If you still haven’t heard of Niu Lai yet, this BBC piece should be a good primer.

In short, it’s a simple story about a calf, made by no more than a two-person crew consisting of a mother and a son, using only interior design software - for 5 years.

Initially, because there was no marketing budget or big distribution deal at all, only a few people watched it in the cinema, and some of them complained online about what a giant pile of c**p they just paid for. But those complaints and the unique backstory quickly turned Niu Lai into a national sensation and an unlikely commercial success.

To grasp the nature of this phenomenon, just look at the poster at the cinema I went to last night: there were no official posters, only one hand-drawn by the cinema staff, warning the audience of caveat emptor.

Even the ending credits roll was something I have never seen before. Instead of the hundreds and thousands of names you would normally see after any film and would not care to remember, this one has only 2 names, jumping between producer, director, animator, screenwriter, songwriter, dubber, and singer.

All in all, I have never seen anything like this before.

Now I have become one of the many who have tasted the power of Niu Lai (Do you envy me?) Would I recommend the film? Well, how should I put it… If you happen to pass by a cinema in China tonight, you should go watch it, 100 percent. It’s an experience you won’t forget.

Why does Niu Lai become viral, apart from its good name (which literally means “The Bull is Coming”)?

I can think of at least 5 reasons.

First, it’s authentic. When the filmmaker, Xin Yumeng, switched from interior design to pursue his dream of filmmaking, it was 5 years ago, in 2021. That was still a pre-GPT, pristine age of the human race. In some way, the shoddy quality, the funny script, the indescribably unique animation style, and the public revelry around it seem to be an act of rebellion against the direction humanity will ultimately go. In the face of AI-generated slops that are always one sentence away now, the film preserves mankind’s ultimate stubbornness in using its bare hands.

And instead of making things ever more packaged, ever more curated, the film seems at ease doing what a filmmaker should do: telling a story to the utmost extent he or she can.

Second, this film is for the ordinary folks, because it’s made by entirely ordinary folks. Prior to this film, nobody in China realized that handmaking a film for 5 years and getting past the entire approval regime was actually possible for a single individual. Now, ordinary folks have a hero to cheer for.

Thirdly, this film presents a unique movie-going experience that you probably have never had and probably will never have again: not the “be quiet, no phone” atomized experience that we are all very used to now, but the rowdy, laughing, cursing, and phone-flashing that we all sorely miss sometimes.

Perhaps when humanity first discovered cinemas in the early 1900s, this was what it originally felt like?

Fourthly, at its core, this story is a parallel story about a mother and a son. The film itself was about how a son grew up, with the help of his mother. Outside the film, it was a son with a dream of filmmaking, with a mother who wholeheartedly indulged and actively aided in her son’s dream. This is a universal story, with the kind of touching sentimentality that AI of today still probably can’t get.

Last but not least, just as this story is unprecedented, it may also be unsubsequented. Even if new indie filmmakers go rogue like the mother-and-son crew and launch another one-person project, it would be simply unthinkable if they do not deploy AI.

This film was like a soundless, black-and-white movie before there was Disney. And you will never watch another soundless, black-and-white movie in a cinema that’s rowdy, laughing and cursing.

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In case you don’t know, I like to use books, movies and TV shows to shed light on the national sentiment of contemporary China. For more, you can read this series.

Talk about visiting a Chinese cinema, perhaps the best time of the year will be this coming autumn, in one of the 7 Baiguan China Tours we are organizing.

Last week, I personally did 2 live Q&A sessions to explain our tours. You may read this written transcript.

Baiguan - China Insights, Data, Context

What you will actually learn in Baiguan China Tour?

On Wednesday and Thursday, Robert hosted two live Q&A sessions about the upcoming Baiguan China Tour, attended by more than 30 of you…

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22 days ago · 3 likes · Robert Wu and Baiguan China Tour

On July 28, the Federal Communications Commission added foreign-produced “advanced robotic devices” to its Covered List, defining the category as mobile robots such as humanoids and quadrupeds, but also including household items like robot vacuums. Formally, the restriction applies to equipment manufactured in any foreign country. In practice, however, non-Chinese suppliers are expected to receive exemptions, making it an effective ban on new Chinese robot models.

Then, Reuters reported on August 4 that the FCC was drafting a measure to block imports of new Chinese optical modules. These components convert electrical signals into light and carry data over fiber between the servers, switches, and accelerators inside AI data centers. As optical networking becomes increasingly important to the construction of large AI systems, this sector has ushered in some of China’s most valuable companies, occupying a prominent position in Baiguan’s “China Global Champions 30” index.

The Chinese response was as swift as in last year’s trade war. The Chinese Ministry of Commerce responded on August 5 with a package of targeted countermeasures. Among other things, Beijing tightened licensing reviews for US-bound exports of controlled drones, key components and related technologies, removing the streamlined approval process previously available to these shipments.

Also in the last week, Forbes broke the supposedly “shocking” story that American AI data vendors have been selling training datasets to Chinese large language models.

This type of “accusation” is quite interesting, because at the same time, the same Chinese AI labs are accused of “distilling” from American large language models.

As very eloquently laid out in this article about why Chinese AI labs distill, distillation is mainly used as a shortcut to get high-quality training datasets. It’s a “data strategy”, as opposed to getting underlying algorithms and weights, which is impossible to distill.

Now, if distillation is not allowed, at least you will think buying data through proper channels is fine?

Turns out, it’s not fine. The logic of America today, both its government and its public opinion, appears to be that they should stop selling or giving ANYTHING that might potentially help the Chinese AI industry grow, even while Chinese open-weight models have been widely adopted in the US.

But why should we stop there? We should make it illegal for American firms to use Chinese open-weight models as well.

And it’s not just the US. We should ban all of our allies from using Chinese equipment, just as Chris McGuire, the senior fellow of the Council on Foreign Relations, proposed in response to the Reuters story that Samsung and SK Hynix are testing Chinese chip tools as a hedge against US risks.

At this point, it’s difficult not to do a linear extrapolation into the future and see that at the current rate, we will be heading toward a complete breakdown of the trade relationship between the US and China. No buying, no selling. Don’t touch me!

It’s also hard not to spot a pattern here: in these episodes of trade tension between China and the US, China is always the passive one, on the receiving end. The US introduced tariffs; China responded with equal measures. The US banned chips; China banned rare earths. The US banned robots; China struck back. The US always deals the “tit”, while China responds with that “tat”.

I struggle to think of any one instance in the past few years that China struck FIRST, while the US retaliated second.

It’s also clear who is embracing openness, and who is closing up. The US AI companies don’t allow their AI to be accessed by Chinese companies, but Chinese companies are announcing open-weight models every day.

Clearly, there is a total asymmetry of self-confidence, and of paranoia, between the US and China now.

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Asymmetry of Paranoia

For the US, China is an "adversary," which is just a slightly more charitable word than "enemy." In the Chinese business and technology circles I know, the language is different. The US is certainly a competitor. It is also seen as a power that is increasingly going mad. But it remains a great country from which China can learn.

There is paranoia in China’s security establishment, of course, but it has not penetrated ordinary business and technology conversations to the same extent. For instance, if you read what Liang Wenfeng said about the US, even behind closed doors, he did not sound as paranoid about the US as Dario is about China at all.

Why is today’s America so much more paranoid about China than the other way around?

Perhaps this is simply the psychology of an incumbent and a challenger. The incumbent experiences every exchange as a possible loss of advantage. The challenger experiences the same exchange as an opportunity to learn. One tries to preserve its lead by reducing contact, while the other tries to close the gap by increasing it.

But this explanation does not make the result any less ironic.

For most of the modern era, openness was central to America’s identity and its claim to superiority. Open markets, open scientific exchange, the free circulation of ideas and talent. These were evidence of American confidence. A powerful country could afford to remain open because it believed that it would gain more from exchange than it would lose.

Closed countries behaved differently. They banned foreign products, restricted information, pursued self-sufficiency and treated outside influence as a threat. Their fear of exchange was supposedly evidence of their weakness.

That is the deepest irony of this trade war. America’s opposition to China has become so total that it is gradually adopting the very characteristics it once presented as proof of the Chinese system’s inferiority, and perhaps is even on the path to surpass China in this regard.

I enjoy writing, not least because writing is a form of thinking exercise for me, and I try to write everything myself. However, writing is only my part-time job, alongside my full-time CEO job. To strike the right balance between writing on my own as much as I can and publishing in time anything at all, some articles in this newsletter are written by AI, but always with 1) my own core thesis and skeleton, 2) internalization of my style, and 3) my final proofreading of each word before hitting Publish]

DeepSeek’s Liang Wenfeng is probably the least publicly visible founder of any major AI company today. Sam Altman and Dario Amodei appear regularly on podcasts, at conferences, and before policymakers. We know their arguments, their mannerisms, and sometimes far more about their internal conflicts than we would like.

In contrast, Liang has given only a handful of interviews, mostly in writing. We don’t even know what Liang’s voice sounds like. Yet, DeepSeek has somehow become one of the most consequential AI companies in the world while its founder remains almost entirely silent.

That is why an alleged transcript of a nearly four-hour meeting between Liang and DeepSeek’s investors caused such a sensation when it circulated online late last month. The transcript contains answers on everything from artificial general intelligence to Huawei, Nvidia, open-weight models, pricing, corporate governance, and the future structure of the AI industry.

DeepSeek has not confirmed the transcript, so every quotation attributed to Liang should still be read with that qualification. I cannot prove that it is real either.

My instinct, however, as soon as I got my hands on it, is that it probably is.

The simplest reason is that it sounds remarkably consistent with everything DeepSeek has done, or with whatever little clues Liang has previously let out into the public domain. In a rare earlier interview, Liang described open source as a cultural behavior rather than a commercial calculation. The company has repeatedly released model weights, papers, and production-tested code. Its official model repositories allow commercial use of many releases. It has kept prices extraordinarily low even when demand would probably have supported much higher ones. Its own website still describes the company as being “dedicated to exploring the essence of AGI”.

