right now that he's gotten rid of his

most experienced military commanders and

generals, he doesn't have the

operational experience or combat

readiness now to go in and take Taiwan,

let alone do a quarantine or a blockade.

So, I think this probably delays a

Taiwan showdown for the next couple of

years.

Welcome to China Decode. I'm Alice Han

>> and I'm James King. In today's episode

of China Decode, we're discussing she's

purge at the top and the shock to

China's military command, Tik Tok after

China. Plus, I'll chat with Sunoza about

China's economic reality. That's all

coming up. But first, let's do a quick

check-in with how the Chinese markets

are starting the week. On Monday, the

Shanghai Asia index closed down 0.1%.

The Hang 8 share index rose less than

0.1%, ending the day slightly in the

green. Despite starting the day down

nearly a full percentage point, precious

metals mining company Zin Mining Group

closed up more than 4% as investors

around the world rushed to buy gold and

other safe haven assets. And Hong Kong

property companies Hungai Properties,

Hungong Properties, and CK Asset

Holdings all rose more than 3% after a

Morgan Stanley analyst published a

bullish outlook on the Hong Kong housing

market. But we'll get right into the

first topic. China just detonated the

top of its military command. Beijing has

placed Jang Yosha, Xi Jinping's longtime

confidant and the PLA's second most

powerful figure under investigation

alongside another top general. This is

unprecedented. For context, Jang Yosha

was vice chair of the Central Military

Commission or CMC, which is both a state

and party organ that oversees China's

combined military. So the near total

decapitation of the central military

commission leaves she effectively alone

at the apex. The move signals extreme

insecurity at the top and raises real

questions about cohesion readiness and

she's grip on power. James, there's so

much to discuss. I want to throw it

straight to you. What were your

takeaways from this incident over the

weekend?

>> Yeah, well first of all my first

takeaway was wow. I mean, this really is

um I would put it in the category of

stunning news coming out of China. Um I

think it's certainly in terms of shock

value. It's certainly the biggest the

most shocking piece of news that I've

seen in Cining's tenure that started way

back in uh 2012 2013. I'm not saying

it's the most consequential piece of

news, but I think it is uh it did shock

me more than any other. The other

important thing to say I think is about

Chinese elite politics and that is that

it is a complete black box. When things

like this happen, when a really big

event like this happens, we get all

kinds of interpretations and rumors

flooding across social media and in the

media all over the world. And I think

therefore the important thing at times

like this is to not exceed what we know

for sure. I can honestly say in more

than 35 years of China journalism and 18

of those years were in China itself, I

think I only knew one Western journalist

who could count on regular sources at

the very top echelon of the Chinese

Communist Party. I'm not saying that

there weren't others that I didn't know

that had that kind of access, but that

kind of access really is extremely rare.

So what I would say at this moment is

these are the bare facts of what we know

um according to the official Chinese

media that Jang Yosia who was vice

chairman of the central military

commission which as you've just said

Alice is the premium premier um body in

charge of China's army, navy and air

force. And this guy Jango Xiao was

China's most senior uniformed officer.

He has now been placed under

investigation. And when an investigation

is announced like this in China, you can

be pretty much sure that your fate is

sealed. It's not a case of you're going

to be found not guilty by the legal

system. You are going to be taken down.

We can say that pretty much for sure.

Part of what he is charged with was

corruption. But that's not so

interesting because frankly there have

been hundreds if not thousands of cases

of corruption in China's military going

back over the last decade. The really

fascinating line or phrase uh in terms

of what he is being investigated for was

that he had quote severely trampled on

and damaged the chairman responsibility

system. Effectively what that meant is

that he had gone against Cining

politically in some way. It could have

been anything from disobedience to

treason to plotting or something else.

We just don't know exactly what that

means. The chairman responsibility

system though is absolutely clear. that

is that the chairman of the central

military commission which as we've just

been talking about is the top military

body commands all of the navy, the army

and the air force. And this person has

exclusive and supreme authority over the

whole of the people's liberation army.

In other words, whatever Cinping says

goes in the Chinese military. He has the

final say. And it was this that uh

General Jang trampled on and damaged.

