Spillovers: Batteries, EVs and AI Applications

In this episode, I sit down with Kyle Chan (Brookings Institution) to unpack the thinking behind his provocative New York Times op-ed, “In the Future, China Will Be Dominant, the U.S. Will Be Irrelevant.” We start with the DeepSeek moment and why it surprised the West, why it didn’t surprise many China-watchers, and why Kyle sees it as only “the tip of the iceberg.”

From there, we zoom out into the bigger story: China’s rise isn’t just one breakthrough model or one champion company. It’s a system of interlocking capabilities: EVs, batteries, renewables, industrial automation, robotics, and AI, advancing in parallel and reinforcing each other through spillovers, supply chains, and fast-moving “Swiss Army Knife companies” like Xiaomi and Huawei.

We also dig into what people often get wrong about China’s state role: not pure top-down command, but a mix of industrial policy + private-sector experimentation, including practical mechanisms like compute vouchers and local-government support. Finally, we cover India’s trajectory, geopolitical constraints, and Kyle’s “hedges”—scenarios in which today’s narratives (in both China and the U.S.) could still break in unexpected directions.

Relevant links: https://www.brookings.edu/people/kyle-chan/

In today’s world, there’s no shortage of information. Knowledge is abundant, perspectives are everywhere. But true insight doesn’t come from access alone—it comes from differentiated understanding. It’s the ability to piece together scattered signals, cut through the noise and clutter, and form a clear, original perspective on a situation, a trend, a business, or a person. That’s what makes understanding powerful.

Every episode, I bring in a guest with a unique point of view on a critical matter, phenomenon, or business trend—someone who can help us see things differently.

For more information on the podcast series, see here.

00:00 — The NYT op-ed + the DeepSeek catalyst: why Kyle wrote the piece, what he wanted to correct, and why DeepSeek was a wake-up call (“tip of the iceberg”).

06:53 — Kyle’s origin story: infrastructure obsession (high-speed rail) → the path into tech & industrial policy.

12:31 — China’s “electric tech stack” + spillovers: EVs, batteries, renewables, robotics, AI moving in parallel—and why “Swiss Army Knife” firms (Xiaomi/Huawei) can leap across categories.

19:12 — Why autonomy pairs with EVs: the technical and architectural reasons autonomous systems “almost always” sit on EV platforms.

24:01 — China AI ecosystem in practice: startups + hyperscalers + policy “tailwinds” (compute vouchers, industrial parks, local government support) and how that differs from the U.S. model.

29:46 — China’s development playbook vs others + the India comparison: proactive bottleneck-solving (“ground game”), plus India’s tailwinds and constraints over the next decade.

41:00 — The hedges + the wrap: what could derail or reshape the trajectory (trade backlash, geopolitics, bubble risk, robotics paths), and Kyle’s non-consensus take on policy intervention.

AI-generated transcript

Grace Shao (00:00)Hi, Kyle. Thank you so much for joining us today. Kyle, I want to start with your recent New York Times op-ed, which had a pretty provocative headline. It’s called, In the Future, China Will Be Dominant, the U.S. Will Be Irrelevant. When I saw that, I was like, whoa, this guy, someone’s going to go get blood now. How did that piece actually come about? What was the main, I guess, objective or goal out of that piece?

Kyle Chan (00:16)Yeah, yeah. Thanks for asking about that piece. Yeah, that piece, it got quite a reaction. I was surprised. And there’s been a number of pieces I feel like now—sort of, it’s almost become a genre of like all the things that China’s doing, all the things that the US is doing, the sort of divergent trajectories of the two countries, especially on technology. And for me, one thing I really wanted to focus on was—

So we had the big DeepSeek moment earlier in the year, and that really got people to wake up and take notice of what’s happening in China and China’s tech development in a way that really, I mean, I can’t remember the last time that something like that happened. And so that was quite a big wake up call. But as someone following a number of different sectors in China for a while, I was like, this is just the tip of the iceberg.

I mean, first off, within AI itself, DeepSeek—I think it was kind of funny—was surprising for a lot of people who follow actually China’s AI industry quite closely, because I think we might have been expecting some of the bigger tech companies to have made a bigger splash, but DeepSeek seemed a little bit out of left field. But within AI in China in general, there is so much talent, so much engineering talent, a vibrant developer community, top-notch researchers.

So like when you look at, say, who is accepted, whose papers are accepted for NeurIPS, one of the top AI conferences, right? It’s many, many, many names from Peking University or Tsinghua University or Zhejiang University. And so if you follow that space for a while, DeepSeek was not so surprising. Maybe it was surprising that it was DeepSeek itself, but that China could produce a world-class AI model on par or nearly on par with some of the best in the US—that was maybe not so surprising.

And then it’s not just AI. The other thing is like when you follow EVs or when you follow batteries, or if you follow anything related to clean tech—solar, wind, hydrogen fuel cells. If you follow robotics, anything related to industrial automation, industrial robotics, also self-driving cars, smart driving systems. I mean, the list goes on and on for all these different areas.