Then, the plot thickens. A few days after the transcript appeared, Bloomberg reported that DeepSeek had paused its second fundraising round, driven in part by Liang’s frustration over the leak. A new alleged story piles on another.

Who is the “good guy” in the AI race?

The American debate about China and AI usually begins with a familiar premise: the United States must win because it cannot allow the Chinese government, or people working under the Chinese system, to control such a powerful technology.

Yet, if we compare Liang with some of the leading American AI founders purely in terms of disposition, restraint, and the moral values we would want behind the wheel of AGI, it becomes difficult to say who the “good guy” is.

Again, we know very little about Liang. Secrecy naturally creates suspicion, especially in the current geopolitical environment. Yet the limited evidence we do have presents a founder who already had enough money, preferred difficult scientific problems to a celebrity life, and built a company around a narrow mission. In the leaked transcript, he repeatedly says DeepSeek will avoid attractive businesses that do not advance the path toward AGI. The company does not use conventional KPIs for researchers. It wants employees to retain time for unscheduled exploration. Liang also famously describes restraint itself as a strategy.

This kind of person is a minority in China. But it’s a growing minority.

Most Chinese entrepreneurs, like most entrepreneurs everywhere, care a great deal about profits. But I increasingly see a newer generation of founders, who were born into relative comfort and for whom money becomes the means rather than the end. (POP Mart’s Wang Ning is another case in point.)

Liang’s self-made wealth as a quant boss gave him the freedom to start DeepSeek without asking investors for permission. More importantly, it gave him the freedom to define success in his own way.

That freedom shaped the company before outside capital arrived.

“Open weights” as the objective

Many technology companies use open weights models to recruit developers, win attention, or pull users toward a paid product. For them, openness is one stage in a commercial funnel.

DeepSeek, however, seems to judge success partly by how widely its models can be used, including by people who will never become DeepSeek customers.

The alleged transcript makes that philosophy unusually explicit. Liang says DeepSeek intends to release even its most advanced models, wants other companies to deploy them successfully, and does not keep a superior private version for itself.

What’s remarkable in the transcript is that he laid out a clear maximum profit goal (10-month payback and 6-fold return on investment), so the open-weights stance does not seem like an empty promise but an intentional, calculated bet. In his own telling, the more restrained company has a better chance of reaching AGI because it avoids wasting energy fighting for every adjacent source of revenue.

In other words, open weights are part of the mission itself.

This is close to what the name OpenAI originally meant. In its 2015 founding announcement, OpenAI described itself as a nonprofit intended to build value for everyone rather than shareholders. Its researchers would publish papers, code, and patents, and collaborate freely with other institutions. Its charter still says its mission is to ensure that AGI benefits all of humanity.

OpenAI has faced pressures and responsibilities that DeepSeek has not yet encountered, and DeepSeek’s own ideals may eventually collide with commercial reality. Still, judging from their present behavior, the Chinese company looks surprisingly close to the original OpenAI proposition.

The Chinese government has also begun to recognize the geopolitical value of this approach. At the 2026 World AI Conference in Shanghai, Xi Jinping emphasized openness, inclusive development, and support for AI capacity in the Global South. China’s Foreign Ministry subsequently described the country’s open-source AI ecosystem and AI-related international public goods as tools for narrowing the global AI divide.

That language is self-interested, of course. All soft power is. But cheap, downloadable Chinese models offer something tangible. A developer in Indonesia, Brazil, or Nigeria can run the weights locally, modify them, and avoid permanent dependence on a handful of American platforms. This is a more useful form of soft power than another nice speech about “win-win cooperation.”

Is “intelligence” a commercial product, or a public good?

It’s tempting to compare China’s AI strategy with its manufacturing playbook: enter at a low price, improve quality quickly, and eventually offer a product good enough that the price gap becomes decisive.

That’s the more friendly way to put it. The unfriendly way will call this strategy “dumping”.

The analogy is useful, but AI may go further. A vacuum cleaner or an electric vehicle is just a consumer product. But “intelligence” could become a basic input used by every person and every business, closer to what the internet, electricity, or water are today. If that happens, the social value of making intelligence extremely cheap may outweigh the value captured by any one model company.

On this topic, Liang sounded almost Hegelian. In the leaked transcript, he said:

This differs from open-sourcing a piece of software in the past, because that software’s market wasn’t so large, while AI is simply too big. If we tried to monopolize the benefit, we would certainly be discarded by history. Most fundamentally, I think this is an objective law — a view of history.

这跟之前开源一个软件可能是不一样的，因为那个软件的市场没那么大，而 AI 这件事实在太大了。如果我们想独占这个利益，那一定是要被历史抛弃的。我觉得最主要的是，这是一个客观规律，这是一种历史观。

DeepSeek’s pricing suggests that it is already operating with this possibility in mind. According to the leaked transcript, its API prices are designed to recover equipment investment in roughly ten months and earn what Liang considers a “reasonable return.” He says the company could charge substantially more without losing much usage, but chooses not to, and when DeepSeek once cut a model’s price to one quarter of its original level, the team “celebrated.”

The Nvidia triangle

The leaked transcript becomes more politically awkward when Liang turns to semiconductors. He reportedly says Nvidia is “digging its own grave” by allowing export controls to accelerate Chinese substitution. He also claims that DeepSeek used Nvidia hardware to train V3 while reducing its dependence on Nvidia’s software stack, and that the company is working closely with Huawei’s emerging ecosystem.

Some of the specific technical claims in the transcript, especially its comparisons between Huawei and Nvidia hardware, remain unverified. Yet, the direction is much easier to see. DeepSeek is helping Chinese models run efficiently on a technology stack that depends less on CUDA and advanced American chips.

I recently described this as the “galapagosization” of Chinese technology. Export controls create short-term pain, then give Chinese companies a powerful reason to develop alternative hardware, software, interconnects, and standards. DeepSeek sits on the software side of that emerging ecosystem.

The interests of the three main actors now point in different directions. China wants distance from Nvidia. The US government also wants Nvidia to keep its distance from China, but for a different reason. Nvidia itself wants to remain at the center of both ecosystems.

This is why Jensen Huang sounds so frustrated when American policymakers tell him the China market will be lost anyway. Jensen understands that technology competition is perpetual. If Chinese developers keep building on Nvidia, the American ecosystem retains scale, influence, and visibility. Forcing them away does not stop development. It helps create a second ecosystem that the United States can neither control nor easily observe.

Liang’s reported language is more combative than Jensen would like, but the two men appear to agree on the mechanism.

Capital comes after the mission

DeepSeek now faces a contradiction of its own. I previously argued that its success was possible precisely because the Chinese government did not create it and venture capital did not control it. I went further in Baiguan: had DeepSeek taken conventional VC funding at the beginning, investors might have pushed it toward user growth, monetization, and a faster exit before its research culture had time to mature.

DeepSeek has now taken outside money. According to The Information, as relayed by Reuters, its first round raised more than RMB 50 billion, or about $7.4 billion, at a valuation above $50 billion.

I do not think this invalidates my earlier argument. Sequence matters. DeepSeek accepted investors after its mission, culture, and technical credibility were established. The reported deal placed most investors into a limited partnership controlled by Liang, imposed a five-year lock-up, and gave them no voting rights. (China’s national AI investment fund was the notable exception.) These are unusual terms for an unusual company.

The money also serves a clear purpose. DeepSeek needs compute, and it needs to keep a small group of researchers who could command much higher compensation elsewhere. In an earlier account of the fundraising meeting, Liang’s most important demand to investors and large technology companies was simple: do not poach his people. The leaked transcript says team stability is the company’s main non-negotiable interest, and that financing has reduced the risk by giving employees meaningful equity.

Capital has become a means of protecting the mission. Whether it stays that way is now the central test.

Bloomberg reported that the paused second round could resume later and that DeepSeek had been seeking a valuation around RMB 500 billion. Reuters has also reported early deliberations about a possible listing on Shanghai’s STAR Market. Neither step is a confirmed company plan. Yet a domestic listing would make sense if DeepSeek needs liquid equity to retain talent and finance compute without surrendering strategic control.

The company does not need to remain profitless to remain mission-driven. Liang’s stated goal is a reasonable profit and a durable commercial foundation. The real question is what the company chooses to optimize when revenue, market share, research openness, and its AGI mission eventually pull in different directions.

That test has broken many idealistic organizations before.

When OpenAI was founded in 2015, it said a leading AI institution should prioritize a good outcome for everyone over its own self-interest. Nearly eleven years later, one of the companies making the most serious attempt to operationalize that idea is a secretive Chinese laboratory created by a quant billionaire and now financed partly by Chinese state capital.

DeepSeek may still disappoint me. Its culture could change as it grows. Political pressure could narrow its openness. The alleged transcript could contain errors or inventions. But the vision inside it is coherent with the company’s behavior: make the models open enough to spread, cheap enough to become infrastructure, and profitable enough to keep the research going.

I hope DeepSeek ends up becoming the real OpenAI. That is what I am rooting for.

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The CXMT IPO

In a highly anticipated event, Chinese memory maker CXMT finally became a listed company. As expected, it became the most valuable company listed across both A-share and H-share on its first day of listing, surpassing ICBC and Tencent.

From an issuance and market-stability perspective, this was a major success.

Things could easily have gone much worse. The nightmare scenario was a repeat of PetroChina’s 2007 IPO: shares were immediately bid up to a stratospheric valuation, then began an excruciating decline that made the company a symbol of the market top. PetroChina, you may have forgotten, briefly became the world’s first trillion-dollar public company, at least on paper.

