Global alarm is rising over Japan's sharp rightward shift and the resurgence of militarist rhetoric.
Foreign investors are stepping up their presence in China's A-share market.
And U.S.
President Donald Trump elevates Saudi Arabia to major non-NATO ally status.
Welcome to Road Today, a news program with a different perspective.
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Global alarm is rising over Japan's sharp rightward shift and the resurgence of militarist rhetoric.
A new CTTN survey finds respondents view Japanese Prime Minister Sanae Takeuchi's recent remarks hinting at possible military intervention in Taiwan, not as a slip, but part of a troubling trend echoing Japan's darkest historical chapters during the Second World War.
Majorities warn Tokyo's defense expansion, Relaxed arms export rules and references to the quote-unquote survival-threatening situations send dangerous signals, with 90 percent fearing a repeat of the militaristic mistake.
The survey also flags growing concerns that Japan's right-wing forces could destabilize the region.
Over 7000 participants share their views across CGTN's English Spanish French, Arabic and Russian platforms within just 24 hours.
For this and more.
Joining us on the line is Liu Kuangyu, researcher at Institute of Taiwan Studies, Chinese Academy of Social Sciences.
Thanks for joining us, Kuangyu.
Hello, this is Kuangyu.
Kuangyu.
The poll shows that nearly 89 of respondents think Japan's recent actions send a worrying signal of militarism returning and 90 fear the country could repeat its militaristic mistakes.
Why do you think people are so alert to Japan's right-wing shift and what kind of historical memories and current anxieties are behind these numbers?
This heightened vigilance I think stems from Japan's unresolved historical reckoning and the today's resurgence of the right-wing ideologies that is threatening the post-war pacifism.
We see the collective fear of the Japanese militarism reflect deep historical trauma from the Second World War, where Japan's aggression caused immense suffering across the whole Asia, even the Pacific area.
So we see, the current anxiety is amplified by the rise of groups like, for example, like Nippon Nishinokai or the Japan Innovation Party, or Takaichi's fraction.
So we can see also this present-day fear centered around Japan's military expansion.
We see a more than 25 defense budget increase since the year 2023 and it's reaching soaring to the whole portion of 2 of the GDP.
And also their plans for nuclear-powered submarines and their defense white paper labeling china as the greatest strategic challenge.
Rivalry and those moves.
They all destabilize northeast asia or even the pacific area.
So we can see we have territorial disputes, we have historical grievances and those questions are remain unresolved.
So the public's Anxiety also steps from Japan's failure to address wartime apologies comprehensively.
All these things, if they mix together, everybody will worry and they will doubt what Japan is going to do right now, in the future.
Guangyu, we see that Takahashi again used the phrase survival-threatening situation, a term Japan's right-wing forces have historically used to justify his words of aggression against the world during the Second World War, and nearly 90 see this as a reckless challenge to the post-war international order.
How should we understand both the historical harm and the current provocation in this wording?
First we see, if we check this term, whether we call it a survival threat in a situation or existential crisis scenario, it means the same.
Its definition is a clear and present danger where attack on a foreign country closely tied to Japan threatens Japan's survival.
So, fundamentally exploiting this concept, they're trying to leave this ban on the so-called collective survival self-defense rights.
That is aiming to dismantle the constitutional constraints on Japan's military expansion and oversee operations.
So this is a move that Japan, as a defeated power in the Second World War, has no intellectual right to enact.
And also we see that Taiwan is not a country.
It's part of China.
So this definition has no legal or factual connection to Taiwan at all.
So that is why Takeuchi's remarks are totally wrong.
So if we check all these legal terms that you can see, it just cannot stand.
More alarmingly, we can see that in history, Japanese militarism, militarist regime used similar crisis narratives to justify their, For example, against the Chinese mainland in 1931, also invading Taiwan under the presence of so-called Ryukyu contingency.
So even when they attacked the U.S., the Pearl Harbor, they also used the same term.
They have the facing the so-called survival-threatening situation, crisis.
So that is a cause for them to carry out their mission.
Militarism and expansion invasions, when they want to invade other countries, they use this term.
So that's why we must be vigilant on this term they use.
We see 90 of respondents believe Takeuchi's refusal to retract her remarks reflect Japan's incomplete reflection on its crimes during the Second World War, which echoes your analysis earlier.