Just as a little followup, uh there was

another senior military official called

General Leo Jan Lee who was also put

under investigation and he was also a

member of the Central Military

Commission which previously had seven

members and now only has two, Siinping

and another man called Jung Shangming.

But Jung Xming is merely an

anti-corruption officer. He he really

has no say over military matters. So

this means as you said Alice that really

we have Sigin Ping in charge in sole

charge of the world's largest military.

Let me just give a few metrics on the

people's liberation army because it

really is it really is uh huge. The PLA

has over 2 million soldiers and 4

million if you include paramilitary and

reserves. The PLA Navy has the world's

largest navy with over 780 ships and

vessels. Um, and the Chinese military

has around 600 nuclear missiles,

including those that are launched by

land, sea, and air. And some of these

missiles are powerful enough to reach

the entire territory of the United

States. Like I say, I don't want to

exceed what we know, but what it seems

to be the case here is that we have one

man in charge of the world's largest

military, and this uh military is

obviously a rival to the US and to other

countries in the West. I'd leave it at

there, Alice, and throw it back to you

for your your take on this. I mean, you

know, it is complex, obviously, and it's

delicate as well. What what would you

say?

>> Extremely delicate. I I definitely agree

with you on that front, James. And it's

funny I highlighted the same section

because I think the wording of it is so

precise and so idiosyncratic. The

wording of, you know, trampling on the

responsibility system of the chairman of

the CMC, that is wording that I haven't

seen in previous investigations of other

generals that have been purged. We've

had a total of 17 generals purged in the

PLA since Jinping came to power in 2012.

That is the largest purging at the

general level since chairman Ma and that

is a significant indication of his not

just anti-corruption drive through the

military but he's unhappiness

potentially with the loyalty and unity

of his generals. Now I suspect as you do

James that this is a personal matter.

What is interesting to me is that uh

Jang Yu Sha he is a brother I would not

in a literal sense but a brother in the

sense of coming from the same hometown

Shanchi to Xi Jinping. Their fathers

were comrades who fought in the civil

war in the 1940s in China uh and were

also Sanhi natives. Uh so this is a guy

uh General Jang who has been a longtime

uh childhood friend and close ally to Xi

Jinping. Xi Jinping kept him around uh

after 2022 even although uh General Jang

had already reached the retirement age.

He was 72 at the time because he

believed he needed a close confident

ally in the military. And so Jung was

effectively the second in command at the

CMC. The CMC is a central military

commission. Just for context, it is both

a state and a party organ that oversees

both the PLA, people's liber liberation

army, as well as the police, the

people's armed police and the militia.

So, this is an extremely important

decision-making body that has the powers

to decide the military operations

procurement campaigns and would be

completely gerine in a Taiwan context,

which I'll get to in just a bit. My

reading of this James and I wonder if

you had similar theories is is a a

factional reading which is when I look

at the configuration of the seven uh

members of the CMC

five of them have been purged. The only

two remaining as she who is the chairman

Xi Jinping remains as the chairman uh as

as well as his number two now who uh was

the anti-graft guy at the CMC. And this

guy um Jang Seong Ming, he's still

around. The other five have been

eliminated and the other five were

largely I think evenly divided between

two factions. There was on the one hand

the Fujen faction of generals who

largely came from the Fujen region. Um

so Huon who was uh ousted a couple

months ago back in October from the

party as well as the PLA. He was also a

co- vicechairman of the CMC. He was in a

rival faction to uh Jang Yosha who was a

Sanhi faction leader and potentially uh

led the Sanhi faction within the CMC and

the PLA. All this is to suggest I think

there was a balance of power. They uh Xi

Jinping decided to get rid of one of

these rival factions, the Fujen faction

by getting rid of a lot of these

generals. He then realized that his

longtime friend Jang was way too

powerful because he was effectively the

only general left standing of of weight

and standing in the CMC and decided to

take him down as well after he must have

crossed him personally. Um, hence the

the wording of the uh PLA party readout

as well as the People's Daily readout

about the investigation. So we don't

know the details but I I'm very

skeptical that the Wall Street Journal

is correct in their line that or spec

speculating for instance that it could

be uh secrets leaked to the US nuclear

secrets. I'm skeptical of that the

Chinese PLA and government don't have a

habit of leaking highle nuclear secrets.

