well done.
You know, we need to do better.
They kinda said that, but at the same time they're unleashing this kind of electronic warfare.
And that's what is it sabotage when you're out there trying to take down a company because it did something better than you.
This is what we call the Tonya Harding defense.
She was a limpet skater who was friends with Christine Namaguchi, who was her competitor.
And she decided that you so afraid that Christine would win that she had her boyfriend and some other people attempt to break her legs prior to the Olympics.
And this is exactly what the US is doing, they say we don't want to compete, we don't need to compete.
What we need to do is to hobble our competition to make sure that they can't compete against us.
And that just doesn't work.
It's not a long -term plan, you cannot do this to the entire world.
And that's what happened.
I mean, think about it.
um all around the world right now they realize that they can download a free program start building applications um and this is going to be extremely appealing to countries throughout the global South who have different cultures different needs uh different systems and they're going to embrace this.
And the US knows this and they're trying anything in their power to just you know cast some shade or to to make it look like uh Chinese systems are unreliable but it's As I said, it's just not deep seek.
There are four other major Chinese platforms who are putting out AIs that are better and cheaper than the U .S.
variants. Thank you, Ainer, for your keen insights.
That was Ainer Tengen, Senior Fellow at the Taichung Institute.
This is World Today and we'll be back.
Welcome back to World Today, the spring Festival edition.
I am Geana in Beijing.
With years of thoughtful government planning coupled with entrepreneurial spirit and a commitment to achieving carbon neutrality, China has built up an EV industry worth of billions of dollars.
In 2023, China surpassed Japan to become the world's largest auto exporter.
What have the Chinese government and enterprises done right to bring up this booming industry?
How's the rise of Chinese EVs reshaping the global auto industry?
My colleague Ding Hong recently engaged in a conversation with Josie Lee, associate professor of economics and finance at the University of Macau, Warwick Paulwell, adjunct professor at Queensland University of Technology and senior fellow of Taipei Institute, and Chen Jiajhe, chief investment officer of Novanark Technologies.
Jiahe, to start with you.
According to data from China Passenger Car Association, China exported more than 5 .8 million cars from January to November in 2024, a 23 % increase.
EV exports in these 11 months totaled more than 1 .8 million.
The Philippines, Belgium, and Thailand are some of the top export destinations for Chinese EVs?
So in your observation, will China's car exports, especially exports of EVs, continue to grow in the near future?
Yeah, it looks like it's very certain because currently, China is having an automobile industry that is growing very fast.
The country will producing a huge amount of automobile in the world.
And one of the major things why Chinese cards became so popular in the global market is basically because we got a very strong competition within China.
If you come over to China's automobile industry and you talk to people, everyone is talking about competition every day.
People are trying to innovate with better products, better designs, and reducing the price and the cost as well, and increasing the quality.
So it's a huge amount of competition in China's automobile industry.
Actually, as an investor, I've been investing in some of the firms.
It's a very hectic thing for me to pick out the companies because you're facing so huge competition among these companies and it's very difficult for you to figure out who is going to win because so many companies are working so hard, they're investing so much money.
So this kind of huge competition produced one of the best export products in the global automobile industry and that explains why many of the Chinese automobiles are so welcomed in the global market and looking into the future, I think this trend is continuing.
So, things you talk about the domestic competition here on Jaiheh, follow up on in that regard.
In your observation, do you think they are a benign competition or vicious competition?
Actually, when we talk about vicious competition, there is a terminology popular nowadays called Ne Juan or in evolution, right?
That's something I think Chinese authorities are trying to address in the tech industry.
Yeah, definitely. You're talking about the right point.
Currently if you look at industries in China, different industries have got different levels of competition if you look at airline companies, because it's basically dominated by three large airline companies and you've got a kind of certain kind of cooperation between them.
So the competition The competition in China's airline industry is not that serious, but if you look at the automobile industry, it's probably one of the most serious places for China's business competition to be.
China's authority has actually realized that, and called them to reduce the degree of competition and bring it to a more logical level.
It looks like in the automobile industry, many companies are rushing in.
And finally, it turns out that not many companies are making profits.
And this is not the right saying we want competition, but we don't want competition to go to the level that every company is kind of not making profit or even losing money from year to year.
And definitely this competition can't continue like this forever.
So, yes, I mean, the competition is actually a bit too much in China's automobile industry.
And probably in the five years from now, we see this degree of competition be reduced by some extent.
But in the meantime, they are also positive in a sense that they make the whole Chinese EV industry more competitive globally speaking, I guess that's the point you're trying to make, you were trying to make earlier.