It is far too early to say that CXMT has escaped PetroChina’s eventual fate. But the immediate disaster many investors feared, a giant IPO draining liquidity and crushing the market around it, did not happen, despite the turmoil and blow-ups in the memory and semiconductor sectors internationally in the past few weeks, hastened by a certain German Wunderkind and some maximally leveraged Korean gamblers.

It's a success story for the Chinese securities regulator as well. It’s clear that ensuring a successful IPO for CXMT is of paramount importance for regulators. On the eve of the IPO, when market sentiment noticeably soured along with the broader fall in global AI sectors, securities regulators and the “National Team” came out hard with clear messaging and hard cash to support the market.

I have long observed that the capital market has transitioned from a secondary matter to a primary policy item, and Chinese regulators’ skill at managing market expectation has grown rapidly. CXMT’s debut is another data point supporting my claim.

Also in the spotlight is Hefei. Long overshadowed internationally by cities such as Shenzhen and Hangzhou, Hefei has gradually built a reputation as one of China’s most consequential technology and industrial-investment hubs. CXMT’s IPO has now pushed that reputation much further into global view.

Measured by the combined market capitalization of locally headquartered A-share companies, CXMT alone catapulted Hefei from 19th place to fourth, behind only Beijing, Shenzhen, and Shanghai.

The “Hefei Model” is quite unusual in that it’s where government venture capital places massive, concentrated, and long-duration bets on strategic industries, and several of these bets paid off spectacularly. This is actually amazing, because government funding tends to be risk-averse and isn’t usually associated with roaring success stories.

Naturally, people may ask, given Chinese local governments’ tendency to neijuan, will more cities in China follow suit?

Well, I wrote a long article about it two weeks ago, but my conclusion is simple: No. This is probably one of the rare cases when, although one city may have a stellar success, it’s not easy for other cities to follow suit and copy.

You can replicate success and scale it up if capital is the main constraint. But when it’s serendipity, people factor, and something as rudimentary as “having guts” that’s at stake, there is really no clear roadmap.

You can find more details about it here:

Baiguan - China Insights, Data, Context

The "Hefei Model" behind CXMT: a rule or an exception?

On July 15, ChangXin Memory Technologies, better known as CXMT, is scheduled to begin book-building for what may become China’s largest semiconductor IPO. Investor subscriptions will follow on July 16. The company plans to raise RMB 29.5 billion, or about US$4.3 billion, to upgrade its DRAM production lines and develop new memory technologies…

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2 months ago · 19 likes · 1 comment · Robert Wu

I want to do this kind of short, single-issue briefings more frequently. Here are some other recent events that I find interesting. Which ones do you want to hear my takes about?

To make sense of this whole saga, we need to first run down the key facts and timelines, and then I will proceed to answer some of the top questions.

Timeline of the Meta-Manus Acquisition

• 2022: The startup, originally operating as Butterfly Effect, is founded, with research and development teams based in Beijing and Wuhan.

• March 2025: Manus debuted its general-purpose AI agent, capable of executing complex, multi-step tasks such as resume screening and stock analysis. The release gained massive viral attention and is compared to “DeepSeek” as a sign of China’s rapidly closing AI capability gap.

• April 2025: Benchmark Capital led a $75 million funding round in the startup, valuing the company at $500 million.

• May 2025: The U.S. Treasury Department launched an official inquiry into Benchmark’s investment. Regulators investigated whether the funding violates outbound investment security rules, citing concerns that the capital could accelerate sensitive AI development in a “country of concern.”

• Mid-2025: To mitigate geopolitical and regulatory pressure, the company relocated its headquarters to Singapore. The founders laid off remaining staff in China, shut down local social media accounts, and rebranded to position themselves as a Singaporean enterprise, a move industry observers dubbed "Singapore-washing."

• December 2025: Meta announced its acquisition of Manus for more than $2 billion, aiming to integrate the company’s autonomous agent technology.

• January 2026: Chinese regulators launch a formal investigation into the deal. Authorities focus on potential violations of national laws regarding technology exports, data transfers, and foreign direct investment.

• March 2026: The regulatory situation intensified. Manus co-founders were summoned to a meeting in Beijing with officials from the NDRC. They were reportedly barred from leaving the country while the investigation proceeds.

• April 27, 2026: The NDRC formally blocked the acquisition.

What’s special about the Manus deal?

Under Chinese law, the acquisition of Chinese companies by foreign investors is subject to government approvals, a process similar to CFIUS in the US. If Manus were a Chinese company and were acquired by Meta (assuming CFIUS approval), the deal would need to go through the approval process in China, as with any cross-border M&A, and there wouldn’t be anything dramatic about it.

What made the Manus case unique was that it was originally a Chinese firm, but just as the product went viral, they dissolved the Chinese entity and re-established themselves as a new company in Singapore.

While they kept the same product, technology, and core team, this “Singapore-washing” move allowed them to bypass the approvals (or so they believed) that would otherwise have been required when Meta acquired them.

Fast forward to today, Beijing is basically saying that substance matters more than appearance, and that Manus cannot bypass the relevant approvals. Because they completed this deal without the necessary authorization, it must now be unwound.

It is important to note that there are no penalties or fines yet, nor is there any criminal prosecution.

So far, it is strictly business.

Why did Manus conduct “Singapore-washing” in the first place?

Manus served a mostly international market, received USD funding, and was built on US foundational models such as Claude. The US inquiry into Benchmark Capital’s investment in Manus was perhaps one of the many triggers that persuaded the team to change its identity.

They are caught between the two worlds.

How would the unwinding actually take place?

Conceptually, it’s not as hard as it sounds. If all of the 3 key parties: founders, investors, and Meta, agreed to an unwind, it can be done. The details of how to “decontaminate” Manus technology away from Meta are secondary matters.

I heard that at least some investors have already agreed to return the cash. It’s also entirely possible that Mark Zuckerberg already had buyer’s remorse since the consensus was that he was in a bit of FOMO when pulling the trigger back then. And the founders? Very likely, they were the first to fold.

Does Manus control any core technology that warrants such an unprecedented reaction from Beijing?

Manus belongs to the class of companies that are often referred to as “AI wrappers”. They do not train their own models, but through smart design and engineering decisions, they leverage model capabilities to deliver a smooth user experience.

I have been a happy Manus user for almost a year. I find that, for someone like me with no engineering background, I prefer Manus to Openclaw as my go-to AI agent for tasks like creating a simple app or conducting deep-dive research. (However, had I had access to Claude, I probably would have considered switching over.)

Overall, Manus is not DeepSeek, or Huawei, and I do not think Manus controls any core technology that Beijing would care much about.

So why is Beijing blocking the deal? Is Beijing not afraid of hurting overseas investors' sentiments and entrepreneurial spirits again?

Although Manus does not possess any core technology of national security importance, Beijing is afraid that such “washing”, if unchecked, would serve as a terrible example for others to follow, rendering China’s foreign investment regulation toothless.

A key factor that explains Beijing’s action that outside observers often missed was that Meta’s $2 billion deal was very openly touted by Manus’s founders and investors as a dizzying success story.

It was very to-the-face.

Had the Manus founders not been so overexcited about the deal and never made the $2 billion price tag public, I doubt this would ever have happened. But since it is now well known that a previously Chinese start-up achieved such huge success immediately after changing its “cover” to become a foreign company, Beijing’s hands are also tied. Allowing this to happen without any brakes will send a wrong signal to future tech entrepreneurs.

So, why were the founders and investors of Manus so giddy about the Meta deal? And also, why did the Manus founders reportedly return to China, given the possibility they would be barred from leaving?

I think the main sin of the Manus team is their naivety.

When they did Singapore-washing, they genuinely believed what they were doing was good and necessary. And when they were acquired so quickly at such a high price, they genuinely believed it was something to be celebrated. And when Beijing raised eyebrows, they genuinely believed they could explain the trouble away and chose to come back to the country and straighten things out.

Had they been conscious of the consequences, they would “Singapore-wash” or “Silicon Valley-wash” themselves from day one, as many of their peers had long ago, and they would not be where they are today.

They live in the illusion that this world is still the same globalized world when Mark Zuckerberg founded his empire.

Will this landmark episode force Chinese founders to leave and found companies overseas from Day 1?

I believe this has already happened.

My sense was that most founders who wanted to do this “Day 1 washing” had already done it. They just weren’t as outspoken as Manus about it. The remaining ones are perfectly happy with being a Chinese company. So net-net, the damage from this case to China would be limited and would be outweighed by the benefits.

The problem with Manus is that they only half-did it and thought it was not a problem. It’s the combination of this half-heartedness and the naive over-excitement I mentioned above that made Manus into a punching bag.

Most companies have already picked a side. Manus was just too late in making up their minds.

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It is shocking on several levels.

First, Zhang Youxia was the most senior uniformed officer in the country. Second, his relationship with Xi Jinping went far beyond ordinary patronage. Their families’ ties dated back to the revolutionary years in the Northwest, when their fathers fought side by side. Zhang was widely seen as one of Xi’s most trusted confidants inside the military system. Third, this came after years of high-profile, rolling investigations into top generals that have already fundamentally reshaped the PLA’s command structure. With this latest development, Zhang Shengming, head of military discipline, is now the only remaining uniformed member of the Central Military Commission. Every other vice chair and member in uniform is gone.

And yet, in another sense, Zhang’s fall is not entirely surprising.

Before becoming CMC vice chair, Zhang oversaw armaments and the military space program, and essentially the core of China’s military-industrial complex. Over the past few years, the most systematic and far-reaching investigations have been concentrated precisely in this area: weapons procurement, aerospace, missiles, and their surrounding defense enterprises. Almost all of the senior military commanders and major heads of defense companies were ensnared. It was a great reckoning inside an opaque system long known for its capacity to corrupt.

Under that lens, it would have been more surprising if Zhang, as the man at the top of that system, had been personally untouched.