Then compare it with Germany's deep introspection about its wartime past, why Japan is lack of historical reckoning and how it becomes a long-term risk to regional peace and stability.
Yes, there's a huge contrast between Japan and Germany.
We can see, Japan's failure to undergo a genuine and thorough post-war reckoning and reflection now had profound negative impacts on its current politics, society and even the whole regional security.
First, we see the right-wing forces consistently refuse to acknowledge Japan's wartime defeat or apologize for its war crimes.
So this denial has grown louder in recent years and amplified by public media Also.
The generation has been passing.
So it's now becoming a dominant narrative among especially young right-wing populists.
So this is a key base supporting figures like Sanae Takeuchi.
They can become the woman in power.
And secondly, compounded by Japan's so-called last three decades of economic stagnation.
So these disillusioned groups increasingly blame external factors like China's rise or international systems.
So this fueling militarism sentiments.
And thirdly institutionally, Japan's refusal to accept defeat has prevented from fully embracing the post-war constraints.
So this allows far-right factions to exploit Lupo, seeking to dismantle wartime accountability mechanisms, including its own pacifist constitution.
So in essence, as many Japanese myths warn, if you find a unresolved evil spirit.
If you only temporarily sealed it, it will inevitably resurface and wreak havoc.
We see the pool shows about 80 view Japan's right-wing forces as a destabilizing power threatening regional and even global peace.
In reality, what concrete impact has right-wing-driven military expansion already had on the security landscape of Northeast Asia?
And what chain reactions could it trigger?
The primary impacts, I think, manifest in three key areas.
First, Japan is accelerating its military preparations, particularly through the militarization of the Ryukyu Islands, which has significantly deteriorated the security situation in the East China Sea region.
And second, Japan continues to bolster the US-led so-called Indo-Pacific Military Alliance network through bilateral or multilateral cooperations and mechanisms or even ordinations such like RAA.
So Japan is drawing various powers into the Northeast Asia and greatly complicating the regional security challenges.
And third, Japan itself is rapidly developing intermediate range missiles and pursuing nuclear capabilities.
So that portends disaster for all of the East Asia.
What we are worrying is that Takahashi's a blatant militarist and imperialist mindset, evidenced by her denial of Murayama's statements, attempts to whitewash wartime atrocities, rejection of the three non-nuclear principles and efforts to incite East-West bloc confrontation as a pretext for global conflict, reveals a dangerous trajectory.
I think she's leading Japan down to a reckless path of denying aggression, distorting history and subverting order and undermining peace, serving as a bridgehead for a nuclear war or even a front of a new hot war.
So that is, I think, the chain reaction in my trigger.
Let's delve further into the consequences.
80 years ago, Japan invoked the idea of a survival crisis to launch wars of aggression against the world.
Now, with a similar rhetoric resurfacing around 91 warn that Japan will pay a heavy price if it again pursues expansion and military force.
So, from both historical patterns and today's geopolitical context, what might this heavy price look like?
The price has got to be very, very heavy.
First, I think Japan is embarking on a militarist path again, and will truly be.
If so, it will truly be an existential crisis for this country.
First Japan.
We can see the government is already crippled by debt and far-right forces seeking to revive militarism and expand their arm industry to revive manufacturing.
This might seem appealing, but this will only deepen the industrial distortions and also trapping Japan in the arm race against other neighboring countries.
And secondly, attempting to so-called normalize its military posture could trigger a regional security panic with multiple nuclear states and territorial disputes states with Japan around this country in Asia.
No neighboring country, I think, want to see Japan so-called re-militarize.
So trying to Two policies for strategic leverage will only backfire and militarizing will be adding new crimes to its wartime atrocities.
I think Japan, as what I've said, has no right to unilaterally redefine its political or military identity or status.
So if regional conflicts erupt, it will only just face national collapse, but also the very legitimacy of its post-war situation.
Existence will also collapse, I think, not just the country, but its own legitimacy of the country, why it can exist.
Thanks for the depth of your analysis.
Liu Kuangyu, researcher at Institute of Taiwan Studies, Chinese Academy of Social Sciences.
This is Road Today.
Stay with us.
Hello, I am Dr Digby James Ren, a political analyst and international relations scholar specializing in China area studies.
World Today offers unmatched in-depth perspectives on China's politics economics business, technology and society.
World Today's team of reporters and contributors provides valuable information from all of the world's major economies.
