Everyone keeps calling the US-China AI competition a race.
But Eric Olander, co-founder of the China Global South Project, says that framing is wrong — because a race implies a finish line, and this competition doesn’t have one.
Eric’s view is that Chinese AI companies aren’t necessarily looking to out innovate US closed-weight models.
Instead, the goal for China is to become Android to America’s Apple — 10% of the profit, but 90% of the world’s users.
On this week’s episode of the Trivium China Podcast, Eric discusses China’s approach to building AI offerings in the Global South with host Andrew Polk — but only after the two run through the flurry of travel and diplomacy Xi Jinping is undertaking throughout September.
The two discuss the implications of Xi’s travels, then turn to China’s AI strategy in the region, touching on:
How Xi turned a single stop in Egypt into a four-birds-one-stone diplomatic play, touching on the Iran war, the Israel-Palestine conflict, Africa-China relations, and the dynamics around Xinjiang all at once
Why the India-China thaw is real but fragile, and why Xi and Modi’s sideline meeting at the upcoming BRICS summit matters more than anything on the summit’s official agenda
Why China’s AI push into the Global South won’t really be about the models themselves — but about enabling those models with Huawei servers, support contracts, and services sold on top of free, open-weight code
Why the “China is less secure” pitch against Chinese AI companies doesn’t land in a Global South that trusts Washington about as little as it trusts Beijing
Why nobody in the Global South expects much from Xi’s Washington visit, and why the mood in Beijing right now is just as hardened as it is in DC
Strap in — we cover a lot of ground in this one!
Transcript
Andrew Polk: Hi, everybody, and welcome to the latest Trivium China Podcast, a proud member of the Sinica Podcast Network. I’m your host, Trivium Co-Founder, Andrew Polk, and I’m joined today by a very special guest. He is the Co-Founder of the China Global South Project. Joining us from Ho Chi Minh in Vietnam, it’s Eric Olander. Eric, how are you doing today, man?
Eric Olander: Great to be here. Long-time listener, first-time caller, first-time guest, you know, but big fan.
Andrew: That works. And for those who don’t know, we’ll talk a little bit about the China Global South Project in just a sec. But Eric and his team are also a member of the Sinica Podcast Network. Their work is excellent. You should definitely check out their podcast. They’ve got a whole suite of them.
Excellent, excellent work on what China is doing in the Global South.
And the reason I’m talking to Eric today is because that’s exactly what we’re going to go over. We’ll get into Xi Jinping’s recent run of diplomacy with sort of Global South entities, having been at the Shanghai Cooperation Organization, having trips to Kyrgyzstan and Egypt, and then in the next few days, participating in the BRICS summit in India.
Then we will talk about China’s AI push into the Global South and what that means for global AI competition. I say global, but really between the US and China. And then we’ll close maybe with Eric’s thoughts on what to expect from Xi Jinping’s upcoming trip to Washington and the EU-China trade talks as well, because I know he spends a lot of time speaking with European policymakers and businesses as well.
But before we get into that, we have to start, of course, with our customary vibe check. So, Eric, how’s your vibe today, man?
Eric: Oh, the vibe is uncertain. You know, when you live here in Southeast Asia, you’re getting pulled in all these different directions. On the one hand, you’re looking at the economies that are looking at 8%, 10% growth. Can you imagine 10% growth anywhere in the world? But in Southeast Asia, they still talk about those kinds of numbers. And at the same time, there’s this precipice of disaster right in the South China Sea, or it’s the Thailand, Myanmar, you know, has the Thailand, Cambodia, and the Myanmar civil war and, and all these things.
And obviously AI and Trump and the disruptions. And so, every day in this part of the world, you wake up with a kind of a split view of the world, which is one incredibly optimistic, surrounded by vibrant young people who are just busting their asses to improve themselves. And at the same time, a geopolitics that feels incredibly dangerous.
Andrew: Yeah. Well, uncertainty is one way, certainly an aspect of it. So, I’m in Shanghai reporting from Shanghai today. I love being back in China. I love being back in this part of the world. The part and parcel of uncertainty is just energy and vibe and people like striving and possibility and all of those things and the chaos. I miss all of that about being in Asia.
Eric: There’s an energy here that you don’t get in other parts of the world.
Andrew: A hundred percent.
Eric: And I mean, it’s the kind of thing that on a Sunday night at seven o’clock, and I don’t know if this is a good or bad thing, but kids are getting out of English class at seven o’clock on a Sunday night. And you just get this sense that there’s a drive to hustle, a drive to improve, a drive to really take advantage of the moment. And it contrasts with Europe where people talk about going to a four-day work week, a 35-hour work week.
And it feels weird in Europe because you see how hard they’re working out here. It may be, I’ve been out here in this part of the world for too long. This feels normal to me to basically have a six-day kind of drive. There’s a little bit of slowdown on Sunday, but not much in these parts of the world. So, it is a contrast, it’s also with the U.S. as well.
Andrew: Yeah, well, we’ll talk about all those aspects, that energy, that chaos, that striving as part of our conversation today. So, love that vibe that you bring to the podcast. It’s matching mine today. But before, of course, we get into the content, got to quickly do some housekeeping. Just a reminder to folks, we’re not just a podcast here. Trivium China is a strategic advisory firm that helps businesses and investors navigate the China policy landscape.
That, of course, includes domestic policy in China along a range of areas, tech, autos, minerals, consumer goods. You name it, we do it. But it also includes policy towards China out of Western capitals like D.C., London, Brussels, and others. So, if you need any help on that front, please do reach out to us at hq@triviumchina.com. We’d love to have a conversation about how we can support your business or your fund.
And otherwise, please just tell your friends and colleagues about Trivium. The word-of-mouth recommendations really, really, really help to grow our business and to grow the listenership for the podcast as well. I want to get into the content, but one last piece of housekeeping today. Eric, I’d love for you to tell folks. So, we’re going to put this podcast out on your channels and our channels. But for folks on the Trivium channel who aren’t familiar with the China Global South Project, can you just tell people a little bit about what you guys are doing?
Eric: Yeah, I appreciate it. We’ve been around for 16 years now.
Andrew: Wow.
Eric: And it’s funny that we go back to the early 2010s. We started podcasting and creating this. And we started with this idea that we don’t look at China as good or bad. And so much of the discussion about China has been so hyper-polarized. We look at China as complicated. And so, on a Monday, you’re going to see some critical coverage. On Tuesday, you’ll see some more favorable coverage. On Wednesday, it’s critical. And it just goes back and forth because we’re following the complexity.
And so, what we look at is China and what they’re doing in Asia, Africa, Latin America, West Asia, which is the broader Mideast Persian Gulf, Central Asia, critical minerals, looking at tech, looking at the diplomacy. So, what we’re going to talk about with Xi Jinping today in Egypt. This is the stuff that we do every day, whereas the New York Times, for example, will have a big article that came out this week on China and the Chancay Port in Peru. We literally have a service based in Peru that covers this in Spanish every day.
And so that’s what we do. And you really can’t understand the full breadth of the China story in 2026 if you’re only looking at U.S., China, China, Taiwan, and China domestic issues. Just as it was in the first Cold War, the competition between the U.S. and China is not going to be played out in the U.S. and in China. The competition is going to be played out in Brazil. It’s going to be played out in Vietnam. It’s going to be played out in Kenya, all over the world.
And unless people have this full understanding of the landscape, you’re missing big parts of it. And that’s the gap that we try and fill with our team. And our team is all from the Global South. I’m the only one not from the global South, but I’m living in the global South. So, we try and bring that out of D.C., out of Brussels’ view of the world to try and give people a different way of thinking about these things.
Andrew: Love it. That’s awesome. And so, everyone should check out the China Global South Project. They’ve got subscription products as well that you should check out that really keep you up to date on what China is doing in the Global South. And then also an excellent YouTube channel with a bunch of content as well. So, check that out. Great. Well, Eric, you ready to get into it?
Eric: Let’s do it.
Andrew: All right. Well, so we’re going to start with diplomacy. I mean, Xi Jinping is on a bit of a tear. He’s been, I would say, he’s kind of at the start of a really real journey around the world. We’re recording today on September 10th, but from August 30th to September 3rd, he had a five-day trip where he attended the 2026 Shanghai Cooperation Organization Summit and then had state visits in Kyrgyzstan and Egypt.
So, we’re going to start there. Can you just talk to us a little bit about kind of what you saw coming out of the SCO?
Eric: Yeah.
Andrew: Xi talked about, his big speech was, at least the part that Chinese media is particularly highlighting this “push for an equal and orderly multipolar world.” I think there’s some real, I don’t know, hopium in that. But anyway, interested in kind of your take on how the SCO went.