So Wowik going to you, can you put your fingers on some of the key factors that might determine China's EV export trends in the near future?
Just going back on some of the earlier comments, I think it's worth bearing in mind that intense competition has a natural tendency toward squeezing profit margins.
This is a typical pattern in in market -based systems.
And what tends to happen is that firms then seek to respond in a number of ways.
One is of course by investing in continual product and process innovation in the hopes of creating a product that enables them to capture above average profits, or securing cost reductions via process innovations.
The second way in which firms often respond is, well, in a broad market sense, is via a process of mergers and acquisitions where the marketplace itself consolidates, which naturally then reduces the extent of the intensity of the competition between firms, and lastly, firms can often seek to secure regulatory -based rent -seeking opportunities, which again, provide means by which firms can secure above average profits.
Now, all of these are well -understood dynamics within intensely competitive market -based systems, so I don't think that there's anything particularly untoward at all about the nature of the Chinese EV industry.
Insofar its ability to continue to be globally competitive.
We're looking at a number of things.
One is obviously the effects of domestic competition on product innovation and pricing.
The second way, of course, is a need to understand what it is that enables the pricing to be so tight.
How is it that the costs of Chinese manufactured EVs have reached a point where they are half the cost if not even cheaper than alternatives being developed and manufactured by non -Chinese firms.
And we need to understand this from the point of view of the overall ecosystem as a whole and a manufacturing ecosystem requires a combination of hardware, technologies, capital goods automated systems together with the right kinds of software by which I mean the human skills and capacities needed to operate these design intensive systems.
The last point that I will make here is that much of the competitive dynamics also comes down to Chinese leadership in the battery space.
Much of the cost in contemporary EVs is actually in batteries and the ability to deliver batteries with longer periods of usability and greater travel ranges for a given unit cost is going to be absolutely fundamental to the ongoing competitive dynamics of EVs both domestically and also internationally.
Let's look back a little bit.
China's policy support has partially contributed to the rise of the country's EV industry.
Many people acknowledge that.
I think things can date back to China's 12th 5 -year plan from 2011 to 2015.
More specifically, in the year 2012, China's state council issued a document specifically outlining the government's strategy for developing new energy vehicles.
So, what do you make of the domestic factors paving the way to China's commitment in this field?
And why did China believe at the time that it needed this new emerging industry?
Yeah, that's a very good question.
Just let me use the reasoned debate from the Elon Musk and Taylor Swift's Paradigm from the Tombs who is author of The Weather is Flat.
But I quoted it in a flipways.
So I think China has earned a lot of time to lift up more Elon Musk styles of the entrepreneur with bring for a more homemade manufacturer who can make a big stuff that we can export more things but import less from the rest of the world.
Why the Western or most America say we're going to use our time to let in more Taylor with to spend more monies on entertainment, consumer goods, which is made abroad.
But of course, they make more offering to the financial service to emerging markets like China.
So I guess China is like you call Neizhuang.
It's not afraid of these kind of competition, even these competitions there's a little bit a lot of the cost -driven stuff.
But in eyes of Chinese government, there are no foreign firms or domestic firms.
As long as you can produce goods in China, we can enjoy the same kind of the government support and the financial subsidiaries.
So, when I have the time, first the time, interviewing in one of the media in about May 10th, 2018, Tesla opened its first factory in Shanghai.
I said Tesla cannot lose China because that time Tesla is in trouble.
They are heavily shot by those Wall Street financial analyst, But I also predict China can bring multiple Tesla's in following years given its production powers.
So at that time, Elon Musk is at best, one of the American manufacturing, most Chinese entrepreneurs fear, but also respect.
So we learned a lot from Elon Musk.
And also, long before, we learned a lot from Steven Jobs.
So you are good at making zero to one.
But in China, a lot of entrepreneurs, they are very good at going from two to 100.
So that's why we can use your domestic champions like BYD, Ne -O, Xiaopen, and Xiaomi, etc. So, Jiaheh, going back to you, what is your observation regarding this from zero to 1, and then from 2 -100?
hundreds this points raised by Dr. Joe earlier.
Well if you look at industries, most of the industries will say it's not from there to one.
It is very difficult for you to start something from there to one.
I mean especially nowadays after the industrial revolution has been going on for a few hundred years in the world.
Most of the technologies and stuff have been developed by someone and some economies, some businesses.
So I think for 99 % of the businesses in the world, we are talking about you are trying to move from 1 to 100 or from even 10 to 1 ,000.
So that's the business of most of the businesses in the world.
I mean, we are working on something that's called zero to one, for example, quantum computing.