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Foreign investors are stepping up their presence in China's A-share market and increasing allocations to Chinese assets.
Data shows that global institutions have made more than 1200 on-site research visits to Chinese listed companies so far this quarter.
Meanwhile, foreign holdings of Chinese equities have risen for two straight quarters, suggesting that this isn't just window shopping capital is starting to move.
This renewed attention comes as China strengthens its role in global value chains, powered by rapid advances in high-tech industries, rising RD investment and a comprehensive manufacturing ecosystem.
With more, Jiao Yang spoke with Li Lun, Assistant Professor of Economics at Peking University.
Professor Li Lun.
First, what do you think is driving the surge of foreign investors' interest in Chinese A-share market right now?
I think one of the most important reasons is that the investors are seeing improving fundamentals and increasingly clear policy.
So we're seeing, for example, from the recent October statistics that, for example, our CPI growth is steadily growing.
For example, in October is a 0.2% year on year.
And we're seeing a pretty strong momentum for our export market. for manufacturing.
So all these factors are kind of reinforcing investors' confidence in China's economy that is basically very stable and resilient in this turbulent time.
And also, I think, another reason is that the valuation of Chinese A share is relatively undervalued compared with the US.
S&P 500.
So, I mean, the PE ratio for Chinese stocks are usually around 11 to 12 times, sometimes 15.
But compared with U.S. stocks, the PE ratio is is often 20 times or even 30.
So Chinese equities to investors are comparatively more affordable and also undervalued.
So there could be some opportunities for investors to invest in them.
And also, I think there's a lot of reforms, for example, to attract private equity, to attract foreign investors.
There's recent laws that guarantees equal access and equal market.
Basically equal market access and equal rights for private and state-owned enterprises.
So I think these all boost investors' confidence that in the future I think there's going to be more attractive and more equal opportunity that investors can pay attention at this very moment.
And sectors from healthcare and energy to the new materials and the internet economy are once again drawing global attention.
So what makes this sector particularly attractive?
Yeah, so we can start by healthcare.
I think China has an aging population and we have a lot of RD-driven, AI-driven pharmaceutical breakthroughs.
So I think in terms for the future, there's definitely going to be a lot of investor interest in healthcare and biotech.
And in terms of new energy, China dominates the new energy market.
For example, produce more than 80 of global solar panels and more than 60 of EV batteries.
So for some sectors, like new energy, China is probably the only place to go if you want to invest heavily into these sectors.
And also in terms of digital economy, advanced manufacturing, AI enabled services and devices.
China is also growing very rapidly in this area.
So if you want to look at, for example, application or how these new technologies are actually put into practical uses and production, China is definitely the place to go.
So I think all of the following reasons are basically why investors are coming to China and also observing the structural transformation.
Because, for example, what used to be staying in their imagination is actually happening on a daily basis in China.
So that's why I think it's very attractive to investors at this time.
And many research visits focused on the manufacturing-oriented firms.
So does this reflect a broader thesis around China's manufacturing competitiveness?
Yes, definitely.
I think it's basically confirming people's confidence in China's manufacturing depth and strength.
So what used to be merely a wars factory, for example, if you visit Guangdong or the Shenzhen area, right now we're seeing a more upgrading instead of relocating of the manufacturing capacity.
So, for example, with the technology and AI, with the high-end and precision manufacturing, we're definitely seeing more opportunities for semiconductors robotics, EV components.
That's basically an upgrade from the previous generation.
You know low end or low, not so profitable mode of manufacturing.
I think definitely.
You know, the investors also notice this improvement in terms of efficiency, in terms of the level of innovation, the level of technology.
So that's why I think people are, you know, scheduling a lot of research visits to these places, also in terms of, you know, observing how these you know advanced manufacturers are actually improving the productivity of the factory.
You know that they're visiting.
So, yeah, definitely.
I think they're also probably studying how Chinese firms are becoming so successful and maybe, you know, learning some of that mode to apply to their own factories in their own countries as well.
And to what extent are emerging sectors like AI, the new energy and high tech manufacturing reshape the foreign investor strategy towards China?
Yeah, so I think, emerging sectors, you know, oftentimes in the Western world or in other developed countries, there are merely imaginations or they're merely giving you some pictures of how things are going to be in the future.
But in China, a lot of these you know blueprints are actually put into action actually, you know, entering the daily production.