Eric: So, it’s not surprising that the president of China or the, in this case, the leader of China, the head of the Communist Party, is traveling abroad. It is surprising that this particular president and this particular general secretary is starting to travel again. If you recall over the past several years, really since the COVID pandemic, Xi’s travel schedule has fallen considerably. And he’s really relegated a lot of that to Li Qiang, the premier. So, that he’s gone on so many trips in such a short period of time is something notable and something we haven’t seen in several years.
So, that is very interesting that he’s getting out. I think Xi sees a moment in all of these trips, and there’s a linkage among all of them, between the SCO, Egypt, BRICS, and the Trump visit that, of course, the Chinese like to talk about changes not seen in a hundred years, but this is an incredible moment that we’re in right now, where the power dynamics are shifting. And Xi clearly sees an opportunity to try and push that more into China’s favor. So, I think that this is the context that you have to look at these trips and his messaging at each of the different stops, which had some similarities to it.
Again, another baseline point, you know, we hear this in the U.S. quite a bit, that the Chinese want to displace the United States as the global hegemon, that the Chinese want to overthrow U.S. institutions. That is just not backed up by the facts. And that’s not backed up by the scholarship and also what the Chinese themselves are saying. The Chinese have no desire to be a global hegemon. They don’t want to pay for it. They don’t want the burdens of it. And they don’t want the responsibilities. Xi is first and foremost focused on making China great again. He is a nationalist through and through.
And so, when we see the rhetoric, when he’s talking about a multipolar world and he’s talking about community for common destiny, that’s the umbrella structure of all of this. All of that is to give China more room to move in the international system to achieve its own objectives, but to the point where it doesn’t overthrow the existing institutions that it has benefited from enormously over the past 40 years. It doesn’t want to overthrow the UN. It doesn’t want to overthrow any of these institutions, but it does want to create these new parallel international governance architectures like the SCO and like the BRICS.
So, I think that’s a scene-setting that is really important, I think, to understand. We can go into the particulars of what he said. But I think that it’s vastly misunderstood and misframed in a lot of the Western discourse on these types of engagements.
Andrew: I totally agree. And I want to pick up on that, another just kind of scene-setting point for our audience who are all over the place, but many of them are in Europe or the U.S. and come at this through that lens. Again, I’ve already mentioned, you talked about the global initiatives that Xi Jinping is putting forward. And then I talked about this sort of equal and orderly multipolar world that Xi Jinping is talking about. I think people in Washington, where I live, hear that and they have one of two responses.
One is never going to happen, people don’t want to follow China, or they just generally kind of roll their eyes. But as you know, from living in the global South, or maybe I’ll ask you in case some are wrong, I mean, there is a receptive audience for that kind of ideas in this part of the world, right?
Eric: So, there’s two things that are going on simultaneously. And again, unfortunately, our discourse in the U.S., and to some extent in Europe, is reductive and binary, and it lacks the nuance to understand these two things that are going on at the same time. You cannot overstate the depths of frustration and anger and resentment that many people in these countries have towards the U.S. and Europe for the way that they have run the world for the past four or five hundred years.
Okay? And this is part of the discussion that Europeans don’t get because they don’t talk about colonialism in their education, the same way we don’t want to talk about slavery in our education. It makes them uncomfortable. But when you go to Africa, you’re in here in places like Southeast Asia. The resentment is very close to the surface. Now, here’s the thing. You’ll see that Americans get treated very well when they go to these parts of the world. And because there’s a custom in Southeast Asia, in the Middle East, and in Africa that you treat visitors with respect.
And so, you’ll get this rhetoric from American diplomats say, “Well, we really prefer working with you.” You hear this all the time. You know, an American cabinet secretary will come back from an African country and say, “You know, they told me that they would rather work with us than the Chinese.” And you know what that guy is telling the next visitor that comes in, “I’d rather work than the Americans.” So, we get blinded by that. And so, we have this kind of us versus them.
In so much of these countries, the choice is not the U.S. or China. It’s a both and combination. They don’t feel that they are in the position to be able to choose one or the other, and they want to engage them all. Vietnam, of course, is the best example of this. Bamboo diplomacy, friend to all, enemy to none. That is the pronounced policy and the announced policy of the Vietnamese government that a lot of developing countries adopt.
Notice that within a week of Xi Jinping leaving Egypt, the Egyptian government announces a new billion-dollar NVIDIA AI data center. This is the dynamic. So, it’s not an either-or, and I think that’s a very important thing. So, the resentment towards the West is deep, is growing more so, and China kind of fills in then and says, “Hey, listen, we’re here.”
And so, you see in a lot of these pollings from Pew, Afrobarometer, Arab Barometer, the Institute for Southeast Asian Studies — China is ticking above the U.S. more and more. What the posters, and we’ve interviewed all of them on our show, what they’re telling us is that the depth of support for the Chinese tends to be quite shallow. In many ways, it’s a protest vote against the U.S. So they go, “I don’t like the U.S., so I’m going to vote for the Chinese. Yeah, I like the Chinese.” And then they’ll go back and they’ll ask people in secondary questions saying, “Why do you like the Chinese?”
And people oftentimes don’t have an answer. They’ll be like, “Well, they’re not the U.S.” Okay? Well, so then China’s support in these countries is quite low and it’s kind of superficial. And again, that is a takeaway. And it’s a current discussion going on in foreign affairs right now that really the U.S. is the stronger soft power in the world. I would be cautious of that because, again, when China comes out with these new governance initiatives and says, “We want to have you to have a seat at the table.”
And I was in Europe a couple of weeks ago with some senior-level stakeholders and I challenged them. I said, “Name me one European governance institution or one European initiative that puts Togo,” and I just picked a random country, pick any country, “puts Togo as a member at the table with you.” Okay, I’ll wait. Okay? There isn’t one. So, we can say all of these things that the Chinese are doing- SCO, BRICS, New Development Bank, Asian Infrastructure Investment Bank, the Global Governance, Security, Civilization, AI- all these initiatives are just a bunch of vaporware.
But when you are Togo, or you are Keny,a or you are any of these countries who have been excluded from the system for so long, and China then says, “Hey, we want you to have a seat at the table.” So, Kenya signs on to the World Artificial Intelligence Organization as a founding member. That has never happened in a U.S. or European institution, in contemporary U.S. or European institutions.
Andrew: Yeah, great point.
Eric: That’s very powerful. So, when we look at the Global Development Initiative, and some 70+ foreign ministers were there as founding kind of supporters of it in 2022 on the sidelines of the UN General Assembly, and yet the New York Times doesn’t even send a reporter to it, you start to see our blind spots on this, that no one’s forcing the Saudi foreign minister to go to a global development initiative thing. They’re going because they think it’s interesting and there’s something there for them. What is it? When does it pay off? Nobody really knows, but they like the rhetoric, and they like the tone, and they like the both/and of it where they can sit down with the Americans and they can sit down with the Chinese.
And also, this emphasis that the Chinese have on multilateralism now is something that resonates in this part of the world because, again, we’ve lived in a system where the Americans got to pick the head of the World Bank, the Europeans got to pick the head of the IMF, and then there were five countries at the top of the UN, and everybody else is basically told to sit on the sidelines. And so, this new multilateralism, if you’re India, Nigeria, Indonesia, Brazil, you have power today, real power, and you want to be respected in that.
Last point that I’ll make on this is that S. Jaishankar, the very outspoken external affairs minister of India, he famously said, “Listen, we tried to get into the G7, and they wouldn’t let us. So we made the BRICS.” So, this sense of exclusion that many people in these countries feel from the existing institutions is something that is fed into what the Chinese are doing. And the Chinese are leveraging that, leaning into it. Some say exploiting it, but it’s good politics.
Andrew: Totally. Well, and the cynic would say, “Well, this just serves China’s interests,” but that’s just smart politics. Exactly.
Eric: But it is. Of course, it serves their interests.
Andrew: Yeah, yeah. Both can be true at the same time. Yeah.
Eric: I mean, come on, this is the game we’re in, you know, just the same way that in the post-war era, us creating these institutions, these governance institutions served our interests.
Andrew: A hundred percent.
Eric: And for 75 years, it served our interests. Marco Rubio says it doesn’t anymore. I think a lot of us would disagree with that. But here we are. So, we can’t blame the Chinese for pursuing initiatives that are self-interested. That is the nature of politics.
Andrew: Yeah, totally, totally agree. Well, excellent analysis on sort of the contextual part of this. Let’s get into some of the details. Was there anything from the Shanghai Cooperation Organization meeting that jumped out at you?