Yet, this is still emotionally shocking. Under the old logic of Chinese elite politics, where personal loyalty, shared history, and patronage networks often provided implicit protection, this should not have happened. The fact that it did tells us something important.

The most plausible explanation is that Xi is demanding absolute purity inside the military system, and it reinforces a broader pattern we have seen repeatedly: Xi does not care about face-saving. He is a man of a deep sense of mission, with little interest in looking benevolent or maintaining appearances. If something is rotten, he does not compromise and settle for a half-deal. If someone, no matter how close that someone used to be, must fall to serve his objective, so be it.

For ordinary observers, however, the theatrics of court politics quickly give way to two practical questions.

First, what does this mean for the People’s Liberation Army’s fighting capability? Is the PLA being weakened by the removal of so many senior officers? The second question is inevitably about Taiwan.

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Tactically, the operation was very impressive. It was decisive and effective, and a long-standing adversary was removed in a single stroke, without prolonged escalation or domestic political cost.

Strategically, it could well end up in a disaster. History offers plenty of reminders that tactical brilliance and strategic wisdom are not the same thing. The Iraq War, too, was executed with speed and overwhelming force, and went on to reshape the region in ways its proponents neither intended nor controlled. And the fact that Donald Trump is great at improvisation, but never at strategic thinking, only hardens the suspicion.

Inevitably, China also becomes part of the conversation. Ostensibly, only hours before the dramatic capture, a Chinese envoy had just met Maduro himself. This is bad optics showing China’s cluelessness, while also reinforcing the perception that Caracas sits firmly within Beijing’s geopolitical orbit.

For years, China has been Venezuela’s most important external lifeline: a major creditor, a long-term oil partner, and a diplomatic “friend” when the regime was isolated by the West. In the public imagination, especially outside China, Venezuela is therefore not just another failed state, but a symbol of China’s influence in the Global South and of its willingness to back embattled regimes in defiance of Washington. Seen through that lens, the Maduro episode is almost automatically interpreted as China-adjacent, whether or not Beijing had any role in the events themselves.

Two different kinds of narratives quickly emerge. One treats the Maduro operation as a sort of a green light for China, as if Beijing were watching Washington to see what precedents it might now exploit elsewhere. The other frames it as a warning, a demonstration of American resolve meant to deter China from testing U.S. red lines.

Both are quite silly.

First of all, although the Jan 3 operation is a massive gold mine for Beijing’s PR efforts, Beijing does not need a “green light” from Mar-a-Lago before making moves in its own neighborhood. China’s decisions regarding Taiwan are governed by domestic legitimacy issues and calculated risk, not by whether the U.S. follows international law. Beijing sees America’s current lack of respect for both morality and legality as a given, and a flexible tool of convenience. It is neither surprised when the U.S. breaks the rules, nor does it feel it needs “permission” to follow suit.

Also, is this a “permission” anyway? For a person as unscrupulous as Trump, the distaste for double standards doesn’t exist at all. So he could perfectly square his power to arrest another head of state at will, while preventing anyone else from doing the same. Beijing is not so misguided as to take this “moral signaling” seriously.

And to suggest that this operation can act as some kind of deterrent is beyond ridiculous. What deterrent? That U.S. special forces might parachute into Zhongnanhai and abduct Xi Jinping?

What both camps of these commentators obfuscate is that this event, fundamentally, has not much to do with China. It’s America’s problem, not China’s. What is really at stake is what kind of power the US is and what type of image the US wishes to project to the world. China is, by and large, only a bystander watching this show.

Then there is also the usual refrain that China is giving up on its “ally”. Once again: China has no allies and is not seeking alliances. There has never been a Chinese version of the Warsaw Pact, and there will not be. China does not like the idea of fighting other people’s wars. It’s just not the Chinese way of thinking about things, and I have discussed this before.

There are three substantive things, however, that China will really be pondering as a result of this episode, and I will explain in the paid section below. (Visit here to claim your Baiguan member benefits for free access)

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Starting this week, I will try to make the “Briefing” section more like the early days of this newsletter, where I write weekly reviews of events I think will matter beyond news cycles.

1. PDD’s scuffle and the media blackout A scuffle involving PDD senior employees and market-regulation officials briefly surfaced last week—and then almost completely vanished. Bloomberg ran two stories, but they failed to propagate on China’s social media at all, which was quite unusual. Caixin also published, then pulled its piece within hours.

What stands out is not the incident itself, but the level of media control it revealed. This was not routine censorship, nor a broad political taboo, but a highly targeted blackout centered on a single private company. PDD appears to possess an unusually strong ability here.

I published a piece yesterday in my personal investment newsletter about my view of PDD right now, where I also described this incident and its implications in more detail. My investment newsletter is now a paid one, but if you are already a paying subscriber of Baiguan, you can enjoy a 56% discount. You can find that coupon in the Baiguan Member Exclusive Package.

The rest of this briefing is also paywalled. But again, for Baiguan subscribers, you can claim your complimentary access, also at the Baiguan Member Exclusive Package.

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The column starts with a blunt question: What can the world still sell to China? Harding’s conversations in China — with economists, technologists, business leaders — all pointed to the same awkward answer: not much beyond commodities like soybeans and iron ore, which don’t help Europeans sleep at night. Some mentioned luxury goods, some mentioned higher education, and several even suggested that Europe should just let Chinese companies build factories there. But after running through all these options, Harding lands on a stark conclusion: “nothing.” Nothing that China truly wants to import, nothing it believes it cannot make better and cheaper on its own.

He does acknowledge, to his credit, that China still buys semiconductors, aircraft, advanced software, and high-end machinery — but then immediately frames China as the “resident doctor,” merely buying these goods until it can produce its own and eventually export them. And he concedes China’s insecurity caused by US export controls. All of this is reasonable analysis. Yet it leads him to a sweeping final diagnosis: “The only good solutions lie with Beijing,” because only China can fix its deflation, boost consumption, strengthen the renminbi, or curb industrial subsidies. The rest of the world, he argues, can only respond with either politically painful reforms that reduce welfare or protectionism.

This is where I think the framing needs a reset — not because Harding misses the right issues, but because he stops at exactly the moment the harder questions begin. He correctly identifies the pressures. But he underestimates the number of levers the West still has, and overestimates China’s ability (or willingness) to close every door forever. Most importantly, he jumps past the most basic principle of trade: if you want to sell, produce something worth buying. If you don’t, the customer goes elsewhere. Trade is reciprocal: you sell when your value is competitive; you buy when it isn’t. It’s astonishing how much geopolitical commentary often loses sight of this simple truth. Instead of complaining that the client no longer buys from you, maybe start by asking whether the product still holds up.

So let me offer three specific areas where the FT narrative — and much Western policy thinking — unnecessarily narrows the field.

First, high-end technology. Harding writes that China still buys the sophisticated machinery it cannot yet produce. Yet the column treats this like a temporary, fading opportunity. What it doesn’t ask is why these sales dropped so sharply: not because China lacks demand, but because Western governments blocked the supply. China did not lose interest in EUV lithography machines; it lost access. Nvidia did not decide China was no longer a customer; Washington did. If those controls are relaxed tomorrow, demand would be immediate. The FT frames China’s tech trajectory as inevitable; what’s equally inevitable is that the world’s top producers will always have products China cannot yet replicate - if they stay competitive. The opportunity remains — unless the West refuses it. Without a choice, China will be forced to develop its own competitiveness in these areas.

Second, services. The FT barely touches this, except for mentioning higher education. But services are precisely where Western economies are strongest. Tourism, creative industries, finance, legal services, management consulting, higher education, and design — these are not sectors where China has announced a national drive for airtight self-sufficiency. Yet instead of expanding service exports to China, many Western governments have spent the last five years discouraging them: higher visa barriers and suspicion toward Chinese students, restrictions on consultants working with Chinese institutions. China isn’t rejecting Western services; Western governments and institutions have been choking off their own exports.

Third, inbound investment. Harding recounts that several economists told him directly: Let Chinese companies build factories in Europe. And then — oddly — he drops the thread. Inbound investment is one of the cleanest, most direct ways to rebalance an economic relationship. If China buys fewer goods, let it buy more assets. Let it create jobs. Let it finance new industries. But recent cases suggest the opposite instinct. The Nexperia saga is a perfect illustration: a Chinese-owned semiconductor firm was forced to be taken over without a clear justification. I wrote about that earlier — the real message to Chinese investors was that even lawful, productive capital is politically unwelcome. Under these conditions, it’s hardly surprising that economic engagement shrinks. You can’t slam the door on someone’s investment and then ask why they aren’t contributing to your economic future.

By this point, I can’t help but sense that the undertone of FT’s article is that of condescension: you can’t be allowed to sell more than I do, nor can you be allowed to invest in my territory, because c’mon, how can you be better than us!

Harding does gesture toward the need for competitiveness: Europe needs reform, less regulation, more dynamism. That part is right. But he frames competitiveness as something Europe must pursue because China stopped buying, rather than as a way for any economy to survive in global competition. Competitiveness is not a reaction; it is a precondition. If China is manufacturing faster, cheaper, and higher-quality goods, that’s not an argument that trade is impossible — it’s an argument that Europe needs to sharpen its own game.

And this brings us back to the FT’s concluding line: that “the only good solutions lie with Beijing.” But the reality is far more mixed. Some solutions lie with Beijing. Others lie with Washington, Brussels, Tokyo — and with the companies in those economies. Relaxed export controls, expanded service openness, clearer investment rules, and improved competitiveness are all choices available to the West.

China is not making trade impossible. China is making trade harder for those who stopped trying.