So that's why I think a lot of firms, if they're interested in body intelligence, if you're interested in smart manufacturing and the design or innovation of these new technology, China is definitely the place to go because they can actually get awesome personal experience and firsthand experience.
And also in terms of EVs or new energy vehicles, it's dominating over export.
There's a lot of competition. in Chinese firms as well.
So investors are definitely seeing how to scale up these productions potentially, for example, in Europe, where there's very high demand for EVs but relatively low supply for these EVs.
And finally, I think in terms of smart manufacturing, it's a very capital intensive sector.
So a lot of foreign capital are needed for these suppliers, or whether we're talking robotics, or talking about sensors or industrial software, industrial robots
So I think there's a lot of both demand and potentially foreign supply for this capital.
And it could be put into good use in terms of combining the supply and demand for capital and producing an even more productive ecosystem for these.
And for China's economy?
What do you think is driving the resilience of the high tech and equipment manufacturing?
Yeah, so I think the resilience comes from several reasons.
First of all is the continued R&D investments.
These are all by the firms because they want to have a competitive edge in this era of rapid competition and rapid development.
So every firm, every enterprise wants to spend heavily in this R&D spending.
And we're actually seeing in data that Chinese enterprise RD spending is rising, you know, almost double digits year on year, and so you know it's a definitely a innovation of productivity driven growth.
And also, i think the policies alignment and policy support is also very important because you know policy agendas, like you know, made in china 2025, or you know all of these.
You know different policies that support the, the modern industries is giving a lot of clarity and setting the expectations right for investors.
And finally, I think having a healthy export market also maintains the resilience of these manufacturing because they know that, regardless of how domestic consumption is going to be, there's a vast export market that they can turn to.
And also in terms of exporting to ASEAN countries, to EU, there's lots of market to choose from.
So not a single country or region can interfere or deter the export markets, so that these firms have a lot more competence to keep their RD and innovation going.
And is China's real economy strength, especially its food manufacturing system, become a key stabilizer in global supply chains.
Yeah, yeah, absolutely.
I think China, because China has a very comprehensive supply chain and also a complete supply network.
So if you're you know looking for some raw materials, or if you're looking at some, you know, looking for some components, you can definitely find someone.
You can for sure find some suppliers in China that's able to provide those.
So having those you know strengths or stability is very important for these innovations, for these manufacturings, you know, for these firms to keep their manufacturing going regardless of, you know, global turbulence or trade frictions.
And finally, in a world with rising geopolitical and economic uncertainties, will Chinese markets become a natural destination for global capital in the long run?
Yes, I think if you're looking for stability, if you're looking for a large, a very predictably stable market, you should definitely turn to China, because we have a 14 billion population.
We have a very deep know savings pool, so we have a lot of you know policy that's supporting r?
D and also supporting the advanced manufacturing, and also there's a lot of reforms that's, you know, being on track.
For example, no matter, you know, it's the further opening up of capital markets, whether it's, you know, innovation in digital finance, in esg, in green energy.
So these are all creating a more transparent environment for the investors to keep paying attention to.
And, as I previously mentioned, for some sectors like green energy and EV, you can't really avoid China if you want to build up a meaningful and profitable portfolio.
That was Li Lun, an assistant professor of economics at Peking University.
More to come.
UAE aerobatic team fully upgrades to Chinese-made trainer jets.
U.S.
President Donald Trump elevates Saudi Arabia to major non-NATO ally status.
And Microsoft, NVIDIA and Anthropic announce strategic partnerships.
This is World Today.
We'll be back after a short break.
Welcome back to Road Today with me, Ge'enna, in Beijing.
China is making a strong impression at the Dubai air show.
The spotlight is on the Middle East debut of China's C919 passenger jet.
In another Made in China moment, the UAE Air Force-famed Knight's aerobatic team has fully switched to China's L-15 advanced training jets, the first aircraft change for the team since it was founded in 2008.
This year's show features over 1500 exhibitors and more than 200 aircraft, including nearly 100 from China.
So for more on this, let's have Zhang Fan, Associate Professor of Astronomy Department of Beijing Normal University.
Thanks for joining us, Professor.
Hello.
Professor, the UAE's ninth aerobatic team is considered a national symbol.
Many analysts say it's choice of equipment carries strong political and strategic significance.
How do you view the team's decision to fully switch to Chinese made trainer jets?