Eric: Well, yeah, so from SCO, first of all, it’s not surprising that he went because Central Asia holds a very special place in Xi’s kind of worldview. Remember that it was Central Asia where he went in 2013, less than a year after he was general secretary, to launch the Belt and Road Initiative. He’s seen Central Asia as one of the few uncontested spaces around China’s periphery that isn’t affected by great power competition or by rivalries like with India, for example, and whatnot.
And so Central Asia has been this space that he really likes to go to. In fact, after the pandemic, it was at the C+C5, the China plus the Central Asian five were the first leaders to come to China. So again, he has this special place. So, it didn’t surprise me that he went to Bishkek. The rhetoric was very much what we expected. Again, it’s a security organization. You know, the SCO has struggled in these current issues because of India’s relationship with Israel. Iran is a full member.
And there was this very awkward picture of Xi and Wang Yi, the foreign minister, with the Iranian delegation and the Iranian counterparts. I don’t know if you saw that picture where some people looked at it. It was like, yeah, the Iranians positioned it as — we had a sideline meeting with the Chinese — and everybody were looking at it going, “Well, that didn’t really look like a sideline meeting.”
Andrew: Standing meeting.
Eric: It was a standing meeting and Xi has this very standoffish approach if he doesn’t like somebody. His body language is always very interesting to watch. You know, when he’s with a Japanese prime minister, he just looks pissed off. He just puts the dead fish handshake. He’s like, I just want you to get away from me. And then when he’s with the Tanzanian president, he’s just so effusive and smiling. I think we were somewhere in between on that one with the Iranians, where he wanted a picture to show that he’s not isolating them and abandoning them. But at the same time, he also didn’t want to get too close.
That, in a microcosm, shows you the complexities of the SCO for China. And so, on the one hand, remember that the SCO has struggled on the Iran wars because India has had this very close relationship with Israel. In the June 2025 five attacks from the U.S. and Israel against Iran, the SCO didn’t issue a statement. And then when they issued a statement, they did it without India. And then India came up and said, “Wait, whoa, no, we did not agree to this.” And it shows you the fissures within these organizations.
This brings up the point on the BRICS as well. What do these organizations actually do? If you cannot issue a statement after one of your members is under full attack by rivals, what’s the point, right? I come back to that these are forums that allow for these leaders to get together for Modi and Xi. In this case, Modi didn’t meet with Xi, but it allows a space for this interaction. That’s number one, which wouldn’t happen otherwise. It allows for the articulation of these frustrations and grievances with the legacy institutions of the international system. That’s really important.
And grievance is something that I think is underappreciated as a political force. Grievance is what drove the AfD to win in Germany. Grievance is what powers Trump. Grievance is what powers Nigel Farage. Grievance is the currency of our politics today. And so, the SCO and the BRICS don’t actually produce much in the way of tangible outcomes, but they do allow a forum for grievance. And Xi spoke to that when he talked about his displeasure with the current security system. That is an expression of grievance.
And so, I think if we look at it on the level of grievance, then these institutions start to make more sense. And I’ve heard people in D.C., MAGA people in D.C., dismiss grievance as a force. And I’m just like, wait, what? I mean, you’re literally in power because of grievance. So, they dismiss it when they see it from people that they don’t understand or they don’t like. But when it’s their grievance, it’s legitimate.
Andrew: Right.
Eric: And so that’s, I think, the most important things that come out of these SCO and BRICS summits.
Andrew: Yeah, that’s a really, really good point. Really well put. I think the tendency is to look at these things and say they’re nothing burgers. You know, people kind of put up this sort of false expectation. Like, if there’s not a $40 billion worth of commercial deals or something concrete you can hold in your hand, that it was a flop. But that’s not the point.
Eric: No, that’s dumb. That’s an old way of looking at it. And think about this. If these institutions or whatever they are, these forums were nothingburgers, why is it that dozens and dozens of countries are lining up to join them? Vietnam has plenty of things to do with its time besides go to the BRICS. But yet the prime minister is going to the BRICS summit.
Why?
Now, is it because they’re going to get big trade deals out of it?
No.
Is it because they’re going to get some type of financial benefit?
No, because the BRICS has been around for 15 years and has produced barely anything.
So, in that sense, yeah, it’s a failure.
But it puts the Vietnamese prime minister in the room with Modi, with Xi, with any number of presidents, prime ministers, and others who are very much aligned with him in terms of that worldview. Now, it’s not all grievance. There is productive things that do come out of these things. And also, it’s a de-centering of the West. This is really important. The West is not invited to these clubs. They’re not even invited as observers. This is not their party. And that is very empowering for people, again, who’ve been marginalized for as long as they’ve been marginalized, and saying, “You know what, you’ve got your things, we’ve got ours, you can stay over there.”
And notice how sensitive it gets, how people in Washington are becoming increasingly sensitive about this. As much as Trump and the MAGA folks want to say these are nothing burgers, Trump turned around on multiple occasions and threatened 100% tariffs on any BRICS country if they go through with the BRICS currency. Okay, on any number, you know, he didn’t even know that China was part of the BRICS, which I think is laughable. But again, you can tell that there’s a little bit of anxiety about this. It’s a nothingburger, but we don’t like it. And you’re like, “Well, if it’s a nothing burger, then what do you care?”
Andrew: Totally. Totally. Well, again, I think those are really good observations and super helpful for, I think, how we think about these things. We’ll talk more about the BRICS piece of it in a second because that’s upcoming. But in the meantime, after the SCO, Xi went to Kyrgyzstan and Egypt for a state visit. Definitely want to talk about Egypt. I don’t know if you have any thoughts on the Kyrgyzstan visit.
Eric: Well, so Kyrgyzstan is important because that’s really the heart and soul of the Belt and Road Initiative. This is where it started and this is where the beating heart thrives. So, when we look at the big infrastructure projects, we look at the energy projects, you look at critical minerals, Central Asia is right in the middle of all of those. So, the announcements again on progress, on the big railways, these are railways that are connecting China to Europe. And so, a lot of air conditioners went through these countries on the way to Europe this summer.
Again, these are railways that are probably going to become more important in the future as waterways become potentially contested and weaponized. So, railways will play a more important role. So, the fact that they made announcements on the rail systems, I think is something that we should watch. Also, you can’t take away anything when it comes to Central Asia and the competition between Russia and China. Russia still sees that as its traditional sphere of influence. China clearly feels the upper hand over Russia.
Basically, in many ways, in my view, there’s nothing that pleases the Chinese more than seeing Vladimir Putin walk up the steps of the Great Hall of the People, you know, of like, “You work for me now,” right? And so that plays out in Central Asia. I think, again, taking advantage of the moment. Russia may be stronger one day. Russia’s relationship with China may be more contentious. Historically, it has been that way. And so, I think the Chinese are taking advantage of the moment that we’re in right now by exerting considerable influence in Central Asia while Russia is focused on Ukraine and Europe and all the other things that are going on and its ability to exert influence in Central Asia is diminished.
That’s always been a big part of it. Again, China’s periphery, its neighborhood diplomacy is supreme right now in its strategic thinking. And Central Asia is absolutely central, no pun intended, to that. So, I think you have to look at that all in that context of Russia, neighborhood diplomacy, supply lines, the Belt and Road. That’s what makes this visit to Bishkek so important. And all the visits to Central Asia and the engagements with Central Asia are so important. It doesn’t get a lot of attention outside of the kind of BRI press, if you will, these kind of small communities like us, who obsess over these things. But it’s one that I recommend people to follow closely.
Andrew: Yeah, I know you’re an avid reader of BRI Monthly, your magazine. So, well, then what do you make of the Egypt trip?
Eric: Okay, so this one was really interesting. And at first, I was scratching my head as to, okay…
Andrew: Why?
Eric: Why? But then when you sit and think about it, it was a masterful stroke of diplomacy. So, ostensibly, the reason they’re going is to mark the 70th anniversary of diplomatic ties between Egypt and China. Blah, blah, blah. There’s always those anniversaries. You know, it’s the 60th anniversary, the 70th anniversary. Xi doesn’t go to those. Egypt, though, is a country, because of its location, that ticks so many boxes. So, let’s just go through the list right now. North Africa.
So, this is the second visit since 2024 that Xi has made to North Africa. Remember, he made a stopover in Morocco on the way back from the U.S. And that by itself indicates that MENA and we call, you know, so North Africa is treated separately like it is for the U.S. It’s not part of the sub-Saharan Africa in the Ministry of Foreign Affairs. They count North Africa as part of their MENA division. So, MENA holds a very special place. And if you look during the pandemic where vaccines went, disproportionately, they went to North African countries much more than they did to sub-Saharan African countries.