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Yes, we had previous episodes of bad blood between the two countries, from the 2012/2013 Diaoyu/Senkaku dispute to the more recent nuclear waste controversy. But none of these past incidents was as politically poisonous as Takaichi’s comment on Nov. 7 regarding Taiwan:

If warships are used accompanied by the exercise of military force, then however you look at it, it could be a situation posing an survival-threatening threat to the country (Japan).

What happens afterwards has been intense information warfare from all sides. On China’s side, the Chinese consul at Osaka shocked social media with his “beheading” comment. I don’t think letting crude comments take the center stage is wise here, as it easily shifts too much of the attention towards this patronizing attitude of how overly “emotional” or “immature” China seems to be. The ensuing noise makes many people unable and unwilling to ask the simple question: just why exactly is anything happening to Taiwan a “survival-threatening” event for Japan again?

It’s a bit absurd if you consider the fact that this would imply that the Republic of China government in Taipei and Japan are military allies, and that Taiwan falls under Japan’s protection, or at least sphere of influence. It’s as if the Empire of Japan and Taiwan’s status as its overseas colony never ceased to exist.

It’s absurd also because even the US has never said this kind of thing. Never has the US officially claimed or guaranteed that it would ally with Taiwan should the war happen. But Japan has. You heard it right: Japan, represented by Takaichi, is the first one among all countries to explicitly state that a military action in Taiwan would trigger its own military response.

At least 2 reasons immediately come into my mind for China’s fierce protests against this, and it will be impossible for China to off-ramp until Takaichi, a long-term China hawk, takes down her comments.

First of all, for an issue as “core” as Taiwan, if China sits there and does nothing about the first country to speak out about its intention to engage militarily in Taiwan, there is a risk of creating a domino effect. If more countries join this, China will be cornered into some very dangerous action regarding Taiwan.

This is why I found no merit in the kind of comment cheering Takaichi’s speech as likely to deter war. To the exact opposite, her comment will only encourage war.

I told Baiguan’s members in our member-exclusive Discord channel recently that if there was a meter in my mind for the risk of war in the next 10 years in Taiwan, it just shot to somewhere at the 50% mark from perhaps the 30% mark instantly after Takaichi’s speech.

Secondly, the fact that this speech comes out of the mouth of the leader of Japan, of all people, becomes an instant spark for nationalistic sentiment in China because of obvious historical reasons. The domestic pressure on Beijing to act forcefully is dialed up to the max. It’s especially sensitive that Taiwan used to be colonized by Japan for half a century between the first and second Sino-Japanese War.

What’s adding more salt to the wounds is that Taiwan is also joining the fray. Just as China re-imposed a ban on Japanese seafood as retaliation, Lai Ching-te, the leader of Taiwan, publicly showcased that he enjoyed Japanese sushi for lunch in an obvious dig at Beijing, adding to the impression of the “soft alliance” that Takaichi is implying and that Beijing is specifically attacking.

I don’t think these are serious people. To them, the possibility of a war seems to be a matter of fun, and that the battle of memes is all there is. Like children, they can just poke their stick here and there, thinking these can mean anything.

Or perhaps neither Takaichi nor Lai is stupid. All of these dramas happen in a broader context that few people mention in the heat of meme battles: what the US is going to do.

2025 marks a crucial watershed moment when China reaches peer status with the US. As the US and China negotiate terms for a detente and the US becomes increasingly isolationist, the risk of being sidelined is acutely palpable in both Tokyo and Taipei. The strategic gambit by Takaichi-Lai is perhaps to create enough noise to remind the US of its perceived obligations in East Asia and to drag the US back in.

It’s a calculated, but highly risky move. It’s getting riskier by the day as the Trump Administration stays notably silent about the whole thing amid all the rancor. Trump, Rubio, Vance - none of them spoke a word.

This radio silence would only add to Takaichi and Lai’s suspicion and may push them to double down on their gambit, which would only lead China to escalate further.

Brace for more troubles ahead.

Last Friday, not long after China put up an American-style export control regime on critical metals, Donald Trump responded with a long and melodramatic Truth Social post that once again wiped out hundreds of billions of value in one stroke.

Trump accused China of “becoming very hostile” and of essentially making him lose face while he should be celebrated for brokering the peace in the Middle East after “three thousand years of bedlam and fighting”. Like a lover who felt betrayed, he said he would have no reason to meet Xi at the coming APEC Summit in Seoul.

Soon, in another post, he threatened that he would impose an additional 100% tariff. But ostensibly, this new tariff would only be effective after the APEC Summit. At a press briefing immediately after that post, Trump seemed to have already softened the stance. “I’m going to be there regardless, so I would assume we might have it.”

TACO again?

Almost at the same time, a report from CNN emerged, which included an interesting piece of detail:

…But there are also private frustrations at the White House after the US Commerce Department expanded the number of Chinese firms on an export controls backlist late last month that could have frustrated China, sources said.

This insider tip, and the fact that it exists at all in the public domain, seems to suggest that Trump has also started to realise that China was only retaliating, not escalating.

It also seemed to confirm the storyline that Chairman Rabbit, the well-connected Chinese influencer/commentator, wrote about last weekend. Chairman Rabbit speculated that a number of new US trade policies and sanctions in September angered the Chinese side, but Trump didn’t seem to realize the severity of it. One plausible reason was that Trump was busy with other matters lately, including the peace talks in the Middle East and a new federal government shutdown. The Chinese side decided that in order to put their frustrations on the table, they would have to retaliate, and only afterwards would Trump get the message.

Then, in the middle of the week, Scott Bessent raised eyebrows with his remarks describing Li Chenggang, China’s lead trade negotiator, as “unhinged” and “going rogue.” It’s not every day that high-stakes negotiations between major powers descend into personal attacks. Perhaps Bessent believed that by singling out one Chinese official, the U.S. could create a scapegoat—someone Beijing could later dismiss or sideline, giving both sides a pretext to restart talks? If so, it was a naïve miscalculation, while the tone and reaction from the Bessent gave off a strong impression that Washington might be running out of options.

And out of options they are. Finally, on Friday, Donald Trump said that he planned to meet with Chinese President Xi Jinping in South Korea in two weeks and suggested that imposing an additional 100% tariff on all Chinese goods appeared infeasible.

TACO again.

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Almost simultaneously, another story was unfolding in Europe. On September 30, 2025, the Dutch government invoked a rarely-used emergency law—the Goods Availability Act—to take effective control of Nijmegen-headquartered chip manufacturer Nexperia, a subsidiary of China’s Wingtech Technology, which acquired Nexperia a few years ago for $3.6 billion.

The highly exceptional move was prompted by “serious governance shortcomings” at the company that the government stated posed a risk to Dutch and European economic security by threatening the continuity and safeguarding of crucial technological knowledge.

The details are still emerging, but from what I can gather, it does seem Nexperia under Wingtech was engaged in some dodgy corporate governance practices. But let’s be honest here. No amount of dodginess warrants a drastic takeover by government authorities. Even the Chinese government won’t do this kind of thing today. If the Chinese government seized a foreign business simply because of suspicion of corporate mismanagement, just imagine the uproar!

From stories as reported by the Dutch media, as well as from the Chinese side, we start to see a common thread: The Dutch government had long wanted Wingtech to cede substantial control of Nexperia, in order to protect the Netherlands’ domestic semiconductor base from being trapped in the U.S.–China power struggle.

The sequence of events is crucial here. Among the many new U.S. trade restrictions on China announced in September, which triggered Beijing’s recent retaliation, the most notable one was the so-called “50% rule.” Under this rule, Nexperia, as a subsidiary controlled by Wingtech, would automatically fall under U.S. sanctions because Wingtech itself was listed on US BIS’ Entity List. On the very next day after the 50% rule was announced, the Dutch government moved to seize control of the company. The motive—to shield itself from the crossfire of the U.S.–China trade dispute—could not have been clearer, and when forced to choose between the U.S. and China, the Dutch chose the U.S., while sacrificing Chinese interests in the process.

Wingtech’s main sin is that it’s Chinese. What the Nexperia case has demonstrated is that the fact of being Chinese itself has become a risk factor in doing business in Europe. As a Chinese businessperson myself, this feels both troubling and disheartening.

This raises a fundamental question for the Dutch government—and for Europe as a whole: what exactly do you want from China?

Europe needs industrial revival, infrastructure renewal, and investment. To achieve these goals, Europe needs foreign capital and know-how—and few countries can offer both as abundantly as China can. Yet the Nexperia case suggests that Europe may not actually welcome Chinese investment at all. If that’s true, who will fill the gap? Does Europe believe Donald Trump—or any U.S. administration—would commit to a “Marshall Plan 2.0” to make Europe great again?

And if Chinese investment is not welcomed, European officials should shut their mouths next time about accusing China of “over-capacity” and “trade imbalances”. After all, what’s a better way to resolve these issues than allowing more Chinese companies to invest in Europe?

If Europe is still open to Chinese investments, then some major clarification is needed to restore confidence.

It is worth noting that Nexperia was not commonly considered a core strategic asset. When it was sold to Chinese investors, both the seller and the regulator knew it was a low-end business of NXP, and they got a great deal from Wingtech. After all, Nexperia is no ASML or Airbus, the kind of truly core European strategic assets that nobody would imagine the Chinese investors would ever be allowed to buy.

So where is the line? If one day CATL or BYD are added to the US’s whichever restriction lists (not entirely unlikely), do the massive plants that they have built or will be building also face the risk of seizure? Unless that line is clarified, Chinese investors—from industrial giants like CATL, down to small and medium-sized businesses—will be extremely cautious about investing in Europe. And that would be Europe’s loss.

Key points across these announcements include:

• Announcement 55: superhard materials-related items, effective Nov 8, 2025

• Announcement 56: some rare earth equipment, raw materials, and related items, effective Nov 8, 2025

• Announcement 57: medium- and heavy-rare-earth related items, effective Nov 8, 2025

• Announcement 58: lithium batteries and artificial graphite anode materials, effective Nov 8, 2025

• Announcement 61: rare earth-related items, effective Dec 1, 2025

• Announcement 62: rare earth–related technologies, effective immediately.