In this regard, I think it's much more

personal and I think it was a decision

to have a clean complete clean slate of

the CMC going into the 21st party

congress which is in 2027 when she will

have to bring in more people uh to

replace the uh empty chairs that

materially and this takes me to my

conclusion which is materially it

matters for the timeline and

probabilities of Taiwan because right

now that he's gotten rid of his most

experienced military commanders and

generals he doesn't have the operational

experience or combat readiness now to go

in and take Taiwan, let alone do a

quarantine or a blockade. So, I think

this probably delays a Taiwan showdown

for the next couple of years. But my

concern and and I saw that Bill Bishop

had this view too of sinusism. concern

is that if we look to beyond 2027

and the new generation, the new guard so

to speak, of generals, might we end up

with an outcome in which we have wolf

warriors in the CMC and the PLA that are

going to be much more belly coast and

ready for a Taiwan showdown? That is my

concern. But I think, you know, market

shrugged it off. You know, the CSI 300

was in the green today. uh it's not an

economic I think issue but it certainly

is a military geopolitical issue and at

its heart a political issue about uh Xi

Jinping's security and longevity as as

the president. One thing that I'll end

on is that uh I certainly think that

this further reinforces his power and it

delays any talk about a succession

because he's effectively wiped out any

contenders uh for that role. Yes, I

would agree with that last point. And uh

just coming back to the Taiwan question,

I mean I have also read uh the idea that

this could make China less likely to

launch some kind of military adventure

against Taiwan um you know in the

near-term horizon. And yeah, I mean, you

know, that that seems to be fair as an

analysis, but uh I just feel that we

know so little about how decisions are

really made in the Central Military

Commission and at the top levels of the

Chinese uh Communist Party that it's

it's a bit of a leap even to to have an

interpretation like that. I mean it

could equally well be it seems to me

that if Cining is the only man in charge

then and he wants to launch a military

advantage against Taiwan then maybe he

gets his way. So I think you could read

that both ways. Um I think the only

takeaway that I have from this whole

thing that I'm sure of is that the

opacity of the system is the risk. the

opacity of China's political system and

particularly the military

decision-making system, you know, it

being a complete black box is a great

risk for us in the west because we just

have no way of tapping into it. Um, I

don't think any government around the

world including the US has regular high

level contacts with the people's

liberation army or any other uh military

body in China. And so uh to me that is

the key risk here. Um and uh it it's

just so hard to know how to call it. I

also saw that the price of gold I think

today went above $5,000 an ounce. I'm

not sure if that's connected to this

either, but uh that may be a bit of a

stretch, but I I must say, you know, we

so rarely focus on military issues. This

one came out of left field, as it were.

Um, but I'm I'm glad that we're focusing

on it today because it is one of those

sort of lurking risks in the Chinese

system that uh now that it's come to the

four uh I think it it at least deserves

a good look at.

>> Yeah, certainly. I think the gold story

might be more associated with American

waning influence uh and and dollar

weakness. Uh maybe it's a riskoff

attitude that people have to to US

assets. to sort of add to what we were

discussing uh about power and the

military. I think it can't be overstated

how important this is and how I hate

using this word, but I have to use it

unprecedented

um this is in modern Chinese history. I

don't think I was looking back into

previous episodes of this going as far

back into uh the 1940s. Uh and the only

other real analog is what happened uh

during the great leap forward uh as well

as uh the cultural revolution with two

key generals pundu and limb uh who were

both really close to Maltaong but were

effectively uh purged and killed and

this was again succeeded by a massive

purging of the PLA by chairman Mao. So I

think history is repeating in certain

respects and and my big takeaway is that

this suggests that she feels insecure

about the combat readiness and about the

loyalty of of the military advisers and

guys around him and this should be seen

as a sign of weakness at least from my

perspective. Uh but it certainly to your

point James uh is going to be really

really crucial in terms of the Taiwan

probabilities and Taiwan scenarios. I

think we may disagree there. I think it

probably gets delayed by a couple of

years. Uh but certainly we need to keep

our ears to the ground in terms of

seeing who comes in as the new god.