The choice of trainers for this aerobatics team is mostly technical.
So aerobatics is all about perfect control agility, which is why they use slow flying trainers.
The Chinese trainers are actually quite famous for being very well engineered and very easy to fly.
Even during the very early days.
There's the Chu Jiao 5, which is a single propeller really simple aircraft, but it's so easy to fly.
It's actually still being sold in large numbers today to the airplane enthusiasts.
The IL-15 in particular, it's the one trainer.
It's for training top-of-the-line modern jet fighters.
So the...
It has advanced avionics and the flight profile.
So it's perfect for aerobatics.
But of course, there's a political aspect of it as well.
If you are using Chinese trainers, then it's natural.
It's a natural progression.
If you buy Chinese fighter jets, then it's very easy to train the pilots there.
All the stuff, aeronautics are the same.
Professor, many reports mentioned cost-effectiveness and China's cooperation model without political strings attached, or the growing maturity and capability of China's aviation technology as the key point why Chinese aviation equipment won the favor of UAE.
What's your take on this?
I think it's all of the above.
So first, cost-effectiveness is quite clear.
For example, IL-15, when they bought the first batch, 12 of them, the total is like $400 million.
So that's really cheap. for this type of aircraft.
So they bought three times that many later on as well.
And they used that for training and potentially in low intensity warfare as well.
There's also discussions of possibly sale of more advanced stealth fighters.
So that cost effectiveness is certainly a consideration.
And then also the no strings attached issue.
If you look at more recent conflicts involved in the Middle East, there's a restriction placed on you, on who you can fight.
So when you pay a huge amount of money, you don't want to be told, especially when other people attack you.
You can't defend yourself, and it's a big problem.
So China not only doesn't have any strings attached, it also comes to the third, the customization issue.
If you look at Pakistan, when it bought the JF
17 Shalong aircraft, it was actually jointly developed with Pakistan as well.
So they not only buy the aircraft, they also build up the whole capability of actually manufacturing those aircraft domestically.
So that's obviously a huge leap in terms of reliability.
Do you think this will create a demonstration effect in the region?
Could it prompt other nations to reevaluate and potentially adopt China's training systems and aircraft in the near future?
I think so.
So newcomers into an established market, people always need demonstrations.
And the thing with China is China hasn't engaged in any serious warfare for so long.
Its weapons systems are mostly for deterrence purposes.
Obviously, people would need some sort of demonstration.
And especially you have this third party who's not intrinsically biased.
And if the pilots from the night's aerobatics team say, you know, this aircraft is really good, then all the people in their immediate neighborhood will take notice.
And it's just a reliable source of words.
Let's move to China as a homegrown passenger jet.
German media say the C919 marked the shift in the global civil aviation landscape, breaking the longstanding Western monopoly.
With the C919 making its Middle East debut in Dubai, how do you assess its international performance so far?
So it's a competitive aircraft.
That's why the media says it's competitive. making a shift in the landscape.
Its list price, once again, cost effectiveness is good.
Its list price is 10% to 20% lower than the competitors, the Airbus A320neo and Boeing B737 MAX.
It's not only cheaper, it's wider.
So the seats are wider.
It's more comfortable for passengers. passengers.
Also, the noise inside is significantly lower.
The fuel cost, because of aerodynamics and choice of engine, is quite good as well.
So the carriers would like it.
So it's competitive.
However, it hasn't sold that many in the international market.
There's mostly some international aircraft leasing companies that have bought it, but they might be leasing back into the Chinese domestic market.
And the reason for that is because you need, like FAA, the regulators for the airspace in the various countries to certify it.
A lot of countries recognize the American or European regulators.
I wouldn't say they're dragging their feet, but it's a slow going.
The process with the European regulator is getting pushed through gradually, but there's hardly any movement on the US side.
So there's So non-technical, non-product related issues hindering the international push.
Professor, this year's Dubai Airshow features China's integrated presence across civil aviation, military aviation and aero engines, with platforms like the C919, the L-15 and the Taihan engine showcased together.
What does this tell us about the current trajectory of China's aviation industry?
What's driving China's rapid progress in the realm?
Right.
So that kind of broad swath of capabilities, competitive products being shown really shows that China's aviation industry is now reaching a breakthrough point.
So previously, because of all sorts of technologies being cut off from the Western technology and all that China had to to slowly develop its capabilities comprehensively.