The full translation can be found here by .

The surprising move naturally leads to a score of questions: Is it an escalation on the part of China? Or is it just matching similar US restrictions? Is it just raising the stakes in the ongoing US-China “Big Deal”, a proverbial stick as in “carrots and sticks”, or just a unilateral move to piss the US off?

[My initial take on this is behind the paywall. If you are a paying subscriber of Baiguan, you can contact me for a complimentary access.]

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Now on to the main topic of the day: the K visa.

I must admit that the recent controversy surrounding the so-called “K visa” took me by surprise. Before the last few days, I hadn’t realized that the MAGA-style xenophobia and conspiracy theories had infiltrated the Chinese discourses so deeply. It seems, after all, that we are still living in a globalized, interconnected world, where problems and grievances also appear quite similar.

In this briefing, I will attempt to describe what this whole drama is all about.

Due to the sensitivity of this matter, I have placed the remainder of this article behind the paywall. If you are a paying subscriber of Baiguan and haven’t got the complimentary access yet, please DM or email me. If you have a tight budget but really want to see this article, you are also welcome to contact me for a copy.

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It’s not known whether this is a permanent ban, but as of today, on China’s social media platforms, you won’t be able to find their own accounts. (You can still find many of their video contents shared by third-party accounts, suggesting that the ban is a punishment to deprive them of user attention and income streams, rather than a blanket obliteration of memories about them. This implies that they have not crossed the most extreme type of red lines, and that whatever their wrongdoings are not criminal.)

These two influencers have no relations with each other, and they specialize in distinct kinds of content. But the fact that they have been banished around the same time deserves attention.

Among the two, Hu is younger and has been famous more recently. Coming from a humble background, he first made a name for himself by conducting interviews with grassroots individuals, investigating common livelihood issues, such as the purchasing power of 100 yuan in different cities and different countries. Besides shooting short videos, he was known for hosting live streaming sessions, during which he received calls from random viewers. His signature opening questions were always about education level, occupation, income level, and type of mobile phone, satisfying the voyeuristic desires of his audience.

Increasingly, he became more and more obsequious to the rich. For example, in one show, he received a call during his livestream. The guest claimed to have 50 million yuan (~$7.5m) of assets. Hu “ordered” the guest to open the camera to show his home, and after seeing his humble kitchen, Hu scolded the guest for lying. But after the guest showed his bank balance stands at over 5 million yuan, Hu stood up, bowed repeatedly, and apologized dramatically.

The pinnacle of this obsequiousness to the rich was the “Apple person vs Android person” theory that he created, which many people assumed led to his ultimate downfall. “Apple” is Hu’s word for being rich and having good taste. It’s not just about having an Apple phone, but driving a Tesla, shopping at Sam’s Club, and living in a big apartment are all considered having an “Apple” life, while the opposite is “Android”. When someone called in with poor microphone quality, Hu called him an “Android person”, with “Android logic”.

It is true that in many people’s minds, Apple stands for the premium, while domestic phones like Xiaomi and Vivo, which mostly run on Android systems, are considered to be sub-premium. But it can still be a shocker when this is explicitly talked about and applied to all facets of life in order to categorize people into different classes.

Not long before he was banned, he received a call from one of his early followers during a livestream. The follower scolded him for betraying his roots, calling Hu's “Apple person vs. Android person” theory a disgrace, and stating that Hu would not be far from his downfall.

In comparison, Zhang Xuefeng was famous much earlier. An education consultant who helped students apply for graduate schools, he was first brought into the limelight in a viral video in 2016, where he shared a funny take on 34 of China’s top universities in 7 minutes. And he has gradually grown in popularity ever since. Before Zhang was silenced, he had already garnered over 40 million followers on Douyin.

Zhang was famous for his bombastic, unforgiving, and politically incorrect takes. In 2023, he made national headlines sharing his disdain for any humanities major, calling anyone who majors in humanities will eventually end up in the service industry and would just be “licking舔” (at their clients).

In a famous episode, he laughed at a parent whose child, with excellent STEM grades, wanted to study journalism in college to fulfill his dream. Zhang’s advice to the parent was to beat the child into a coma in order to stop him from having this silly idea. He further stated that anyone should just blindfold themselves and pick whatever random major, and it will still be better than journalism.

For many people, Zhang’s ideas are rude, and his style of delivery looks almost like a villain. However, for many others, Zhang is merely the anti-hero who reveals the unfiltered truth to common people, free from propaganda, fantasy, and lies, for their own benefit.

The direct trigger for Zhang’s banning, though, is widely believed to be a leaked video of an internal speech he gave after the recent military parade. In that video, with his usual fiery style, he proclaimed that the same day the PLA sends troops to Taiwan, he promised to instantly donate 50 million RMB. His audience, mostly his students, clapped ferociously.

The video was leaked on foreign platforms, such as X, and created a significant amount of controversy. He knew he was in trouble. A few days later, in his livestream, he was furious and wanted to find the perpetrator. Still, he shrugged off this episode and laughed that he was not afraid.

Only a few days later, he was gone.

If reunification with Taiwan is the long-stated policy of the PRC, why would Zhang be banned because of it?

First of all, as much as you should not under-estimate China’s resolve to reunify with Taiwan, you should also not under-estimate the resolve to reunify PEACEFULLY. (I plan to write about this topic one day.) At the very least, war or peace, the CPC does not like the narratives of a topic of such utmost importance to be shaped by such an unsavory demagogue, right after the Big Parade was successfully concluded. If Zhang doesn’t face consequences, what kind of message is the CPC sending to the world?

On the other hand, I also don’t think the punishment would have been so drastic had Zhang not been such a controversial figure to start with. The fact that Zhang was censored at the same time as Hu and similar KOLs suggests that it’s not just because of a single video. Rather, these cases happened directly as a consequence of a recent online campaign launched by CAC, China’s internet regulator.

On September 22, CAC announced that it would launch a two-month campaign to fight “maliciously stirring up negative emotions/issues.”

Targeted behaviors include:

Inciting extreme group antagonism. This includes exploiting social hot topics to forcibly associate them with identity, regional, or gender labels in order to stigmatize and sensationalize, thereby provoking inter-group conflict. … Certain subcultures, such as “ACG communities” or so-called “troll youth” groups, have even been found to incite hostility, engage in “doxxing,” or teach others how to buy and sell doxxing services.

Spreading panic and anxiety. This … targets fabricated or distorted details about events that feed conspiracy theories or sensationalism, as well as false personas posing as “masters” or “experts” who exploit concerns around jobs, marriage, or education to sell products or courses.

Stirring up online violence and hostility. This includes scripting or staging fights, bullying scenarios, or malicious pranks to glorify “violence against violence.” It also covers sharing raw, graphic footage of bloody or horrific scenes, or distributing disturbing images/videos involving animal abuse, self-harm, or extreme acts. …

Over-amplifying negativity and pessimism. This includes concentrated promotion of extreme or absolutist claims such as “hard work is useless” or “education is pointless.” It also covers malicious interpretations of social phenomena, exaggerating isolated negative cases, and using them as opportunities to spread nihilistic worldviews. Further, it targets the creation of so-called trending terms, memes, emoticons, or catchphrases that excessively demean oneself or glorify despair and apathy, leading to unhealthy imitation and viral spread.

It appears this new campaign is tailor-made for the likes of Hu and Zhang. Hu’s “Apple vs Android” theory, Zhang’s “Humanities is worthless”, and “I will donate 50 million RMB the moment the war breaks out in Taiwan”, can all be found here, from stigmatization of social labels, to inciting violence and hostility, to sensationalism, to glorification of no hard work and no education.

The commonality between Hu and Zhang is that both of them owed their success to tapping into social anxiety in the first place. Hu’s exposé about actual inflation levels and the realities of poor people’s lives, and Zhang’s earnest and practical advice for graduate students, all touched on the right nerves.

But as they became more and more successful, social anxiety morphed into division. “Your logic is Android”. “Let’s donate to our cause in Taiwan!”

The big backdrop for all of this is the increasingly dire youth unemployment situation. These influencers are merely channels through which these sentiments find expression, and the authorities are now afraid that negative sentiments will be self-reinforcing and lead to unbearable social tension.

Unemployment is also shaping up to be a global phenomenon, with slower growth everywhere and the rise of AI that threatens to eliminate many junior white-collar jobs. Everywhere around the world, from the US to Germany, from Italy to even Japan, the rise of the alt-right is a direct consequence of this shifting ground.

What has surprised me recently is that such alt-right sentiments are also quite palpable here in China, as showcased by the recent controversy about the “K visa”.

This will be the main subject of my next briefing.

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In case you do not know, a few months ago, I started a separate newsletter sharing my personal investment ideas and how I structure my own portfolio (which has been running for 11 years).

I love investing, even if only on a part-time basis. For me, investing is a great intellectual journey. Moreover, I am a firm believer in practicing what I preach and putting money where my mouth is. If I can’t monetize my ideas and beliefs through investing, I may not be worth listening to.

To be clear, it is not an investment advice newsletter, and I will not pretend to know everything. Just as I wrote in the first article:

Again, investing for me is a big way to satisfy my own curiosity and to help myself grow intellectually, while writing this newsletter can help me put more discipline on myself. This means that reading this newsletter will not be like having a mentor or a guru, but a study companion in our respective journeys.

In the last few days, I just conducted a quarterly portfolio review, during which I shared how I positioned myself for the biggest trends that I am seeing, from China consumption to global decoupling, from autonomous driving to green energy. I also shared my long-term interest in copper, and expressed my caution in generative AI as well as total disbelief in general robotics.

Before I sign off, let me share a quick take on two interesting news items.