>> Yeah, absolutely. I I was also thinking

about Limbao. I mean, you know, he was

purged after he attempted to assassinate

Chairman Mao by sabotaging the train

that Chairman Mao was riding on in the

early 1970s. So, you know, this type of

thing does happen in China. Um, and most

of the mo I think most of these stories

we simply never hear about. Um, so, you

know, that that's that's my kind of

payoff line in this. the system is so

opaque that it really is so hard for

anyone to uh to find out what what the

true situation is and what the true

stories are behind in this case the

downfall of Jangosa uh Sining's old

friend and comrade in arms as they say.

>> Yeah, exactly. Okay, we'll be back with

more after a quick break. Stay with us.

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Welcome back. After 6 years of bans,

court fights, and superpower

brinkmanship, Tik Tok finally has a

deal. By dance is spinning off a new US

Tik Tok controlled by American and

non-Chinese investors led by Oracle and

Silverlake just in time to avoid a

congressionallymandated ban. The

agreement is meant to sever Beijing's

influence, safeguard user data, and

settle national security fears. Well,

James, this is a big victory uh for Bite

Dance and Tik Tok and I would say Trump

uh who was definitely in support of this

deal. uh effectively it creates a joint

venture structure which is funny because

you often hear about this in a Chinese

context but here we are uh in uh in the

new age where the US is mimicking

aspects of Chinese industrial policy. So

effectively this joint venture allows

Tik Tok USA to subsist in accordance uh

with American rules. This is a big

victory I think uh for both sides. What

is your takeaway from this? Uh, I would

say it's certainly a big victory for

Bite Dance and as you said, uh, probably

for Trump, but to me the really key

issue here is, have the risks to the

American people, um, been truly expuned?

I mean, it does this really mean that

Bite Dance's control, especially over

the Tik Tok algorithm, has been severed

or or not? Um uh and I think you know

obviously it's it's a crucial topic. I

mean uh Tik Tok has more than 170

million users in the US and it's no

longer just young people who are who are

who are looking at Tik Tok. Uh even

oldies like me I think according to the

uh latest statistics are all on Tik Tok

um glued to Tik Tok. I am myself.

>> Yeah, you bet you

using it for

>> I have a bit of an addictive personality

it turns out. I'm finding out rather

late. I'm finding out rather late in

life. I just scroll doom scroll through

Tik Tok the whole time. You know,

there's all kinds of things, food,

animals, pets, um all kinds of stuff

that I'm looking at. So, the question to

me is, has Bite Danc's control over Tik

Tok been reduced or severed? And I would

say it's been reduced. Uh in fact, I

would go a little bit further than that.

I would say that this deal effectively

means that the ownership of the car that

is Tik Tok in the US has been given to a

US company, this joint venture that

we'll get into in a minute. But the

engine of that car remains in the hands

of a Chinese company called Bite Dance.

When I say the engine, of course, I'm

talking about the algorithm. Uh so just

just a few bare bones of the deal. Uh so

Bite Dance transferred the majority of

its US operations to a new entity. That

entity is called Tik Tok USDS joint

venture LLC. And that company, the joint

venture is led by Oracle, Silverlake,

MGX. All of those are American

companies. They hold over 80% of the

ownership of the equity in that joint

venture. But Bite Dance owns 19.9%.

So the Chinese company remains a pretty

pretty significant uh shareholder. Now

the really important thing I think about

these companies and in the case of the

Tik Tok US joint venture, it is also the

most important thing is the algorithm.

The Tik Tok business is nothing without

the algorithm that underlies it. And

although Oracle is now responsible for

securing the data of American users and

overseeing the retraining of the

recommendation algorithm using American

sources, you know, so American data will

be used to retrain the algorithm. The

control of the algorithm will remain in

the hands of Bite Dance and it will

lease the algorithm to the American

joint venture, Tik Tok uh joint venture

and it will get payments for that of

around 20% of the American entities's

revenue. So this to me means it is bite

dance that remains in control of the

algorithm. That's the key point because

um it it means that presumably Bite

Dance can tweak the algorithm anytime it

wants without informing the US entity.