And now it's reaching this inflection point where things are coming through, not just this, what's shown in this air show.
If you look at the sixth generation fighters, the sub-orbit, air-brazing sort of hypersonic versions, there's an explosion of a variety of aircraft coming out of China.
So that really is a breakthrough point now.
Mm-hmm.
Thanks, Professor, for those valuable insights.
That was Dr. Zhang Fan, Associate Professor of Astronomy Department of Beijing Normal University.
This is Road Today.
We'll be back.
Hello, I am Dr Digby James Ren, a political analyst and international relations scholar specializing in China area studies.
World Today offers unmatched in-depth perspectives on China's politics economics business, technology and society.
World Today's team of reporters and contributors provides valuable information from all of the world's major economies.
I hope you can join me on World Today for the very best insights and news from China, on China, and help to build a better understanding of China's role in the world today.
Welcome back to Road Today.
Washington has designated Saudi Arabia a major non-NATO ally, a move that depends defense cooperation but doesn't include a security guarantee.
President Donald Trump made the announcement during a White House meeting with Crown Prince Mohammed bin Salman, confirming a new security agreement that will also streamline US weapon transfers.
The announcement came after the Crown Prince pledged to boost Saudi investment in the US from 600 billion to nearly 1 trillion.
Saudi Arabia has long been a key US partner, despite tensions over human rights, oil policy and Israel.
Trump has constantly prioritized ties with the kingdom, visiting Riyadh on his first foreign trip in both of his terms,
So for more on this, let's have Greg Barton, professor of global Islamic politics at Deakin University.
Thanks for joining us, professor.
Good to be back with you.
Professor, some analysis say that elevating Saudi Arabia to a major non-NATO ally shows Washington is shifting from trying to manage the whole Middle East to betting on a few key partners in the region.
Do you share the same stance?
What strategic intentions do you see behind this upgrade?
I think there's a lot of substance in that analysis.
I think Saudi Arabia is long being seen as a key partner.
Of course you go back to, you know the early 20th century and the rise of the automobile and petroleum.
Ever since the creation of the kingdom in its modern form, it's played this outsized role.
But in recent decades the rivalry between Saudi Arabia and Iran and the sense that it is one of the key major powers in the region and it's, you know, broadly on the American side, has grown just gone steadily stronger.
And now we have MBS, this dynamic crown prince interesting, complex character but clearly pushing a modernization move through Saudi Arabia.
I think that's added to the sense that Saudi Arabia is a key player.
Professor, here the interesting part, this new status doesn't include any security guarantee.
Is that an intentional loophole.
What does this closer cooperation but no promises approach tell us about the strategic calculations and the limits of mutual trust on both sides?
Well, I think it's partly reflecting the realities that if America can push ahead with this and if the Saudis are comfortable with this, without formalizing a commitment to come to Saudi's defense in that sort of NATO Article 5 sort of way, that's certainly from the American side, that's better.
And maybe from the Saudi side it's also acceptable because it's a much higher bar to clear if you're trying to set up a formal security protocol that says America would come to Saudi defence.
So this may just be a question of what's possible and what's easiest to do.
It also reflects to some extent that Donald Trump has his own interests in these negotiations, that a lot of them have to do with personal business and family business and nothing to do with American geopolitical considerations.
And, with that in mind, the security community in America is cautious about yielding to the president and allowing America to be signed up for things that they'll have to deal with long after he's no longer president.
So it's a sort of a bit of a complex dance here.
No one wants to oppose the president publicly, but I don't know that there's a great deal of confidence that he's going working always in a consistent way for American interests.
Professor Washington is also prepared to sell F-35 jets to Saudi Arabia, something only Israel has in the Middle East until now.
And it's worth mentioning that US law states Israel must maintain a qualitative military edge in the region.
With the Saudi-Israel normalization stuck because of the Gaza crisis, could this cheaper way at Israel's military edge?
And how might Israel take this?
Well, Israel has, you know, it will be quick to put its own interests and defend its own interests.
Israel does want this normalisation with Saudi Arabia and wants Saudi Arabia to be supporting it.
Bear in mind that in this earlier point I made about tensions between Saudi Arabia and Iran, Israel of course sees Saudi Arabia very much on their side as being against Iran.
So that's a consideration.
There's another level of detail, though, with the F-35 deal.