In a significant development for global trade, Chinese Premier Li Qiang announced on September 24, 2025, that China will no longer seek “Special and Differential Treatment” (SDT) in any current or future WTO negotiations.

Although Chinese officials explicitly clarified that this does not mean China is abandoning its self-declared status as a developing country, the practical significance lies in the concessions it is giving up. SDT provides benefits like longer timelines for implementing trade commitments, technical assistance, and greater leeway for subsidies. By voluntarily forgoing these new privileges, China is effectively raising the bar for its own trade obligations.

And then a few days later, China made another announcement:

China will tighten the rules for exporting electric vehicles by requiring automakers to obtain export permits from next year, the Commerce Ministry said Friday. The export licenses, required from Jan. 1, are intended to “promote the healthy development of the new energy vehicle trade,” the ministry said in a statement. (AP)

To be sure, an export license is not an export quota. But it will go a long way to eliminate unauthorized exports by so-called “parallel traders” by requiring that only automakers and their authorized distributors with established overseas service networks can export EVs, protecting pricing power as well as brand image of domestic brands.

Both of these new developments align nicely with the zeitgeist - the great pivot from overproduction to a balance between high-quality production and consumption, from an excessive trade surplus to a more balanced trade.

I really want to write another briefing about the ongoing controversy surrounding the so-called K visa and what I see as the rise of “Chinese MAGA”, as well as Chinese censors’ recent crackdown in this direction. But since I am on vacation, it will take at least a few days to finish.

Stay tuned!

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My favorite review so far was written by our always insightful of , titled Litigation Nation, Engineering Empire. It’s one heck of a book review, blending his personal experience with a lot of data (which Dan seems to be lacking in his book), and gives a rigorous and well-intentioned “lawyerly prosecution” of the case in “true American fashion”. If you don’t have time to read Dan’s book, I encourage you to read Jonathon’s review instead.

Because I haven’t read the book yet, I can’t give you my book review. But I find it interesting to give a review of the reviews. Maybe this is where the public reaction to the book is even more interesting than the book itself.

A common pattern I observe in the reviews is that for Chinese people, or for people who have a deep understanding of China, the book barely registers. I suppose this is because for us, most of what the book covers is already common knowledge. For instance, one member of Baiguan said in our Discord community that although she expected herself to be glued to the book, she was a bit disappointed thus far.

Another friend of mine, a Silicon Valley founder born in China but who later relocated to America as a teenager, commented:

The book talks about stuff that’s not in the main American discourse on China. But for me it doesn’t really offer anything new / insightful.

Then obviously, there is a huge contrast in how the American public is receiving this book. I am truly impressed, and perhaps even a bit envious, by how much of a media buzz Dan has created with this book.

The wild public reaction shows one thing: Breakneck is more about America than about China. It’s about how Americans, and especially the elites, after witnessing exasperating signs of decline in themselves, suddenly find China as a mirror and try to draw some inspiration from there. In that sense, Breackneck can even be seen as a sub-branch of the broader self-reflection kick-started by Abundance, part of the broader soul-searching of the American Left advocating for economic growth and a “supply-side progressivism” beyond identity politics.

Here, China only serves as a mirror, a referencing object, so the real subject can reflect on itself.

In the past, China was only a niche topic in the US. For Americans, China was no more than a curiosity. I don’t think it has to do with “discrimination”. Nor do I think there is any real “smearing抹黑” like what China’s state media often claimed. No. It’s just nonchalance. Neglect. China is just a small news item, curious, alien, and sometimes even grotesque, flashing by every now and then. America didn’t really care about China.

But ironically, Chinese people would unconsciously, but wrongly, assume they were the focus of America’s attention.

Why? Because America has always been China’s “referencing object”. Chinese people, from elites to masses, watch America closely and intently. When I was a kid, Monica Lewinsky was as big a topic as she was in the US. We studied your language. We studied the papers written by your founding fathers. We tracked every one of your technological breakthroughs. You created the Internet? We wanted it. You created smartphones? We wanted it. You made commercial space programs and commercial electric vehicles a reality? We wanted them. Large language models? We wanted them too, ALL of them. Most, if not all, of the decisions, from political decisions to business decisions and down to family and personal decisions, are made in reference to what the United States of America has to offer. “America is doing this and that. Can we as well?”

And so what is truly amazing about what’s going on right now is that for the first time in history, China has risen to become a “referencing object” for America, too. At long last, China is no longer a niche topic, and not just an abstract “adversary”, but a true peer that the American nation as a whole needs to reckon with. No longer is it just one mirror pointing at another side, but two mirrors looking at each other.

Heralding this new age, I guess this is why Breakneck, a book that’s only a beginner’s guide for those of us in China, can have such a huge success on the other side.

The parade and the mirrors

Also notable in the last week was the military parade on Wednesday commemorating the 80th anniversary of the War Against Japanese Aggression. I don’t want to comment on the military hardware, which I don’t know much about. What I want to share with you is a translation of a video, which is yet another telling example of this “mirror in mirror”.

The video was made by Mr. Jonathan Kos-Read, a US-born actor who made his film career mostly in China. More fluent in Mandarin than even many Chinese people, he was better known in China by his Chinese name, “曹操 Cao Cao”, named after the famous warlord during the Three Kingdoms period.

Cao Cao / Jonathan has a large following in the Chinese short video space. On Douyin alone, he has over 7 million followers. He is known for his wise and witty remarks about intercultural observations between China and the West. Many of his followers have noted that Cao Cao seems to understand China even better than many of the Chinese people themselves.

Cao Cao’s recent video was about his observations of the military parade. Specifically, he talks about why the Chinese people and the American people view this parade differently. Because I can’t find a version with English subtitles, I will just translate the transcript for you:

曹操看阅兵 How Cao Cao looks at the military parade

Hello everyone, I’m Cao Cao. There’s something very interesting about China’s military parades: the kinds of questions Chinese people ask me are very different from the ones foreigners ask me.

Chinese people ask: when foreigners see all our weapons, our powerful tanks, our advanced aircraft, our drones, even robot dogs — how do they react? Do they understand China’s strength? Are they afraid?

Foreigners, on the other hand — first of all, not that many ordinary people abroad actually know about these parades, but there are always some who notice. And since I’ve been living in China for nearly 30 years, they often come to me with basically three questions. The first: why do Chinese people think a military parade is so important? The second: I watched the parade, the marching was so perfectly in sync — isn’t that just empty formalism? The third: foreigners say, the army is so regimented, every step identical down to the millimeter, isn’t that strange? Isn’t it excessive? You’ve lived in China almost 30 years — how can you stand to live in such an “excessive” country?

Honestly speaking, foreigners who’ve seen or heard of these parades really only ask these three questions. None of them ask about the new weapons. So how do I explain this to them?

As you know, explaining your own culture to outsiders can be hard, because so many things feel self-evident to us. Of course the marching has to be neat — even kindergarteners can march neatly here, how could it not be? But how do you explain that to a foreigner? It’s not easy. So here’s how I explain it.

I tell them: every country, every person, every culture has its own habitual way of solving problems — a “default logic” that people believe will lead to good outcomes. I give them an American example, because they understand that. I say: look, Americans always say freedom is most important. But from outside, we often see America as chaotic, violent, looting in stores, messy. So why do Americans like it this way? Because their core logic is that freedom is the best way to solve problems. Why? Because if people are free, they can compete: “I have this solution.” “No, I have a better one.” Through intense competition, the strong ideas rise and the weak ones fall, and in the end you get an effective solution. That’s the American way of problem-solving, and it’s easy to understand.

How did this start? America was founded by people who didn’t want to be ruled by the king, so they came to America to be free, to solve problems on their own terms. From then until now, people who come to America are those who want to live their own way. So the American society is very comfortable for people who value freedom. That’s why the U.S. Constitution and its underlying logic always put freedom first.

Then I ask them: do you get it? And they say: “Yes, yes.” Then I say: good — Chinese culture also has a core logic, a fundamental way of solving problems. That logic is: above all, you must prevent disorder. Why? Because if there is chaos, there is absolutely no way to get a good result.

Where does this come from? I explain that Chinese culture was born by the Yellow River. You could only survive there because of its water. But the Yellow River flooded catastrophically every two years. How could you manage the Yellow River? Freedom won’t help — if everyone just does their own thing, you’d be drowned. The only way was to organize everyone in society, set clear relations, and prevent disorder. Only then could you control the floods and benefit from the river.

So I tell foreigners: if your civilization grew up next to the world’s most dangerous river, you too would understand the universe as one great river. That’s how Daoism was born. And Confucianism, Legalism, all of them — they’re about clarifying relationships, from emperor and commoner down to two brothers, so that the “Dao” flows smoothly and doesn’t break down. Because if the flow breaks down, you get disasters — floods, storms, earthquakes, even family quarrels. So if that’s your worldview, then the thing you fear most is disorder.

The best way to prevent disorder is to keep relationships and positions organized and correct. From this angle, it’s just common sense. Look at anything in China — it’s always orderly. Compare a Western dinner party, which is chaotic, people sitting wherever. A Chinese banquet isn’t like that: the seating arrangement shows your exact place in the hierarchy, and it must be that way. In calligraphy, you have freedom within strict square rules. In siheyuan courtyards, in the Forbidden City — I could give a thousand examples.

And what’s the ultimate display of organizational ability? If you can make 10, 100, 1,000, 10,000 people do exactly the same movement, not a millimeter off, anyone watching will feel reassured. Because it shows we have the organizational capacity to prevent chaos. That’s what the parade represents: the highest expression of an orderly society where relationships are in place, and therefore chaos will not come.

And then I say: now do you see the Chinese parade differently? And they reply: “Get it! That makes sense.”

And this “makes sense”, I believe, lies the foundation of “求同存异seeking common ground while respecting differences.”