And then it gets even down to sort of like the basics, right? So like some of these traditional industries where you just see this like classic China chart. Call it like the classic China chart where it’s like the share of global manufacturing for shipbuilding, say, or steel—is like, at first you see like China is growing and then soon it’s like eclipsing the rest of world combined.

So to me, it was this bigger story that I really want to highlight: not just DeepSeek and not just AI China, but more broadly speaking, what is this bigger trend and why should we care? How is this going to shape not just Chinese society, but the rest of world?

Grace Shao (03:11)I think to your point, DeepSeek was very secretive, yet it wasn’t like it’s within the AI industry in China—people were already noticing it and people were talking about, I think maybe six months before even they came out with their first R1 and then V1. But I think to your point, yeah, it was a shot to the West because it was like, wow, we always knew that China had strong industrial capacities, right? Like you said, like we had the manufacturing capabilities, the factories and whatnot, the hardware capabilities.

They didn’t expect something like a software to come out of China that was almost on par with what they could produce in the West. I guess my question for you next is then to highlight that—what was your goal really? What was your real message that brought you public? Why did you publish an op-ed on the New York Times?

Kyle Chan (03:55)Yeah, so part of it was to kind of point to the underlying drivers for what was happening because I also wanted to kind of correct this image of China, not only in terms of like China’s tech development, but also what really was responsible for some of that.

So like the image I want to correct was basically this very old notion of China making, you know, low value added commodities like household goods, basic consumer electronics maybe—stuff that maybe is good for economic growth, but isn’t so impressive technologically and doesn’t really challenge, say, the US or Europe or other industry incumbents in these areas.

I want to first point out that, yeah, this is different China now. And this process has been unfolding for a long time, actually. So I was trying to highlight some of the efforts that the government was trying to do to help accelerate not just industrialization, but innovation itself.

This idea that it’s still so deeply controversial in the US—the idea that the government might have a positive role to play in supporting private sector development, supporting cutting edge technology—I think that that is still something that’s debated very hotly in the United States. And I wanted to point out how China has been able to use—not successfully every time, and there’s definitely issues along the way, but overall, quite effectively—it has been able to use industrial policy to really move the needle and support its industries and its private sector.

And so this combination too of like, it’s not just one or the other. It wasn’t just sort of all top-down state driven and it wasn’t just all sort of bottom-up private markets. It was this interesting combination that has produced, I think, these sort of like world beating industries.

And I think the lesson—a big part of the piece was about the US side of it and what lessons we might take away and how the US might need to step up its game. I don’t know if this competitive framing is the right one, but in general, a realization that, okay, there’s a lot happening. This assumption that China would always be the center of low-cost manufacturing and the United States would be the center of high-tech R&D, innovation, Silicon Valley—that the picture was much, much blurrier than that. So that was sort of like my overarching goal.

Grace Shao (06:27)I definitely want to double click on the part where you talk about how the state and the private sector actually work together. And we can talk about that later. But I want to get a sense on what kind of feedback or pushback or even maybe criticism did you get from that piece?

Then furthermore, I want to get understanding: how did you get involved in all of this? You’re in the US, right? You’re in New York, right? How did you get into studying China’s industrial policy? Tell us about your background.

Kyle Chan (06:53)Yeah, yeah. Yeah, I mean, I just recently joined Brookings based in DC, which is a DC-based think tank that has a really great China center that does outstanding research on policy issues related to China, US-China relations. And my focus now is on China’s tech and industrial policy.

But getting to this point has been like an interesting journey. So originally actually—I mean to go all the way back, I don’t know how far you want to go back—but like my family is actually from Hong Kong originally. And so I was born in California.

And my parents—it was sort of that generation where my parents really wanted me to learn Mandarin. They’re like, that’s gonna be the useful language. And it turned out to be very useful.

But also growing in California, I took cars everywhere. It was like a very, very much like a private transportation kind of city. And it was like a revelation to me—I mean, this sounds so ridiculous to anyone who’s grown up in a city with good public transportation—but it was like a revelation to me to later live in places like Chicago or even San Francisco and then later on Beijing and Delhi and Berlin, to be in places with like functioning subway systems and functioning public transportation.

So I got really interested in infrastructure, actually, not necessarily industrial policy. That kind of came later, but infrastructure. And here there is really sort of like a very strong role for the government to play in coordinating, if not actually building and maintaining infrastructure, whether you’re talking about roads, highways, bridges, railways, subways, electricity grids.

And I just found it really interesting then later on traveling to China—how this seemed to be like completely different there. I mean, and I remember at the time really being amazed by the high speed rail system there.

And China didn’t have a bullet train system for most of its, most of the existence of its railway system until basically starting in the 2000s. They started to take seriously this idea of like, okay, maybe we can like really roll out a nationwide bullet train system. And they did a lot of R&D.

And I became really fascinated by how they did this, how they built what ended up being, you know, within a decade, the world’s largest high-speed rail system, how they acquire the technology and how they built on top of that to create this sort of like truly like made in China kind of transportation system.

And then how they did that repeatedly, not just for high-speed rail, but like for regular highways, expressways, for, you know, any kind of infrastructure.