Israel has caused a lot of anxiety in Washington over the way it's managed the technology with those F-35s and done its own modifications and basically gone further than was agreed.
So there's a sense that Israel is in the naughty corner when it comes to F-35 deals and is in no position to be telling Washington what's acceptable, because they themselves have pushed the limits and done things that.
I think, where there's a lot of regret about letting that technology loose and not negotiating control over it.
There are the same anxieties about what could happen in Saudi Arabia as well, it's said, but it sort of balances the extent to which Israel is going to speak up.
Speaking of Saudi-Israel ties, the Crown Prince has made it clear Riyadh will only join the Abraham Accords only if there is a credible path to a Palestinian statehood.
Can this new U.S.-Saudi defense partnership help reopen that door?
Or are the core disagreements still too big?
I think Saudi can play a key role here.
It's a big enough and most powerful enough Middle Eastern power, but it can't be ignored.
And as much as Benjamin Netanyahu, the prime minister of Israel, wants to try and close this door and talk about two states.
As long as Saudi Arabia says we're not giving up on this, this is non-negotiable, then it keeps alive that conversation.
So it's a really, it's a key role to be played.
And, of course, for Mohammed bin Salman, the crown prince.
He knows that his public is very unhappy about what's happened with Gaza, the Palestinian cause,
He doesn't want to be wearing the political cost.
I mean, he's not an elected leader, but popular support is still important.
He doesn't want to be paying the price for Netanyahu's intransigence or for what's happening with American politics.
Perhaps he wants to say to his people that he's holding the line, doing the right thing.
We know the U.S. and Saudi Arabia have long clashed over things like human rights and oil policy.
Will criticism inside the United States over those issues affect how far this agreement can really go?
Yes, I think that goes back to our earlier point that one of the reasons that I'm speculating, of course, but possibly one of the reasons we're not seeing a more formalised security agreement, is because there's just not the confidence that President Trump is always focused on the main goal of helping American security, that he's perhaps more interested in sort of passing transactional deals for real estate and branding.
And so that level of confidence Well, that lack of confidence means that there's going to be a sort of a quiet pushback.
And that's what I think we're seeing in some of the things that haven't happened.
And finally, we've seen that Saudi Arabia has been diversifying its military partnerships worldwide.
So, with this new cooperation with Washington, how will Saudi Arabia balance closer ties with the United States while still pushing for more strategic independence?
Well, one thing that's clear about Saudi defence ties it's sort of locked in on American technology, so that's not likely to change anytime soon.
This just sort of seems to have doubled down on that side.
But it also will want to have better relations with Europe, better relations with China and across Asia.
It will want to try and balance things.
I mean, we're seeing a lot of effort made by the Kingdom of Saudi Arabia, by the Crown Prince, Mohammed bin Salman, to play to Trump's ego and to stroke it and sort of get him on side.
But they know that he's not around for that much longer.
They also know that he's not a reliable partner.
So they're looking to hedge their bets and spread risk and not have it all on one or two difficult personalities in terms of presidents or other leaders.
And that makes perfect sense.
So in public they'll be out of the way to praise and and, um you know, get donald trump on side, recognizing the outside role that his ego plays.
But it doesn't mean that they're naive or they haven't seen the problems, they'll just be trying to sort of balance that with other relationships.
Thanks professor, for those insightful analysis.
That was greg barton, professor of global islamic politics at deking university.
Microsoft and NVIDIA will invest in AI, startup Anthropic and their new tie-up.
Microsoft will commit up to US$5 billion to the company, and NVIDIA will invest up to US$10 billion.
The deal also includes a US$30 billion commitment by Anthropic to use Microsoft cloud services.
Anthropic was founded by former OpenAI staff in 2021 and was recently valued at US$183 billion.
It has become a major rival to the chat GPT maker, driven the strong adoption of its services by enterprise customers.
So for more on this, my colleague Ding Heng spoke with Andy Mock, professor with Beijing Foreign Studies University.
So thank you very much for joining us today, Andy.
Regarding this tie-up, one observation is that it underscores the AI industry's growing appetite for computing power, as companies race to build systems that can rival or even surpass human intelligence.
What is your take?
You know, that's absolutely right, Ding Hong.
And maybe one way to think about compute, to understand it in a little bit more of a tangible way, is that AI whether it's AI as smart as humans or with godlike intelligence that far surpasses that of humans really are all based on what are called tokens.