Andrew: Interesting.
Eric: When you look at investment now, huge investment flows into the Moroccan auto industry.
Why?
Because Morocco is one of the few countries that has a free trade agreement with both the U.S. and Europe. Makes it very, very important. Egypt now is one of the major magnets of Chinese auto manufacturing. So, First Automotive Works, SAIC, any number of these companies have huge investments in both ICE and new energy manufacturing there. There is a big Chinese investment zone along the Suez Canal. And so, the Chinese, more than anything, when it comes to BRI price connectivity.
And so, Egypt, because of its strategic location at the intersection of sub-Saharan Africa, North Africa, the Middle East, and the Persian Gulf, make it strategically very important economically. But that’s not the reason why he went, because a lot of countries fit that. China is concerned that they are being relegated to a secondary position in what comes after the Iran war. That they are not a primary actor in shaping the outcome of this. And that’s by their own choice, by the way.
They don’t want to get involved in the security. Remember, Trump on many occasions said the PLA Navy should join the U.S. I mean, we’re in a different timeline, Andrew. But, you know, I mean, can you imagine this? A joint naval operation between the U.S. and the PLAN, you know, to patrol the Strait of Hormuz? I mean, like, but that’s where we are in 2026. I mean, that was his request. I mean, not once, but on multiple occasions that the Chinese should do it. The Chinese naturally saying, “No, we don’t do that. We’re not going to get involved in other countries and other regions militarily.”
So, there is a concern as to when the dynamics in West Asia start to settle down that they may be positioned on the outside. So, Xi wants to still be considered an actor in the political discussions related to West Asia. But he can’t go to the Emirates because the Emirates is right in the middle of the U.S.-China competition. He can’t go to Iran, obviously, because, well, that would mess everything up. The Saudis, I don’t think, want him there right now. It’s just too difficult of a time. They don’t want the Trumpers there either, okay?
I mean, they’re trying to figure it out. Egypt is one of these countries a little bit like India, which has a tense but deep relationship with the U.S., always a suspicious relationship with the U.S., and at the same time is welcoming to the Chinese. So, there’s a political dynamic there. Remember, so that’s box number two in terms of thinking about the Iran war and the politics of the Iran war and having some presence.
Andrew: Sure.
Eric: Box three is the Palestinian-Israel conflict. And China has seen itself as a long ally of the Palestinian cause from going back to the 60s in Yasser Arafat. And obviously, Egypt is right on the front lines of that. This conflict has been a topic of discussion between El-Sisi and Xi. The Chinese at one point when they were high on their mediation success in terms of bringing Saudi Arabia and Iran back together. They even talked about, you know, maybe they could step in to mediate the Palestinian conflict.
They brought all the Palestinian factions to China in ‘23 or ‘24, which was quite a move. They fancy themselves as being an ally of the Arab street on this, if you will. The Arab street, for those who are not familiar, is public opinion that is shaped out of Cairo. And the Palestinian cause is central to that. And the Chinese have been avid defenders of the Palestinians at the United Nations. They’ve been avid defenders of the Palestinians, obviously, in China and the diplomacy. And going to Cairo allows you that opportunity to talk about that.
The last part, and this did come up in the conversations, and there’s the one that’s poorly understood is Xinjiang. So, in the early ‘20s, remember I said about the Arab street, there is a convergence between China and Egypt on combating Islamic terrorism and Islamic radicalism. This is their words, not mine. So for El-Sisi, it’s about cracking down on the Muslim Brotherhood. And for the Chinese, it’s obviously talking about Xinjiang. So, in the early 20s, Wang Yi goes to Cairo and lays out the policy on Xinjiang and says, “This is what we’re doing.”
And they famously go and say, back then it was like six years, we’re up to about 10 years, “We have not had an attack by an Islamic extremist in six, seven, eight, nine.” They always put the number every year. That resonates in Cairo. And the Chinese get the blessing of the Egyptian government on this. And it legitimizes China’s policies on Xinjiang. And so, they love going to Cairo to talk about human rights, Muslim extremism, and the successes that both the Egyptian and the Chinese governments have had in combating Islamic extremism.
It’s a safe space for them to talk about that. They get no criticism. There’s no protest in Cairo on this. And let’s not forget that the Egyptians have been deporting Uyghur activists back to China and repatriating them. So, there’s been very much an alliance there.
Andrew: That makes sense. Oh, sorry. Go ahead.
Eric: The last box. Sorry. I mean…
Andrew: No, that’s great.
Eric: I get really excited about Egypt, about China politics.
Andrew: No, I love it.
Eric: The last box to tick. And again, this is why I said it was a masterful stroke that, in one trip, he could do all of these things is that, and he referenced this in his speech that Egypt is a part of Africa. Africa is an important part of China’s diplomacy in the Global South. And it allows him the leverage to say, “I am back in Africa again.” And again, this is something that Donald Trump will never go to Africa for obvious reasons. Biden barely went to Africa, only in the last month of his presidency when he was lame duck. Same with Obama. This is a part of the world that the U.S. doesn’t take seriously, has not taken seriously, and there is no indication they will take seriously.
And so, Xi benefits from that by saying, here I am back in Africa again. And I think he used the word Africa quite a bit in his remarks. And that was intentional to direct those remarks to sub-Saharan Africa and to the continent of Africa, not just to the MENA, West Asia, Mideast, Persian Gulf dynamics of it all. So, that’s why Egypt was such a masterful diplomacy for them because they got to do a lot in a very short amount of time. I’ll pause there.
Andrew: No, that’s really well summed up and makes a ton of sense terms of checking all those boxes. I was just going to ask an additional question on some of the comments that he made. It jumped out to us that he proposed this four-point approach to “building a new Middle East security architecture.” And I just wanted to get your thoughts on that.
Eric: So that speaks to what I was talking about, how they are concerned about being marginalized in the post-war dynamic. They want to try and have some space in that. I find it hard to believe that anybody in the region will take them seriously on this, that they don’t look to the Chinese as a provider of security. They don’t see the Chinese as having any leverage on this. They don’t see the Chinese as using what leverage they do have to exert changes. That’s just not the way the Chinese operate. And I also would argue, and I think I’m channeling now a lot of the great Middle East scholars and West Asia scholars that we talk to who say that China’s leverage in these regions is significantly less than most people actually think.
They really don’t have a lot of leverage because none of these countries are going to make national security considerations based on Chinese input on trade. When it comes to national security, that’s above and beyond everything else. So, I don’t think the Chinese actually have a lot of leverage, but they want to be seen as somebody having a role in what comes after this. Now, there may be a tremendous opportunity for the Chinese in the Gulf at the end of this. We are looking at a scenario where a lot of scholars are forecasting that the era of U.S. permanent military presence in the Gulf states may be coming to an end.
And that has been a main priority for the Chinese is to see a retrenchment of U.S. military presence around the world, not just in the Western Pacific, but also in places like the Gulf. Now, the Chinese may not be happy with what comes out of that. They’ve been freeloading off U.S. security for decades to benefit from those supply lines that made oil pass through those regions for a long time without them having to worry about the transit of that energy. So, we don’t know what comes after this. So, it’s not a guarantee that the Chinese win just because the U.S. has lost.
Andrew: Well, that’s what I was going to ask is I want you to clarify that point a little bit, because I think a lot of people hear that. I kind of it was my initial instinct is, “Oh, they want the U.S. to pull back so they can go in and provide the security.” But it’s not that at all. Yeah.
Eric: No, absolutely not. 100% you are not going to see… First of all, the Chinese have a foundational philosophy. It’s back to the Zhou Enlai era of not putting bases in foreign territory. Djibouti was the exception to that. They are showing some flexibility on that. Again, is the Ream Naval Base in Cambodia a base for the Chinese? Is it not? There’s a little bit of both. We don’t know. But there is a lot of resistance within the body politic in China for a large basing presence around the world because it would make them look like freaking hypocrites for them accusing the United States of having a global military presence around the world.
So, I mean, for 10 years, the Pentagon has been putting in their annual report that the Chinese are looking to put bases around the world. And yet, beyond Djibouti, we haven’t seen it. Djibouti was a really exceptional case because of its just incredible strategic location at the mouth of the Gulf of Aden and in Africa and all the different, and right near the Red Sea. And because of the presence of so many other foreign bases, it gave the Chinese some cover.
Whereas you’re not going to see a military base in the Emirates or in Qatar. There’s no evidence that that’s going to happen. And I know, I can imagine some of your listeners right now are rolling their eyes and being like, you know, “Eric is so naive. He doesn’t get it.” And all I just say is decades now have gone by with people forecasting that this is going to happen and it hasn’t happened. That doesn’t mean they’re not going to project security. There’s different ways of doing this today, but they’re not going to follow our way of doing things. That much we know. And we’ve seen that now over the past 40 years of China’s evolution to where it is today.