Um and it gives uh Bite Dance an

operational relationship with the uh the

company in the US. Do you see it like

that Alice or I may am I being two kind

of reds under the bed about this?

>> No, I I have a similar view but I I

would delineate it this way. I would say

that Trump and his codery of

billionaires have put economic interest

above the interest of everyday American

state of security and privacy. The

reason that PAFaka the act was put into

place uh was in because people in

Congress were scared that this tool bite

dance could be used to spy on everyday

Americans. It could be part of a

political interference or surveillance

campaign. Now, we don't have evidence, I

think, to fully corroborate those views.

But if you're an American congressman, I

think you're looking at this deal and

thinking it solves none of the issues,

the n national security, data security,

privacy issues that we have conveyed and

voiced. And ultimately, it rewards uh

the billionaires who now have a seat at

the table and can milk this cow for all

it's worth. That is my view. And this is

why I think ultimately the Chinese and

bite dense uh see this as a victory

because they've been able to keep the

algorithm which from day one was a key

national security priority as per their

data uh transfer laws but at the same

time it benefits Trump because it's a

great political platform for him. It

benefits the billionaire donors around

him who now have a seat at the table

have equity in this uh joint venture. So

I I agree with you, James, but I would

frame it somewhat differently. And I

think it then begs the question, what

happens to these other Chinese apps that

are not considered the political golden

goose uh for Donald Trump? You know when

we think about Shahu which is Rednote in

the west or we think about TMU or Sheen

some of these other platforms Chinese

platforms in a in the US context are

they up for a similar kind of regulation

and what is interesting is that this

creates this Tik Tok USA joint venture

framework I think creates a template for

future deals potentially uh that is

somewhat similar to what we saw

historically With western companies

going into China and signing joint

ventures, they can, if you recall,

James, back in the day, they could never

own more than 50%. That was the whole

point of a joint venture. And they had

to partner with a local uh Chinese

company. Uh that is happening now in the

reverse, but still the Chinese have all

the cards because to your point, James,

uh all they're really sacrificing is the

data security which is going to be

stored locally. But there I mean I

talked to any all kinds of data experts

or national security experts there were

all kinds of back doors that they really

wanted that data and secondly it's the

algorithm that is uh the most of

interest uh to the Chinese government.

Uh one thing that I will end on is

project clover in the EU and what the EU

is going to do. I think the EU is

watching this. I'm not sure, maybe you

have a better view, James, what the EU

is going to do to regulate uh bite

dance, but the EU has the same concerns

I think the Americans have had towards

bite dance from a national security data

security perspective. I'm not sure if

they're going to get their act together

and and and enforce that in the way that

the Americans have done. Uh but that

remains to be seen. What do you what's

your thought?

>> No, I think I think that's such a good

point. I think this opens a Pandora's

box for virtually any Chinese tech

company that's collecting data in

foreign markets. Uh this sets a template

or at least an example of what might be

done, what should be done, what could be

done in order to increase data security

that these Chinese companies are

collecting um either in the US market or

the UK or or European market or anywhere

else in the world. And uh and I think

it's so right of you Alice to point to

what Western companies had to do in

China. And for me the main example was

the way Apple in 2018 had to transfer uh

its mainland Chinese iCloud user data to

a joint venture called Gujo cloud big

data that was uh that's situated in the

southwestern province of Gu of Gujo. And

at the time I think you know we all

wondered um why that was happening why

that had to happen and it was purely

because the Chinese state wanted to be

sure that Chinese people's user data was

not going to be used by Apple and taken

abroad. It wanted control over the user

data. And it seems to me that if you're

a Chinese car company working in Europe

let's say BYD you're collecting data. If

you're a Chinese internet company like

Sheen or or the other ones, even Alibaba

and AliExpress, you know, you're

collecting data. So many Chinese

companies are collecting data around the

world. Surely there has to be now some

thinking that goes into the security of

the data that they collected and whether

or not they need to set up joint

ventures to allow authorities to ensure

that let's say European data stays in

Europe. doesn't go back to China and

vice versa for the US. So I think it's a

I think this is a a big moment in the

treatment of uh the data that Chinese

companies are collecting abroad. Now,

paradoxically,

this may be seen as a a barrier to entry

by Chinese companies into Western

markets, but maybe it's one of those

things that once it's overcome actually

smooths the entry of those companies

into uh the uh the European US or or

other markets around the world. So, it's

a it's a big topic. I think this will

run and run for the next few years.