So we can think about AI as just the ability to produce as many tokens as cheaply as possible and using as little power as possible.
So that, in fact, is the race.
And it's more than just chips and building data centers, because without sufficient electricity you can't power these enormous data centers.
And all of this capital expenditure going to chase compute, as you said.
Microsoft is a major backer of OpenAI.
It began to back OpenAI in as early as 2019 and, And after announcing this partnership with Anthropic Microsoft, CEO Cynthia Nadella said that OpenAI remains a critical partner of Microsoft.
So what do you make of the calculation on the part of Microsoft?
Well, I think this is an enormously important relationship for Microsoft, but for OpenAI as well.
And the analogy I really like to use in describing this is that these are like two mountain climbers roped to each other, terrified that the other is going to fall off the mountain and drag him down with, you know, along with the person that fell.
And so what each side is doing is looking to hedge or to have a plan B.
So Microsoft, of course, is enormously reliant on open AI as the engine to power its AI offerings.
And, of course, I think we are all familiar with just how integrated Microsoft is into the global enterprise ecosystem.
So this is a critical input for Microsoft.
So I think looking to diversify with a second supplier, if you will like Anthropic gives them, you know, more options and is safer for them in the long run.
I take your point.
So, as part of this new deal or new partnership, Microsoft will give its Azure AI Foundry customers access to the latest cloud large language models that are developed by Anthropic
And, as a result, this is making cloud the only frontier model offered across all three major US cloud providers, namely Amazon Web Services, Microsoft Azure and Google Cloud Platform.
What will this mean to Anthropic?
Yeah, that's a good question, Ding Hong.
So, as I mentioned earlier, this really is a race to produce as many tokens as cheaply as possible using as little energy as possible.
And these cloud providers whether we're talking about AWS Amazon, Google or Azure are a critical part of the value chain.
And you know, I'm not really sure you know so obviously there are entrepreneurs policymakers, investors in the United States that really look at the world from what they would consider a national security lens.
And this is where having an only US value chain is considered valuable.
So, you know, we really have to see here.
And Claude, of course, is one of the leaders, especially when it comes to writing software codes.
I think many software developers feel that Claude is much, much And this is, you know, I think, precisely where we are seeing a lot of the productivity gains that perhaps is driving economic growth as well as profits in the stock market.
Yeah.
Now some investors are increasingly uneasy that the artificial intelligence boom in the United States, for example, has outrun fundamentals.
And I guess there is a worry on the part of some business leaders even, that these so-called circular deals, where one partner is propping up another partner's revenue um, they say, this kind of circular deals are adding to the bubble risk.
Is this a legitimate concern?
Well, i think certainly, at least on paper, ding hung.
It is a very legitimate concern because again, if we think about it this way, i say to you, ding hung, buy a billion dollars of my equipment here's, you know a billion dollars to buy it.
Um, you know that that kind of circular transaction uh, you know, can escalate, and you know really, it's just a house of cards, and i think this is, uh why some investors are concerned.
Um, the other argument though, why we might be looking at an ai bubble, despite the uh rising earnings of companies like nvidia, the so-called hyperscalers, you know, the googles, the amazons, the microsoft's um and, i think, the very, very real productivity gains that we are witnessing from AI, is this
So these are all reliant on very, very expensive chips, very expensive servers that chips are put into.
And one of the big issues here is that the depreciation schedule to get really, really geeky from an accounting perspective, just for a second here is like five to six years.
But the reality is that these chips have to be replaced in maybe two years.
And some estimates I've seen is that this means that earnings for the hyperscalers are overstated to the order of like 250 billion.
And if that turns out to be true, that might be catastrophic for these share prices.
And, of course, that could have enormous negative repercussions for the US economy because, as we know, the US economy is very, very bifurcated.
Where we could call it maybe the top 1 or maybe the top 5 drive a lot of the spending because they are wealthier and a lot of their wealth comes from the stock market.
So I think this is the dynamic that many people are concerned about.
These circular transactions, and sometimes they get very complex, certainly could be one factor.
But I think the other factor some investors are starting to become very, very concerned about is the quality of the earnings of these companies.
And, you know, are they using unrealistic depreciation schedules?
And if more realistic ones were used, their earnings would be much, much lower.
That was Andy Mock, professor at Beijing Foreign Studies University.
That's all for today with me, Guiana.
Thanks for listening.