Andrew: Yeah, I fully agree with you that that is not their intention. The one caveat is I don’t think it’s them potentially looking like hypocrites that will keep them from doing it. I’m sure they’re perfectly happy to look like it.
Eric: I think they can get over it. They have no problem getting over hypocrites. It’s just also you have to understand on a basing thing, and this is why I get into so many fights on social media and folks in the Pentagon who are convinced that the Chinese want to put a base in West Africa. And just let’s go through the logic of this very quickly. And this could be anywhere in the world.
To have a base, you need a supply chain that can service that base. You need to power that base. You need to protect that base. It would be so easy in the event of a conflict for the U.S. to cut off that base. Okay? Just to cut off the power to that base, to cut off the food supplies in the base. So the U.S. is able to do it because it’s got this massive ecosystem that allows it to be able to supply these bases. It’s got the logistics capability to do it. China does not have that capacity. It just doesn’t. For all the logistics prowess that China has in delivering Taobao goods, it does not have that capacity militarily. And it is a truly unique ability of the United States to be able to service these bases.
However, what we have seen in the Gulf shows you the extreme vulnerability that these bases have in modern warfare today in an era of drones. That the Abraham Lincoln was sitting in the Gulf getting food from Diego Garcia because the Bahrain base, where it normally was supposed to get food, is shut down because of Iranian drones. The Chinese can’t be a part of that because they don’t have the capacity to defend or supply foreign bases yet. Maybe that’ll change one day, but I’m dubious, you know.
Andrew: Yeah, no, totally makes sense. And I agree, again, being in D.C., it is an uphill battle to convince people.
Eric: It is. They really convince themselves of these narratives. And it’s just like you get 10 people in a room…
Andrew: It’s projection.
Eric: Who all agree with themselves about it. And that’s why I’m just like…
Andrew: But it’s, “Well, we would do it.” You know what I mean? Like, “So, of course, they’re going to do it.”
Eric: That’s right. And that is faulty logic.
Andrew: Yeah, I agree. Well, let’s pivot now to what’s next on the diplomatic agenda, the BRICS Summit. So, this is in India. This is, I think, this upcoming weekend. It also seems like maybe Xi and Modi are going to have…
Eric: Xi and Modi will have a sideline. That is the expectation. A couple of different things. The reason why Xi is going to this, and wasn’t 100% sure, but then it became clear, next year, China is the rotating chair of the BRICS. And the Chinese are obsessed with the optics of these summits in Beijing. And so, if Xi didn’t go to New Delhi, then Modi would have stayed home from Beijing next year. And that could not have happened. So, under any circumstances, to not have India and Beijing for the China-hosted BRICS summit would have been a non-starter. So, that’s the main reason I think he’s going.
The reason why we had some doubts was because there was a foreign minister’s meeting, a BRICS foreign minister’s meeting, at the same time as the Trump visit. So clearly Wang Yi was next to Xi’s side when he was talking to Trump. But that the Chinese didn’t send Vice President Han Zheng, who, remember, welcomed Trump at the airport, but could have easily gotten onto a plane to stand in for Wang Yi. And Vice President Han does do that. He is a ceremonial vice president, but he has the stature to stand in for a foreign minister at some of these types of events.
Instead, they put the ambassador in, which was diplomatically and protocol wise, really a statement. You know, there’s no coincidence in Chinese protocol politics. Everything is thought through. And that let us who are observers going, huh? And it was a wonder if, are they not taking the BRICS as seriously anymore? Are they not as interested when they didn’t send anybody of higher rank than an ambassador when all the other foreign ministers were there? So that was notable. But then people said, “Well, listen, next year, BRICS is going to be in Beijing. So of course, he’s got to go.”
At the same time of all of this, we’re seeing this real détente happen between India and China that’s really started over the past 18 months. And both sides, remember, if you recall, in early 2020 at the Galwan Valley incident, where dozens of Indians, and again, I mean, the numbers are very imprecise. I’m invariably going to upset some part of your audience. The Chinese say only four of their soldiers were killed. Indians will say there were way more. Let’s just say Indians and Chinese were both killed in the Galwan Valley incident. And it really put relations into a deep, deep freeze for about four to five years.
So much so that Xi and Modi couldn’t even look at each other at the South Africa RICS Summit. And they withdrew their ambassadors. They kicked out journalists. There wrecked flights. This was bad. More importantly, they moved tens of thousands of troops to each sides of the border, heavy artillery, mechanized artillery. In fact, the Indians redeployed off of Pakistan to the line of actual control. And what ended up happening about ‘24, ‘25 is that both sides said, “Crap, this is getting too expensive. We just can’t have this much.” the Chinese need to you know, dedicate military resources into the South China Sea, the East China Sea. They need to dedicate resources to other places. The Indians, obviously, it’s about Pakistan.
And both sides said, “This is ridiculous. We got to back down.” And so, they have started this, this détente, which for the most part has really shown signs of progress. Flights are back. Ambassadors are back. Business is starting to pick up. Cultural exchanges are happening. And they’ve pulled back some of troops. Not all, but some of the troops have pulled back. So, that’s all good. In fact, just last week, they had the highest meeting of corps commanders. The top military commanders on both sides of the border met as part of the ongoing conversations. We’ve never seen those two leaders meet.
So, it shows you that there is positive momentum. That being said, the level of distrust and just hate between these two sides is stunning. Just, I mean, go to our YouTube and see the show, the Indian shows, and see how the Chinese comments are like, “These effers, I hate them, I don’t trust them.” And the Indians are like, “I hate the Chinese.” And that distrust is right there under the surface. Som despite all of this kind of wonderful détente and this kumbaya moment and the commanders meeting and, you know, all these different things, boy, the distrust runs very, very deep. And that, of course, goes back to the 1962 border war and disputes over Tibet.
And obviously now what’s happened in Nepal has brought a lot of that back up. Indian media really were quick to jump on the idea that it was Chinese infrastructure building in Tibet that caused this. Again, it’s too early to tell what the causes of this were yet definitively. Nonetheless, you can see how close to the surface the suspicions are. So the meaning between Xi and Modi in summary, in my view, is more important actually than whatever happens at the BRICS.
Andrew: Yeah. Well, that’s also great context in summary. I guess the question for me when it comes to this thaw is like, what do you think the prospects are that it lasts?
Eric: It will last because both have a strategic interest that it should. There is a strategic interest that it gets to a point of sustainability. Are we going to see the Indians pull out of the quad, line up with Xi against Trump? Never. Never, never, never. Despite the hugs in Beijing, remember the famous pictures of the hugs in Beijing? That was a big middle finger to Trump. The Indians simply don’t play politics that way. So, the Indians, again, are a little bit like the Egyptians and a little bit like the Vietnamese where they play all sides and they put money down on red and on black at the casino. So, they both, I think, recognize the limits of what can be done.
The Indians are very, very conscious of the trade imbalance, that they’re not selling very much back to China, but importing quite a bit from China. This is, of course, a concern that everybody has. The Chinese are very conscious and nervous about the Indians kind of being, remember that China Plus One? Well, they’re worried about India being the plus one. So China put exit bans on technical engineers. They are not transferring over some of the advanced technology for phones manufacturing and for auto manufacturing. They’re worried about India because of the scale of what India can produce, that it could be an alternative.
Apple has moved a significant portion of its manufacturing out of China to India for sale in the U.S. and other places. That is something that is of deep concern to the Chinese. Remember, the Indians and the Chinese compete for influence in the Indian Ocean. I, you know, push back heartily against the U.S. when they talk about the Chinese in the Atlantic. The Chinese have no interest in the Atlantic. The Chinese have deep interest in Indian Ocean supply lanes that take resources and energy from Africa and from West Asia through the Indian Ocean to the Port of Gwadar in Pakistan, to Myanmar, and then around India.
Those sea lanes are strategically essential for the Chinese. And India doesn’t like that. They’re competing in places like Sri Lanka and Bangladesh as well for influence. These are areas. And then, of course, there’s Pakistan. The Chinese have a partnership with Pakistan that is really quite remarkable. 80+ percent of Pakistan’s military hardware today comes from China. It is a real-world showcase for Chinese weaponry and military technology. So, they talked about the… remember the DeepSeek moment? Well, during Operation Sindoor, which was the brief war between India and Pakistan, it was the J-10s and the PL-15 missiles- the J-10 fighter jets and PL-15 air-to-air missiles that were being showcased.