>> Definitely. And I mean that we're just

scratching the surface cuz if you think

about it with the internet of things

with embodied AI, you know, humanoid

robots, um, using world models and

spatial intelligence, and then we get

into the realm of autonomous vehicles

collecting real-time data on the streets

and geoloccation data. There are so much

more data out there to mine and Chinese

companies are just scratching the

surface. We're just seeing one

instantiation of it, which is social

media. But it's only a matter of time

where we see uh Chinese companies come

in and do autonomous vehicles, humanoid

robots in western markets. And I sense

that there's going to be a bigger public

debate in western economies about how

you regulate the data associated with

those companies. Uh so I think we're

just in the first innings of uh a global

reframing of Chinese companies, you

know, going global in terms of

collecting data and using data. Okay,

let's take one last quick break. Stay

with us.

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Welcome back. As the US openly turns its

back on globalization and leads harder

into tariffs, China is pitching itself,

at least rhetorically, as the grown-up

defender of global multilateral trade,

even as its own economy shows real signs

of strain. Joining us now to talk with

us about this is Hoza Song, China

economist and director of China research

at 22V research. Hoza, thank you so much

for joining us today and welcome to

China decode.

>> Thank you for inviting me. I wanted to

start uh with something that is topical

this week which is Davos. Uh I think a

lot of attention was paid to both the

Trump and Carney speeches. Uh but the

day before Trump came to speak at Davos,

we had Holifung, Vice Premier Holiff who

is the trade and economies are uh

talking about China's position in all of

this. uh he was critical of the quote

unquote uh tariff style law of the

jungle uh and seemed to defend the WTO

liberal uh trade order and multilateral

institutions like the WTO and IMF. This

is coming at a time where we seeing

record Chinese trade surplus around 1.2

trillion uh last year and it seems like

China will not be escaping this

manufacturing

uh growth. So how did you interpret that

speech and China's uh trade and uh

economic policy going into 2026?

>> I would say in terms of what they have

been saying the message has been pretty

consistent. For example, if you compare

West Premier H speech with the speech uh

President Xi gave before the pandemic

that 2018 the message especially the

part on the global order and the global

trade system basically essentially the

same. So the signaling from the Beijing

has been pretty consistent. Uh on the

other hand in terms of what they have

been approaching and and uh the also the

China's trade policy

uh it has been quite different compared

to say 80 years ago when President Xi

made his speech during the devils. For

one thing China was essentially running

a balanced trade back in 2018. China's

trade surplus uh was less than 1% of

GDP. In contrast, last year, China made

a record $1.2 trillion trade surplus.

And that part of it reflects Beijing's

specifically manufacturing first uh

economic policy, but also a greater part

probably has to do with the fact of weak

domestic demand. And do you think going

into 2026, we've got the March NPC, the

Leah, as well as the new uh 15th 5-year

plan that that strategy of as you

alluding to uh using trade and

manufacturing to drive growth will shift

or is China still wedded to this

strategy in the midst of I would say

still pretty weak consumption growth?

And if you if you could also describe to

us why has it been so difficult uh for

the Chinese government to try to boost

consumption even though it does identify

it as a key economic problem.