I hope you notice the many mirrors here: me translating into English an observation of how Americans view Chinese people, made by an American with a Chinese name, originally told in Chinese for a Chinese audience.

As Cao Cao said, the Chinese “operating system” is all about how to govern “乱chaos”, while the American system is all about how to promote freedom. Both China and the US are sitting at two ends of the spectrum and have perfected their own models.

Yet neither one needs to prevail over the other. Governance without respect for individuality is bound to wither and die, while freedom without proper governance will also end up in nihilism. Engineers without lawyers only create Leviathan in the end, while lawyers without engineers only create castles on the sand.

So, neither China nor the US can fundamentally change the other side. Instead, they will serve as the reference point for each other, providing constant inspiration for new patches into their respective operating systems and new succor into their respective cultures, while also offering living examples for the rest of the world to adopt what works for them.

Isn’t this wonderful?

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July 15, Lutnick says China is only getting Nvidia’s ‘4th best’ AI chip (CNBC)

Commerce Secretary Howard Lutnick on Tuesday said the Trump administration reversed course on allowing Nvidia to sell its AI chips to China because the U.S. company will not be giving over its best technology.

Lutnick made the remark speaking with CNBC’s Brian Sullivan, saying that Nvidia wants to sell China its “fourth best” chip, which is slower than the fastest chips that U.S. companies use. “We don’t sell them our best stuff, not our second best stuff, not even our third best,” Lutnick said.

July 31, Nvidia summoned by Chinese regulators for “backdoors” (CNBC)

Nvidia has denied that its chips have any “backdoors” that would allow anyone to access or control them, after Chinese regulators summoned officials from the company to explain risks associated with its H20 chip.

While Nvidia was given assurances by Washington that it would be allowed to resume exports of its made-for-China H20 general processing units, the AI chips have attracted increased scrutiny from Beijing.

Aug 10, Chinese state media warned against “backdoors” (CNN)

Nvidia’s H20 chips pose security concerns for China, a social media account linked to Chinese state media said Sunday, as Washington and Beijing near a deadline to strike a deal in trade negotiations in which technology has also emerged as a key issue.

China could choose not to buy US tech firm Nvidia’s H20 chips, said the account, Yuyuan Tantian, which is affiliated with state broadcaster CCTV, as it claimed that the artificial intelligence (AI) chips could have “backdoors” that impact their function and security.

“When a type of chip is neither environmentally friendly, nor advanced, nor safe, as consumers, we certainly have the option not to buy it,” said the commentary, which came after China’s cybersecurity administration also raised concerns over backdoor access in those chips.

Aug 11, the 15% export tax revealed (The Financial Times)

Nvidia and AMD have agreed to give the US government 15 per cent of the revenues from chip sales in China, as part of an unusual arrangement with the Trump administration to obtain export licences for the semiconductors.

The two chipmakers agreed to the financial arrangement as a condition for obtaining export licences for the Chinese market that were granted last week, according to people familiar with the situation, including a US official.

The US official said Nvidia agreed to share 15 per cent of the revenues from H20 chip sales in China and AMD would provide the same percentage from MI308 chip revenues. Two people familiar with the arrangement said the Trump administration had not yet determined how to use the money.

Aug 12, China urges firms to avoid H20 chips (Bloomberg)

Beijing has urged local companies to avoid using Nvidia Corp.’s H20 processors, particularly for government-related purposes, complicating the chipmaker’s return to China after the Trump administration reversed an effective US ban on such sales.

Over the past few weeks, Chinese authorities have sent notices to a range of firms discouraging use of the less-advanced semiconductors, people familiar with the matter said. The guidance was particularly strong against the use of H20s for any government or national security-related work by state enterprises or private companies, said the people, who asked not to be identified because the information is sensitive.

Also on The Information and Reuters.

Aug 13, US embeds trackers in AI chip shipments to catch diversions to China (Reuters)

U.S. authorities have secretly placed location tracking devices in targeted shipments of advanced chips they see as being at high risk of illegal diversion to China, according to two people with direct knowledge of the previously unreported law enforcement tactic.

The measures aim to detect AI chips being diverted to destinations which are under U.S. export restrictions, and apply only to select shipments under investigation, the people said.

Aug 15, DeepSeek R2 delayed due to Huawei’s chips? (The Financial Times)

Chinese artificial intelligence company DeepSeek delayed the release of its new model after failing to train it using Huawei’s chips, highlighting the limits of Beijing’s push to replace US technology.

DeepSeek was encouraged by authorities to adopt Huawei’s Ascend processor rather than use Nvidia’s systems after releasing its R1 model in January, according to three people familiar with the matter.

But the Chinese start-up encountered persistent technical issues during its R2 training process using Ascend chips, prompting it to use Nvidia chips for training and Huawei’s for inference, said the people.

Aug 19, new AI chips for China (CNBC)

Nvidia said Tuesday that it is evaluating several products following a report that the company is working on a new artificial intelligence chip for China that is more powerful than the currently available H20.

The new product, tentatively called the B30A, is expected to be based on Nvidia’s Blackwell chip architecture, Reuters reported, citing people familiar with the company’s plans. Nvidia hopes to deliver sample units to Chinese clients for testing as soon as next month, according to Reuters.

Aug 21, China’s backlash against Nvidia’s AI chip seems to be linked to the ‘insulting’ Lutnick remarks (The Financial Times)

Beijing’s move to restrict sales of Nvidia’s China-specific artificial intelligence processor was prompted by remarks from US commerce secretary Howard Lutnick about chip exports that officials found “insulting”.

A group of Chinese regulators have mobilised in an effort to dissuade domestic tech companies from acquiring the H20 — a watered-down processor widely used for artificial intelligence in China.

According to people with knowledge of the regulatory action, the Cyberspace Administration of China (CAC), the National Development and Reform Commission (NDRC) and the Ministry of Industry and Information Technology (MIIT) moved in response to comments made by Lutnick last month.

“We don’t sell them our best stuff, not our second-best stuff, not even our third-best,” Lutnick told CNBC on July 15, the day after the Trump administration lifted export controls, implemented in April, on H20 sales.

“You want to sell the Chinese enough that their developers get addicted to the American technology stack, that’s the thinking,” he added.

Some of China’s senior leaders found the comments “insulting”, leading the policymakers to seek ways to restrict Chinese tech groups from buying the processors, according to two people with knowledge of the latest regulatory decision-making. As a result, Chinese tech groups held off or significantly downsized their H20 orders, according to those with knowledge of their plans.

Aug 21, DeepSeek teased domestic chip breakthrough (SCMP)

Chinese artificial intelligence start-up DeepSeek said that China will soon have home-grown “next generation” chips for AI stacking, fanning speculation over breakthroughs China may have achieved.

In a one-line note on its official WeChat account explaining the “UE8M0 FP8 scale” of its newly released model V3.1, the Hangzhou-based firm said that the model was particularly designed “for the home-grown chips to be released soon”. It did not specify the vendor of these chips or whether their use would be in the training of AI models or inferencing.

In a technical paper explaining V3.1, which integrates reasoning and non-reasoning modes into one model, DeepSeek said the model was trained “using the UE8M0 FP8 scale data format to ensure compatibility with microscaling data formats”.

The disclosure hints that China has made key progress in building a self-sufficient AI stack consisting of domestic technologies, a development that could help the country shrug off US chip export restrictions.

You may unpack what this might mean by reading this thread by . You are also encouraged to follow of , who shared on X that he would write a newsletter about this topic soon and that “The major shift is: DS is jumpstarting a *software-led* full-stack AI ecosystem in China US/western AI so far has been entirely *hardware-led* by Nvidia”.

Aug 22, Nvidia orders halt to H20 production (The Information)

Nvidia has told some of its component suppliers to suspend production work related to the H20, its chip tailor-made for the Chinese market, according to two people with direct knowledge of the communications. The directive comes weeks after the Chinese government told local tech companies to stop buying the chips due to alleged security concerns, The Information previously reported.

So, what is really going on here?

[The content below is reserved for paying subscribers. If you are a paying subscriber of Baiguan, you are entitled to free access. DM me for this]

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What happened?

China’s Supreme People’s Court (SPC) issued a judicial interpretation that unequivocally invalidates any agreements between employers and employees where workers "voluntarily" waive their social insurance contributions in exchange for higher immediate pay.

This clarifies that paying social insurance is a legal obligation that cannot be exempted by contract. The interpretation targets a common but problematic practice where companies avoid mandatory contributions by giving workers equivalent compensation instead.

This interpretation has stirred a new round of heated debates about China’s problematic social security system. Many people are afraid that it will force many small and micro-sized businesses, such as owners of mom-and-pop shops and small restaurants, to go bankrupt due to stricter enforcement, dealing yet another blow to weak business and consumer sentiments.

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Is the SPC’s judicial interpretation anything new?

No. It is nothing new in itself.

The Chinese law on social security is quite clear. It’s mandatory to contribute to social security. Even if employees sign contracts with businesses to waive this obligation, those contracts are not legal in the first place.

So why did the SPC issue a judicial interpretation now?

In practice, non-compliance with social security obligations is commonplace. In some small cities, there were even cases of lower court rulings against this law. SPC is merely coming out to standardise decisions for lower courts.

However, the pressure for reforming social security is so great and the current situation so unsustainable that public opinion has found an easy spark in SPC’s decision to ignite.

What are the immediate implications?

[The following section is reserved for paying subscribers, but you may DM me to have free access if you are already a paying subscriber of . This newsletter, China Translated, is part of the benefits package of Baiguan’s paying members.]

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In this paid article for China Translated, I will discuss my thoughts on the article and the recently concluded Politburo meeting, which approved a new regulation on the CPC’s coordination and deliberation agencies, in this context. (Again, if you are a paying subscriber of Baiguan already, please message me for a complimentary access or refund.)

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