And a lot of people were like, “Wow, this is great. Chinese tech has finally arrived.” We just reported this week that Pakistan has added to its arsenal HQ-17 anti-drone technology to combat the Indians. So, there’s a whole bunch that gets on in this relationship, and it’s very complex. So, we’re literally looking to a point where can we just make it that they don’t dislike each other? It’s like divorced parents with the child. You’re like, “Let’s just be civil to one another. We’re never going to be lovey-dovey. If we can avoid being antagonistic, that’s where I think the sweet spot is.” And that’s where I think they are.
On the BRICS itself, there’s a real cleavage that’s starting to kind of form within the BRICS, more so than the SCO. The SCO is a security-related organization. The BRICS is a much more comprehensive type of group, but you have two blocks that are starting to take shape. Brazil, South Africa, and India don’t want to see the BRICS as an anti-Western block, whereas Russia, China, Iran, all members, do like to see the BRICS as an anti-Western bloc.
And so that is one of the reasons why we’re not really going to see big outcomes out of the BRICS. You’re going to see lots of little incremental announcements. They have an industrial park, you know, sharing agreement. They’ve got media that they do. There’s cultural exchanges. You know, these are all pretty much small-time things in our era, big-time, great-power rivalry politics. The biggest thing we’re going to see out of this one is maybe a BRICS cross-border payment system, which is different than a BRICS currency.
Andrew: Yeah, but it’s not a small thing, actually, potentially.
Eric: That’s not a small thing, but it depends on the mechanics of how that works. The biggest concern for the Indians, and to some extent the Russians, is they don’t want to surrender any monetary sovereignty to the Chinese, which would invariably happen if there was a currency, because a currency would need a central bank. And the largest economy would probably have the largest voting shares in the central bank. And there’s no way that Putin or Modi would ever give that power to the Chinese. So, that’s why Trump is completely idiotic for thinking that there’s a BRICS currency coming.
But maybe a crypto coin back kind of blockchain type of payment system that facilitates non-use of dollar is…
Andrew: Exactly right. That’s what I was going to say.
Eric: … something that could be interesting.
Andrew: Anything that lets these companies increasingly circumvent use of the dollar is high on the agenda, very in vogue, not just in vogue. That’s not strong enough of a word. I mean, these countries don’t want to get caught up in U.S. sanctions, and they’re trying to blunt the power of those.
Eric: Sanctions are one thing, but remember that a lot of these countries, and again, at the beginning of our discussion, I talked about the resentment of the U.S. Remember, a lot of these countries are on the downstream impact of whenever the central bank chief decides to adjust interest rates, that has an immediate impact on the poorest countries and the value of their dollars. And so, they suffer mightily every time the U.S. makes an adjustment to its interest rate and to its monetary policy. And so, they hate that. And a lot of countries, especially after the pandemic, were extremely short of dollars. And that put a huge inflationary pressure on these countries.
And they resent the fact that so much of their monetary policies are out of their control. They’re dependent on this thing that happens in Washington. So, if they can reduce that risk, sanctions is one thing, but just reducing the reliance on the dollar gives them more flexibility. So, this is one of the things the Chinese have been doing aggressively over the past year is doing more of these yuan-based loans, settlement transactions in yuan, and doing more. And a lot of these countries are welcoming that because it doesn’t require them to convert into dollars.
The dollar is still paramount. Until the Saudis decide they want to start trading oil in yuan, which they could do tomorrow, by the way. There’s nothing stopping the Saudis from saying, yeah, the petrodollar is over. It’s the petroyuan now. They don’t because they don’t trust the yuan. They don’t understand the monetary policy. They don’t understand the risks inside with it. So, therefore, they don’t do it. That’s the limitation of yuan-based growth on that. But you’re going to see these non-dollar-based transactions go up, and settlement tools like the BRICS payment system, or whatever that is, go up, just the same way we’re seeing more in crypto and blockchain.
Andrew: Totally, yeah. Well, that would be an interesting one to look out for if there’s any actual movement on that out of the BRICS.
Eric: I’d look for an announcement on that. I think that’s coming. We did something on that, and I think there’s going to be a movement towards a payment system. But you saw the Brazilian foreign minister in Singapore this week going out of his way to say a BRICS payment system is not de-dollarization, and it’s not a BRICS currency. So, they’re just really trying to placate the Americans who are obviously very sensitive about this. And so, we’ll hear a lot of, “No, it’s not this, but we’re doing something.”
Andrew: Interesting. I’ve got one more question for you. Another kind of contextual question on before, if we’ve still got the time to talk a little bit about the AI piece that I know you’ve got a lot of thoughts on.
Eric: Yeah.
Andrew: Just on the diplomacy, someone posited the other day, you know, maybe part of the explanation behind the spate of diplomacy at this time is a year from now, we’re going to have another party Congress. Xi Jinping likely going to go for a fourth term. Do you think there’s any merit to kind of that kind of argument? Is there anything reflected in these meetings about domestic politics in China?
Eric: Not that I’m seeing, no. Yeah, I don’t see anything related to the upcoming party congress in any of the rhetoric or even some of the coded language that they use that you have to interpret. No, I think that this moment right now is very much focused on the U.S. and focused on great power competition and focused on making sure China has a space that it wants. That whatever is happening now, change is not seen in 100 years, right? That they are able to shape the direction of whatever comes next. That’s, I think, the focus less than domestic Chinese politics. I think most people outside of China have a very, very poor understanding of what happens domestically in China.
So, I think if they were bringing that dynamic into their diplomacy, it would probably go over most people’s heads. There’s just not the level of China competency to have that level of sophistication to understand that.
Andrew: Yeah, no, I tend to agree with you. And I thought that the argument, I was a little skeptical of the argument when it was made, but I just wanted to check it with you.
Eric: I bet you that was made by a Chinese domestic policy analyst who overstates the importance of domestic politics.
Andrew: Of what they did, yeah.
Eric: I would be surprised if anybody on the outside would think that. Now, there are things like dual circulation and these community for common destiny, these kind of umbrella statements that both the Party, Qiushi, and Xi will kind of use as architecture language to better understand. But it takes people like Kevin Rudd to then explain that to the rest of the world. The Chinese do an absolutely horrific job of explaining this to the rest of the world. They talk about community for common destiny or dual circulation as if everybody understands what it is. Almost nobody does.
So, that’s the only thing I would look for in the next party Congress is there going to be another architecture type of language that shapes Chinese thinking that will then impact their diplomacy. But typically, that comes out either in the run-up to the Congress or it comes out at the Congress itself. So, just for example, like we saw in the run-up to the latest five-year plan that was released at the two sessions was Qiushi, nine months before, publishes an article talking about how they’re going to hold the entire value chain and low-end manufacturing is going to be important.
Xi then comes out and says and articulates that. That has huge ramifications for the Global South. I mean, just massive ramifications, but most people don’t understand that because they don’t read Qiushi and they’re not following Xi’s speeches. But when China says it wants to hold the bottom of the manufacturing ecosystem value chain, that means that developing countries traditionally who would move up into that space now can’t.
Andrew: 100%.
Eric: So that’s where domestic politics are important to follow. But again, there’s not a lot of China literacy in the world today.
Andrew: Yeah. Well, that’s a whole nother podcast. I’d love to talk to you about the changing development model and how that’s going to impact the global south. I want to touch on the other piece of you said, again, changes unseen in a century. I mean, one of those changes is according to China, the rise of China and the relative decline in the West. Another one is the rise of AI and the absolute breakneck speed of technological innovation. And I know you’ve got a lot of observations around what China is doing in that space, what Chinese companies are doing that you think particularly is going to potentially cause big challenges or present significant competition to U.S. AI companies in terms of deployment in the global south. What do you see?
Eric: If the first China shock was what, the early 2000s and the Walmart China shock where all the manufacturing moved out of the U.S. to make the stuff we buy at Target and Walmart, and the second China shock is new energy and cars, the third China shock, of course, is going to be AI. And what I don’t think is appreciated as much as it should. and by the way, Scott Galloway on the Pivot Podcast, I mean, he’s on this, he gets it right away. And he sees what I see out here, that, yeah, OpenAI, Meta, you know, and Anthropic, they are going to be the Apple, and they’re going to capture 90% of the profits in the market, but they’re going to have 10% of the market share.
And 90% is going to go to Android. And that Android is going to be equivalent in the AI world is Moonshot, or Kimi, and DeepSeek, and Qwen and the others. So, you’re seeing the uptick, even in sovereign AIs, which I think is very funny, that countries are adopting Chinese open source, open weight models into their sovereign AIs. And I wrote an article when Kimi came out and Moonshot kind of came out with this moment. And I said, I gave five reasons why it’s so appealing to global South countries. You’ll appreciate this because you were talking about sanctions.