>> Uh I would say especially in terms of

weakness Chinese consumption weakness

there's both a cyclical component

there's also a secular component. The

secular component being that

historically chi the share of income in

China that goes to the household sector

uh is much lower than other compared to

other uh major economies and also on top

of that there's the ongoing cyclical

adjustment uh basically triggered and

amplified by the ongoing uh real estate

uh hard landing. So as to why the

Chinese central government not providing

uh more help to the household sector and

the economy abroad, there are a couple

reasons. The first is is that uh the

China's central government's priority

um in terms of their priorities. Growth

is no longer the top priority. Growth is

probably at best secondary. So for

example, the China's uh long-term growth

targets through the year 2035 basically

implies that Beijing is aiming for an

average growth rate of 4% point for the

next 10 years. And on on top of that uh

the basically ongoing US China US China

uh tension means that uh Beijing needs

to double down on it uh strategy uh

manufacturing a technology first

strategy to pursue tech independence. to

res reduce reliance on both US and as

well as western technologies. So I think

while that the current that USChina

relationship expected to be broadly

stable this year but uh probably most

people as well as Beijing uh believes

that this more likely to be transitory

meaning that Beijing still needs to uh

aggressively push for his attack

independence initiative to prepare uh

the longer term uh potential conflict

and confrontation with the United

States.

>> Yeah, I want to touch on that aspect.

the tech self-sufficiency in just a bit

because there is an argument that that

drives uh some of the uh anti-involution

uh campaign because it's created uh an

overupp in certain goods uh that has le

led to price deflation. But before I go

into that uh I wanted to touch on the

property sector which you alluded to. Uh

we're probably 5 years into this slump

in the property sector. Now there's a

debate as to whe whether it's a hard

landing or a soft landing, but what is

clear and I think you you've mentioned

this in multiple instances in the past

when we've spoken is that there is a

macro knock-on effect of the property

sector on on consumers on household

spending. How do you think about it now

that we're 5 years in the impact of the

property sector on households and their

spending patterns? And number two, do

you expect there will be some kind of

policy support going into the March NPC

in response to continued double-digit

negative uh contraction in the property

sector?

>> Good question. I would say that first

that uh in terms of interplay between uh

real estates and uh household

expenditure there has been some shift

being that initially like uh 22 to 23

period that uh the you can say basically

that realist real estate uh decline was

the trigger or was the cause of weak

household sentiment as well as

expenditure. But uh in more recently I

would say that uh the ongoing uh real

estate property weakness probably more a

reflection and outcome of the broad uh

growth weakness rather than the cause.

the being that uh I think that currently

that the really the root cause of a weak

household consumption is really the the

weak job market both that the uh

unemployment rate being elevated and

also the fact that the job security that

for example uh close to a third of

Chinese urban workforce are essentially

gig workers. So basically they they're

really not very very sure that they will

still have a job say in 2 months or 3

months from now. I would say that right

now this really the labor market uh

weakness especially this feeling of

insecurity probably has a bigger role in

terms of limiting Chinese household uh

expenditure

>> and is it the case that we're going to

see u maybe more slackness in the labor

market moving forward if you expect that

AI will continue to decrease the demand

for some of these gig workers or even

graduate students entering the job

market there's a lot I think of

apprehension amongst uh new grads uh we

had a record 11 million in last year

going into the workforce. There's

apprehension that they might not be able

to find jobs in an economy that is

slowing down and and where jobs are

increasingly getting automated or

replaced by AI. How do you see that

debate play out in China as being

distinct from what we're seeing in the

US? I would say comparatively speaking

the balance is much more in favor of

technology and capital compared to labor

when it compares to for example debate

and also the public opinion in US and uh

other western countries there has really

that Chinese government doesn't seem to

really uh take into the job uh effect of

AI and automation into considerations

when they draft those uh AI and uh

robotics related policies. So and uh I

would say that actually they are much

more encouraging about the AI and

robotic and its economic impact. So

that's kind of like understandable

because uh seem to seem to me that

really that the technology advancement

especially how it uh helped to China to

boost its international standing out

also its national security position

probably at this moment uh matters more

uh for the Chinese government than

really grows our job. And to zero in on

this more concretely, what are your

expectations in the new 5-year plan for

2026 to 2030? And if you're advising

investors or people following China

closely, what are these sort of green

shoots or hotspots uh in the economy or

even in the financial markets that you

think we should be following in the next

5 years?