Currently, quantum computing is not used world -wide in any businesses or whatever.
We're still using the very traditional computer chips.
But if you look at computer chips, they have been developed in the 1960s or 1970s but later on.
So that's the period of what we call from zero to one.
But at that time, we didn't have much business application for computer chips at all, but later when the world economy went into 1980s and 1990s this industry is built upon the scientific research that was conducted a few decades ago.
So for businesses in the world most, I think it's for 99 % of the time, especially in the world today, where technology is spreading across different countries.
We're not keeping much secrets to ourselves.
Most of the businesses in the world, what we are working on is from 1 to 100.
So we are trying to improve our product with more efficiency, better quality, better advertisement, better to fit the appetite of consumers, all sorts of things.
Wauwick, apart from domestic factors, what do you make of the economic or even strategic factors outside China in the international community at the time that somehow also prompted China to step up the efforts in the EV industry?
I think the early 2010s was a very interesting period because what had brought together was a number of different factors.
One of those factors from a global point of view and I think your question touches upon this is, from a geostrategic or a geopolitical perspective, the Obama administration explicitly made its pivot to Asia and it was also recognised at the time by the Chinese government that China was likely to enter into a period of substantially slower economic growth compared to the economic growth rates that were achieved in the 2000s.
So I think that that's the broad backdrop to all of this.
The other important thing and it's a much more localized factor, in and around 2011 -2012 as no doubt most of you and your listeners would recall, Some Chinese cities were well known for higher levels of air pollution.
And there was substantial public concern about the persistence of pollution and therefore the need to do something about it.
Many policies were implemented at the time to manage the use of the internal combustion engine vehicles in the large cities through things like controls of number plates and which number plates could drive on particular days, etc. etc. But there was ultimately a recognition that a key part of cleaning up the air situation of large cities required a move away from dependence on internal combustion engines for urban transport.
And this is exactly what's happened ever since the move towards electrification of transport also supports a broader geopolitical consideration, which goes to this question of energy sovereignty.
China itself is a significant importer of crude oil and crude oil -based products, and reducing dependence upon that, particularly for domestic transportation through the development of its electric vehicle industry was and remains an important element of enhancing the nation's energy sovereignty.
This incidentally is one of the reasons why EVs are also incredibly popular around the world, particularly for countries in the developing world, the global south, for whom exposure to international crude oil and related markets is a substantial risk and it's something that they struggle with from a foreign exchange and a foreign reserves point of view.
So these are some of the dynamics that have been at work over the course of the last ten years that I think are shaping the EV market both domestically and of course internationally.
The evolution or more?
Sure, sure. It's very interesting.
So I agree with Warwick.
That kind of the things for the energy strategy for the competition or the safety reasons, that is one of the most important ways why the EV market has grown so dramatically, even in Asia and also in China here.
So I guess also because of an electro -optical vehicle, that kind of thing is the biggest part for the manufacturing as well.
So actually, the Chinese government are very keen on manufacturing, not for the service.
So we have a lot of strategies to boost the productions and also the global value change domestically.
So we have very different views on the kind of the values that are defined by those Western.
But to be honest, the oil strategy has been a lot of concerns by the time of the Chinese governors, because they're afraid of geopolitical tensions, resource competitions or certain kind of things on the oil imports.
By early 2010, China was very heavily dependent on these oil products.
So thanks for the EVs, we have been to the oil price, the crude oil price around the $70 in the future market.
But I'm not sure whether it will be a good news to other emerging market as well, because not much market like Chinese market, they have so many kind of the electronic vehicle cars and get benefits from that.
Also, for these kind of opportunities, Chinese government saw these opportunities to leap frog of these long -term established players in this auto car market, and the global standard.
That was the next steps, but how fast and how persistent it will be I'm not sure, because they always also rely on the raw materials such as the other kind of the standard things in Beltri supply chains that Chinese government are very key on this.
So Jiahe, going back to you, in the years since China outlined its goals in terms of nurturing the EV industry, what do you think Chinese corporations like BYD, just one example, have done right to become one of the leading players globally in this industry?
Well, it's many things that China's companies have been doing quite right in promoting the new energy vehicle industry.
One of the very important things is that China is a very large market.
And economic of scale means that automobile companies can't easily find enough consumers in this place.
And China has got a huge amount of engineers.
We got, you know, millions and millions of university graduates every year.
They started very good about engineering scientific things, so they provided these universities actually provided the best, one of the best groups of engineers in the world to Chinese companies, and with these human talents we will be able to produce a product that is outstanding in the global market.