But number one, remember, there is jurisprudence. There’s law, precedent that the United States said that if data passes through U.S.
servers, that is subject to U.S. jurisdiction. That was overturned, if my understanding is correct. But the fact that it happened, and this was a case involving Ireland where data was passing through a Microsoft server in Ireland, and the U.S. said, “Nope, that’s our jurisdiction because it’s an American company.” You know what? If you’re sitting in many parts of the world, you’re like, “Holy crap, I do not want the FBI or the Justice Department in my business.” So, there’s a sovereignty issue. There is the cost issue, obviously.
Most people focus on the cost issue. A lot of people will tell you that the cost, sure, closed networks from OpenAI and Anthropic may be more expensive, but when you’re getting an open-weight, open-source model, you’re still going to need a lot of support to customize it, support it, to defend it, and all these things. So, it’s not free. If you’re a bank in Vietnam and you’re building AI tools, you’re going to do basically what you did with Linux, where you’re going to get Linux as an open-source code, and then you’re going to hire Red Hat, and you’re going to hire all these companies to be able to service it.
This is where the Chinese are going to make their money. They’re not going to make their money by selling the code. The code is the razor blade. No, the code is the razor. They’re going to sell the razor blades. So, all of a sudden you’re going to get free tokens, but Huawei servers, Huawei support, Huawei engineers, Huawei protection, Huawei updates- that’s where the money’s going to be made. So, on the AI itself, yes, are the Chinese three months behind, six months behind? I don’t think it matters. I think that’s the wrong way of looking at it. And again, people keep talking about a race. A race implies there’s a finish. We have no finish in this thing. Okay?
So, success is going to be defined in lots of different ways. Another issue here, and this is a really important one, is that if we look at the seven largest AI companies in the U.S., six are not profitable, and the seventh is profitable only because it’s selling or leasing out data center space to the other six. This was predicated. The whole model for open AI going into so much debt the way they have, was predicated in some ways on a Google model. Here in Southeast Asia, everybody buys Google ads, everybody buys Facebook ads. They had a truly global market and they extracted trillions of dollars of wealth from this global exposure.
Now, if you have Chinese AI, I don’t need to buy OpenAI. I can buy much cheaper alternatives. So, one has to wonder if this is the concern that Scott Galloway keeps talking about, and I share his concern, is that if the Chinese are going to completely undermine the entire premise of what the OpenAI and Anthropic and all these companies who’ve leveraged up into massive amounts of debt, they’re never going to be able to pay it off because they’re not going to get Vietnamese and Kenyans and South Africans to buy their service the way that they bought Facebook and Google, okay? Because the Chinese are there. So that’s another, you know, of my list of five things, and I’ll give you one more, you know.
So, obviously having a closed network without any access to the U.S. is really an important selling point. And the customization is an important selling point. But the security is another important selling point. Remember that the United States will accuse the Chinese of having back doors. Everything runs through the CCP. If you’re sitting in many parts of the global South, let me go back to the first part of my conversation— the depth of resentment that’s in these parts of the world for the West cannot be overstated. They don’t trust the Americans any more than they trust the Chinese. Okay? So, this whole idea that the Chinese tech is somehow less secure is not something that is selling in many parts of the developing world where they look at the U.S. without a lot of credibility on this front.
Andrew: Right. Yeah. That’s a good point. Very good point. And there’s a bunch of different threads there in terms of kind of how this plays out in the competition between U.S. and China. I mean, one point you made was, you know, the characterization of a race doesn’t make sense. I totally agree. And we talk a lot, Kendra, one of my business partners who runs our tech practice and all of our kind of tech-related internal aspects of our company, which includes our use of LLMs, just talks about how we don’t need, for most of the stuff we do, a cutting edge, we don’t need an AGI, you know, adjacent AI capability.
Eric: And neither does a bank in Ho Chi Minh City, by the way.
Andrew: Exactly right.
Eric: And so that’s why Scott Galloway says they’re making a Mercedes when a Toyota or a Hyundai will do fine.
Andrew: Exactly right.
Eric: And again, the Chinese, are they going to make money off the AI? Probably not. I mean, and Kai-Fu Lee was just on a Bloomberg podcast and said the same thing. But the services around the AI are going to be the areas that they make a poop ton of money. And that’s also going to be very empowering for local businesses around the world who, just the same way Linux produced huge quantities of service companies in every part of the world, I think you’re going to see popping up in Nigeria, popping up in Nairobi, all these different companies that are going to take Chinese AI and do amazingly innovative things with it. And they are going to profit from it. That is going to build huge quantities of goodwill for the Chinese.
The last point that I make on this is that you’re going to see much more Chinese out into the product level. So, a Chinese AI will be at the product level, in the cars, in the phones, in the devices. Those are going to be things that people will use in the Global South much more than they’ll use an OpenAI or a Kimi, you know, LLM. So, I think that’s going to be another way that people in the bottom four billion will engage AI is through the product. And so, we’ll see, for example, phones that are better optimized for darker complexions.
We’re going to see better recommendation engines in different languages, in Hausa, in Igbo, in Swahili, and other things that the AI will be able to do. And that’s going to be something very important. That’s going to be a space that the Americans are not going to pay attention to at all. And so you’ll see Chinese AI move into those spaces much more aggressively too because of the open-weight, open-source dynamic that makes it possible to do that.
Andrew: Totally. Another kind of related issue that you talked about, the Google model. I forget who I was hearing say this, but I thought it was a smart point. They were arguing that the AI companies are making the mistakes that some early SaaS companies made, which is to understand that consumers, by and large, are not going to pay for online tools. And yes, there are a lot of people who pay 18 bucks, 20 bucks a month, or whatever it is, for OpenAI, for ChatGPT, and for Claude. But the Google model was to keep everything free and sell the ads. And to know that B2C is not the path to nirvana: basically, you get as many users as you can, and then the users basically become the product and then you sell ads.
And so, it also strikes me as two things. One, a strategic mistake that maybe these companies are making because it’s another way they’re shutting off revenue streams from a bunch of different countries, including Global South countries. But I wonder if the Chinese will figure that out.
Eric: Well, so it was never about consumers with AI. It’s always about enterprises where the big money was. And the key thing to remember is that-
Andrew: No, that’s the point. That’s exactly the point. Yeah.
Eric: Yeah. And Bloomberg has done quite a bit of coverage on this, as well as the New York Times just did a really big spread on Chinese AI in Africa. And one of the things that we’re hearing, again, is the sales distribution channels for Chinese AI is not going to be a moonshot sales team going to knock on every door. They’re going to sell it through the existing hardware distributors who have already a massive presence across these countries. ZTE, Huawei, go down the list, Transsion, all the phone companies. They’re going to start bundling Chinese AI products into their sales channels. So ,I think that you’re going to see a lot more distribution. Again, the AI, that’s not the product. The product is the services on top of the AI. And that’s going to be where I think the money comes in for it.
And the Chinese already have a formidable presence in these countries because they’ve got distribution and sales channels set up everywhere to sell hardware that they’ve been selling already, not to mention the auto companies now that are setting up everywhere. And they’re going to have sales channels. Again, are they going to sell you a moonshot subscription with your car?
No.
But are they going to sell to the auto dealer networks in South Africa a package of software options that can better help you target customers?
Yes.
Do you know what I mean?
Andrew: Yeah.
Eric: So, there’s all these kind of B2B things that I think the Chinese are already well positioned to take care of. Think about it in the mining industry. We’re seeing AI now, you know, facilitate so much in terms of the mining industry. Chinese mining companies are already so present there. Again, I see that’s where I think it’s going to play out. And we don’t have strengths there. U.S. mining companies are not strong. U.S. infrastructure companies are not strong. U.S. technology companies and consumer tech are not strong other than Apple. So, how is Meta going to sell this stuff to a bank in Vietnam? I don’t know. I mean, we’ll see how it shapes, but I’m not as optimistic on that. And I tend to follow Scott Galloway and Kai-Fu Lee on these things.
Andrew: Yeah. Well, and another point relatedly that, again, Kendra has made, which speaks to this idea that you don’t need the cutting-edge model for everything is, you know, her argument is right now everybody’s trying to figure out what the new tool is. People are sort of jumping from platform to platform, AI company to AI company for different use cases because everything’s changing so quickly and the tools are getting to the place where you can actually use them for different things. But pretty soon, people are just settle in, they’re going to have their setup, their AI setup, their various apps that they use for different things, and they’re going to be kind of set in their ways.