>> Uh I think Chinese government is clearly

double down on his uh advanced

manufacturing and technology

initiatives. I think that's fine. I mean

as long as they also taking care of the

broad weakness of the Chinese economy I

don't see there's a fundamental tension

between uh pursuing both initiative that

they on can on the one hand just uh for

example either through providing more

income transfer to the household or

other means to boost the overall

economic growth as well as job creation

and on the other hand they can continue

to fund those manufacturing initiatives.

There's really no fundamental tension

between those two initiative. So the

surprise is really not that they are

doubling down on manufacturing. The

surprise seem to most people myself

included is that they continue to be

very reluctant to really to uh to

stimulate the economy to reflate the

Chinese economy.

>> I would say in terms of investment

implications, one is really the I would

say the most clear implication is the

relevance for the Chinese equities. uh

basically since uh late 24 that Chinese

equities uh has enjoyed pretty solid

rally that uh the uh eco weighted eco

weighted a shares has been basically up

by close to 50% since late 2014 and in

the meantime the curious thing is that

uh the fundamentals the corporate

earnings has not improved much so as a

result basically what suggests the the

much more expensive valuation the P

ratio of Chinese equity indicate that

the investors have uh taken a

categorically more optimistic view about

the ch the the outlook of the Chinese

economic future. I think uh but the the

next step question is really that

whether the the coming year the Chinese

economic performance can validate or

disapprove this the current quite

omimistic uh expectation investors

already price in here I see really uh

kind of like risk of tensions between

the fact that on the one hand the

Chinese government continue to be very

reluctant to stimul the economy and on

the other hand the Chinese equities is

being at a really historically high

valuation level

>> and uh I think I share your view on this

that there has been a reluctance to do

fiscal and monetary stimulus. We saw

that in 2025. Now you could argue that

especially in the first half of the year

they did this to reserve the firepower

if tariffs got really bad but even then

um they were reluctant to deploy that um

in the second half of the year. Thank

you so much for your time. This is an

increasingly important subject. I know

everyone's focused on Davos, but uh

we're in a sprint until March uh where

key decisions will be made in the second

largest economy in the world. So, thank

you so much for sharing your time and

insights.

>> My pleasure.

>> All right, James, you know what time it

is. It is prediction time. As you peer

into the future this week, what do you

see?

>> My prediction this week is in more of a

general vein. I don't have any specific

numbers or statistics that I'm going to

throw at you, uh Alice. I would just

like to say that I think that in

relation to our previous conversation

about the way in which the US is trying

to control data that Chinese companies

are collecting in the US. We're going to

see a very similar effort in the EU this

year. That's the European Union. In

fact, I would say that 2026 will be a

landmark year for the European Union,

led by the European Commission,

strengthening resilience against foreign

cyber threats. Uh, and that includes all

types of Chinese technology. I think

we're going to see this in many

different areas, including cars,

including cellular modules, including

wind farms maybe, and some of the other

areas in which Chinese companies collect

data throughout Europe. That's my

prediction. What about you? Well, James,

just cheekily, I'd say I do feel very

sorry for the Europeans because if you

recall back a couple years ago with the

Prism scandal during the Obama

administration, uh, where European data

were transferred to American authorities

without, um, European permission, and

that obviously caused a a bit of

fracture in the transatlantic

relationship. Now, they're going to have

to go through it all again uh, with

China, and it's going to be even more

complex. Uh, so I do feel very sorry for

the Europeans. Uh so my prediction is

following up on a previous prediction I

made about Chinese tech companies moving

more to Singapore to Singapore wash or

at least desentize their companies in

order to go truly global, get global

investors and have more of a global

reach in terms of marketplace. This is

prompted by uh the Chinese cyber

administration now looking into Manis

and whether or not the Manis meta deal

basically meta buying Manis violates

Chinese tech transfer laws and I uh have

a sneaking suspicion although I'm not

entirely confident that they may try to

kill this deal or delay this deal uh

because this is an AI company. I mean it

does agentic AI so it's not directly

national security dual use related but I

sense that with AI getting even more

charged as a topic in China domestically

there could be some spanners in the

works uh so to speak uh for meta and

mainly because I think it'll make Mark

Zuckerberg's life a little bit worse. So

let's see if that actually happens. All

right, that's all for this episode.

Thank you for listening to China Decode.

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