And the competition has also brought a lot of good products, and also China's government has been dominating this transferring to new energy vehicle.
There has been a lot of reasons behind this.
For example, like Mr. Zhou has just said, it's about the oil and the NH thing, because we import about 70 % of the oil by ourselves.
So developing the traditional cars is not the best strategy for the country, but using new NH vehicle, especially electrical cars, is one of the best things for the NH structure of the country.
Another thing is that because the new energy vehicle is also very helpful to contain in the pollution especially the air pollution which is very beneficial to China as well.
So all these things adding together especially with the talent of millions and millions of engineers China's automobile companies has been able to produce these very wonderful products.
Hmm. The training of talents in China is relatively more cost to benefit I guess, or cost effective, in the sense that we can train these engineering graduates with a much lower cost compared to, say universities, based in advanced economies.
But that's another issue.
So Dr. Joseph Lin, China surpassed Japan and it became the largest auto exporter in 2023.
What do you think are the appeals of those China made autos in the global market?
Yeah, this is a true to be a mindstone for Chinese cars.
So, in old times, we actually respect a lot of Japanese carmakers because we import a lot of cars actually starting from, I cannot remember, but in old days we import a lot of cars from Japanese carmakers.
So I guess we just suppress them using a very different techniques, because if we just follow the strategies, we can never be being being being about it.
So this is kind of the milestones for Chinese cars.
So we abandoned some kind of energy with the traditional kind of the styles.
But we try to make it more kind of the cars in different ways.
That's the one things.
On the other side, we also restructure the global supply chains because car makers they use very heavily on these suppliers.
They have thousands of suppliers to have the different kind of the parts and to assembling it differently.
So in that sense, we actually make it the manufacturing to be more resilient to the global shocks.
And also this is a kind of stronger deal networks which make it a very stronger.
But still, I think we also face same kind of issues when Japanese carmakers had been faced 20 years ago, maybe 30 years ago.
We have like trade wars between other job geopolitical tensions with other markets as well, because you'll have competitive advantage for Chinese auto make cars.
cars. So you are still at cheap prices.
So many markets will be accused about dumping the market.
So we actually can learn from our early experience from those Japanese cars when they first enter into the U .S.
market or in the European market.
What would Bowel going back to you?
Now, based on some of these points elaborated by Dr. Now, some people actually have cautioned that compared to Japan's auto industry, China's auto industry is still far from advanced, especially when we talk about the level of overseas production in the manufacturing.
What is your take on this?
Look, I think it's important to put the global footprint into some context.
There is of course a lot of talk about China's EV export prowess and the fact that it has achieved the kinds of numbers that it has achieved, but the reality is that the overwhelming majority of Chinese EV manufacturing has been absorbed by the domestic market.
Between 2021 and 2023, so this is when Chinese EVs really began to become something that people noticed.
So in those four years, the percentage of total output that was absorbed domestically hovered between 75 and 85%.
In other words, between 15 and 25 % was exported.
Year -to -date, the percentage of output absorbed domestically has grown to about 90%.
So the overwhelming majority of Chinese made EVs is for the domestic market.
So that's something that we need to always bear in mind.
This is not an industry that has grown on the back of export markets, it is not an industry that is actually export dependent.
This industry makes its bread and butter revenues and profits by servicing the highly competitive and growing domestic consumption base.
Now the lesson learned from what's happened historically as firms went overseas, particularly the Japanese firms into the United States, and know that your listeners can imagine or recall the violence that took place outside Japanese motor vehicle factories in America, where politicians and people would stand on top of Japanese cars and bash them with baseball bats and those sorts of things.
Of course, those sorts of memories create concerns and important lessons.
One of those lessons is that there is wherever possible an opportunity for China and Chinese EV firms to become exporters of capital.
So rather than manufacture everything in China and then export it to other markets, there is a need and an opportunity for these firms to establish factories and assembly plants elsewhere in the world and that is exactly what they are doing.
We have for example BYD in Hungary we have Cherry in Spain through a joint venture where they've reactivated a dormant Nissan factory.
Of course BYD is establishing facilities in Thailand, Malaysia, South America.
So I think one of the key lessons here is to to take capacity into other markets of the world.
One, it reduces supply chain related to logistics and transport costs, and also at the same time, it brings other benefits to the partner countries and those benefits of course include local value adding and the utilization and training of local staff.
And that brings us to the end of our spring festival edition of Road Today.
I'm good Anna and it's been a joint sharing this a special series with you And thank you so much for joining us throughout the holiday season We'll be back with more updates and insights from around the world in our regular programs Wishing you all a prosperous and a joyful year ahead