And it’s not going to be like every few weeks or every month or whatever, I change from this to that. And so, it becomes, if the Chinese get in early in these countries, and once people kind of stop, once they’ve adopted and they’ve kind of got their setups, if China’s the first mover there, it will give them potentially an enduring advantage. Do you agree with that?
Eric: Yeah, and then software’s a service. So, the updates will come through the service. And again, you can’t keep upgrading your systems, big upgrades in the systems. One last point on this that I think is important. Again, I go back to what I said earlier about both and. And again, good hygiene in a mobile telecom tech stack is to have some Huawei, some Cisco, some, you know, back in the day, Nortel, Ericsson. You don’t want all from one system because if there’s a virus or if there’s an outage or if there’s a problem, your whole system goes down.
So, you will see probably some diversification in the big companies. The big multinational banks are probably going to have some Chinese and some Western AIs that come in there. And by the way, let’s not discount the Europeans. Lovable is there. Mistral is also there. Mistral, in many respects, is positioning itself, that’s the French AI, as a B2B kind of solution provider. And they’ll be niche. And I guess the important thing to remember is that this is not only an American play. And I think we in the U.S., I am shocked in the U.S. by how few people, even in Silicon Valley, and I live, you know, my U.S. home is in Berkeley, and how little people know about Chinese AI in places like Silicon Valley.
It’s really quite remarkable. And they know the headline. DeepSeek, yeah. Kimi, yeah. Three months behind, yeah. But beyond that, they really don’t know very much. And that is, I think, quite stunning to me. We’re going to see the emergence of other AIs too that are going to be either industry-specific, culture-specific. So, again, they’re developing fascinating LLMs in Nigeria to preserve Nigerian languages because they’re concerned that as the English-dominant LLMs start to kind of take over the world that it just crushes dialects and crushes languages.
That’s really interesting. So we’re not going to see this kind of simple world of China and the U.S. I think right now that’s where we are. But in 10 years, I think it’s going to be far more fragmented than what it is today.
Andrew: Yeah, no, I was thinking about that the other day. I mean, obviously, everyone just assumes that the AI companies that are leading the world now, whether they’re Chinese or U.S., are going to be the ones that outlast. But this is the kind of world where a competitor can come out of nowhere, right?
Eric: Yeah, and you and I are old enough to remember the 1990s in the internet and AOL and Netscape and Yahoo. None of them are around today.
Andrew: Exactly right.
Eric: So, I think that in 10 years, it’s a good chance that all of the current players are wiped out from something else that comes along. You know, Andy Grove, the former chairman of Intel, once said that he’s not afraid of, you know, competition from a Fortune 500 company. He’s afraid of a 16-year-old in a garage. And I think that’s…
Andrew: For many reasons.
Eric: For many reasons. But I think that’s where the concern is, is that innovation comes from lots of different places. Nobody expected that DeepSeek would do what it did. I mean, the Americans were so arrogant, you know, that they had years ahead of the Chinese, and that all vaporized. And Ukraine has taught us that they can reset the rules of war. So, everything can be reset now. And so, I think this is a time that we should all be very, very humble.
Andrew: Yeah, I totally agree. Do you have time for one more question?
Eric: Sure. Yeah, let’s do it.
Andrew: All right. So, last thing, which is coming up. I know you’ve got views on this. U.S., China, Xi coming to Washington. You know, the normal question people ask is, what do you expect? But I want to ask you really just kind of how do you think that meeting and that relationship at this point is viewed from where you sit, Ho Chi Minh and other Global South countries?
Eric: Yeah. The thing that people, I think, want more than anything is stability. That is what has so unnerved so many of these countries is that, you know, the old saying that when the elephants fight, it’s the grass that suffers. And in this case, the grass is Southeast Asia, Africa, Latin America and whatnot. And we see this playing out in Latin America right now. Marco Rubio is on a three-country tour of South America very much to counter China and to push back against China. This is not a space that these countries want to be in.
China is the largest trading country for most of these countries. China is a major source of investment for some of these countries. It’s a very important economic partner, and increasingly a diplomatic partner. They would prefer to have stable relations with both. They would not like to see people like Marco Rubio running around telling them you have to choose us or them. That is not a space that any of them want to be in. Some, like Vietnam and like Kenya, have managed this exceedingly well. Others are struggling to do it. So, when they see some type of stability come back into the U.S.-China relationship, I don’t think anybody believes that this visit is going to do that.
I don’t think that anybody really believes that Trump represents his government when it comes to China. What’s so interesting in Washington today is that Donald Trump has his views on China, and pretty much everybody below Donald Trump, from J.D. Vance down, doesn’t agree with him. And so, there is a sense, I think, that whatever comes out of this is temporary. The Chinese are already indicating that they’re going to buy more wheat, and they’re going to do the typical kind of like, we’re going to make nice, nice for the short term. They’re never going to fulfill Trump’s fantasies of a super mega uber deal.
So, I don’t think the Brazilians are that worried that their soybean market is going to evaporate, again, back to the U.S. I think American farmers made a bet on Trump, and they’ve lost. And the Chinese are never going to come back to buy soy from American farmers in the volumes that they did. Full stop. That is a huge benefit to Argentina and to Brazil. The world has changed from Trump, and it will not go back to the way it was. So, I don’t think people are paying that much attention in the sense of, like, is something big going to come out of this? Are we going to get a start to a type of nuclear treaty with Gorbachev? No.
But it’s a little bit like the India thing — Can we get to a point of sustainability? Can we get to a point where they’re not spitting at each other?
Andrew: Yeah.
Eric: I don’t know if we can, because I don’t think the mood you’re in China, When I’m in China, I was just there a few months ago, it was as toxic there about the U.S. as it is in Washington about China. Like they’re in no mood to placate the Americans any more than the Americans are in any mood to placate the Chinese. One point that I’ll make on this, and I find this really interesting, and I was talking to some high-profile D.C. folks in the think tanks, and they shared the same view on this. I don’t want to say their name because maybe I don’t know if it was in confidence or not.
But when I go to D.C., you hear this kind of parallel universe of like China’s the end-all, be-all evil of everything. I go a lot to Georgia. I was in Ohio. I live in California. I’m going to New Mexico pretty soon. And I find much more moderate views about China outside of D.C. Like, yeah, I don’t like these people, but I’d love to sell them my chicken feet. I’d love to sell them car parts. Silicon Valley would love more investment and more technology and key exchanges. I was at a small college in Ohio, and they said, “We love our Chinese foreign students. They’re fantastic. They bring a lot to our community. They pay full fare. They subsidize local kids.” They’ve never had a problem.
And I think that’s a really important thing to remember in this standoff, is that the people in Washington do not represent the full totality of American views on this. And I say this, by the way, also to people in the global South as well, who don’t always have a full understanding of that. There’s a lot more texture and nuance to American views on China than what’s reflected in mainstream media and what comes out of D.C. And I see that just in everywhere I travel across the U.S.
Andrew: Yeah, that’s a great point. That is a very good point. And we’ll see if those views start to impact kind of the longer-term trajectory of the U.S.-China relationship. I’m hopeful.
Eric: They might.
Andrew: Yeah.
Eric: You might have a pragmatism coming back in the next election and the swing that we’re going to have back. Pragmatism may be the driving force of politics in America, and that may call for a more pragmatic relationship with China. The same dynamics and strategic interest that brought the Indians and the Chinese to a more sustainable, pragmatic relationship might drive the U.S. and China back, that this is not sustainable at its current form. And once the Americans are starting to have an appreciation that if they got into a war the Western Pacific, there’s no guarantee they would win it now, that may also recalculate some of the thinking too.
Andrew: Well, I was going to say, we’ll end on an optimistic note until you added that last little bit.
Eric: Well, hopefully that recalculation will lead to a more pragmatic worldview.
Andrew: Yes. No, that is the optimistic bit. And I like that. I think that’s a good place to leave it because we have covered a lot of ground. Really, this was a lot of fun, Eric. I really appreciate it. And we’re going to make this a regular thing, right?
Eric: Yep. We’re going to do this regularly.
Andrew: Awesome.
Eric: And we’re going to do a lot more between CGSP and Trivium, and looking forward to it.
Andrew: That’s right. yeah.
Eric: So fantastic. And we’ll have you guys on our shows soon too. So looking forward to it.
Andrew: Absolutely. Anytime.
Eric: It was really great to speak with you and I really enjoyed the conversation.
Andrew: Yeah. Well, thanks a bunch for the time. This was amazing, and look forward to doing it again soon and working more with you. And thanks, everybody, for listening. We’ll see you next time, everybody. Bye.