Okay, so that was sort of my foray into infrastructure and that was actually the focus of my dissertation. So I did field work actually for a number of years in China and also in India. I was based in Beijing and Delhi.

And really it was like an enormous privilege to be able to travel around often by train across those two countries trying to understand their systems. And the railways were really useful for like understanding not just the railways and transportation, but understanding deeper political economy questions, like the structure of the governments, how their bureaucracy works, what are the main issues with building a mega project of that scale.

And yeah, and so that for a long time was my focus. And then ironically, for an American audience, it was tougher to convince people that railways was interesting. I think most people were like, well, China can build high-speed rail because it’s the top down society and they just decide where to build and they build. I was like, no, no, it’s much more complicated than that. But it was hard to get traction.

But then I realized like some of the same tools and the same patterns, some of the same institutions in China were also involved in boosting and accelerating development in key industries. So I mentioned clean tech, electric vehicles and batteries and solar, but also traditional sectors.

And so I was really fascinated by this pattern that was, again, it kind of goes back to the New York Times piece. It wasn’t just one industry. It wasn’t just one company. It wasn’t just one state-owned enterprise, but this whole, like across the board effort to, you know, accelerate development overall.

So that to me was so interesting—this process of industrial upgrading, which many, many countries are interested in doing. And that actually got more traction in terms of like, you know, I joke that the U.S.—every country in a sense is a developing country, right? There are areas where we’re trying to improve and areas where we’re trying to catch up.

And I think now, you know, the question is like, what role can the right policies play in helping, say, the United States in a similar process? So that’s a long way of saying that it was—it was a long journey. But yeah, it’s an exciting time to study these topics because so much is changing. Every day it feels like.

Grace Shao (11:30)That’s really good context and I think, you know, for me how I found your work was exactly because you had such a high level kind of view, a bird’s eye view of everything that was happening and how you were piecing it together.

So I believe I came across one of your pieces on High Capacity, which is your newsletter on Substack for audiences who don’t know. You had this Venn diagram where you’re like, this is what China’s good at here, here, here, here, here. And this is what’s happening right now. And this is how it like actually relates to the current EV build out, the renewables, the AI, the robotics. It’s a very big ecosystem.

And in some ways you argue that, you know, all these different sectors operate in parallel, whether is, you know, a top down direction or a directive, or it was organic, you know, growth, but they did grow in parallel. So therefore they’re now able to kind of find synergy and leverage each other’s strength, right? With LiDAR sensors, drones, robotics, all coming together.

Could you tell us a bit about what that diagram really means? I’ll try to pull it up as well in the video. I think just help us explain that in a high level.

Kyle Chan (12:31)Yeah, yeah. So what I try to capture with that diagram was this idea that it wasn’t just one sector or wasn’t just one area, one technology that China had been able to grow and foster maybe through industrial policy or some kind of state support, but it was this combination of these interlocking technologies.

Now there’s a new term that’s coming into vogue, like the electric tech stack, or the tech industrial stack, or the electric industrial stack. And it’s really interesting because I think that really captures sort of this new paradigm that we’re entering.

Those technologies—you mentioned a number of them—electric vehicles, autonomous vehicles, which for various reasons we can get into are built on electric vehicles. There’s strong reasons why those technologies go together. Lithium batteries, which also feed into drones, autonomous delivery systems.

We can think about just regular consumer electronics, smartphones, but also more sophisticated robotics. I mentioned industrial automation as well. There’s a lot of overlap there.

And then the big circle overlapping all of these is AI—different models, software platforms that might intersect with say autonomous driving and, I don’t know, even sort of the humanoid robotics world.

So I just find it so interesting that China was making progress in a number of these different sectors at the same time, and progress in one sector would support greater development in another sector. So EVs and EV batteries grew up together in China.

So the development of, say, lithium iron phosphate batteries that were increasingly inexpensive, that were increasingly energy dense on a, say, kilowatt hour per kilogram basis, that were safer—those developments within the battery world made Chinese EVs more competitive and more attractive overall.

And then developments in China’s EV sector fed back into the battery world and also fed into other related sectors.

And then the other big thing is that I really wanted to highlight companies that lay at the intersection of these different areas. So I think probably right now, one of the hottest companies is Xiaomi, right? When I was younger, Xiaomi to me was inexpensive smartphones and relatively like affordable, like household products, like air purifiers and things like that.

And I think they had built up a brand and a very strong sort of customer base around this general idea. And what was so fascinating was seeing Xiaomi jump into electric vehicles and having such success with the SU7 and now the YU7 SUV, which both of which were like sold out for a long time and are very much in demand.

And they have like incredible features, they have incredible performance, and they have smart driving capabilities. And so it just sort of like showed like, wow, this company that was originally kind of like a smartphone company could make this shift over into the EV world.

And I would argue that it wasn’t just Xiaomi and Ledron’s entrepreneurship. I mean, a lot of credit goes to them for sure, but it was also because of this broader foundation that existed in China that allowed for this common supply chain ecosystem that would feed into these different worlds that would allow a company like Xiaomi to make that pivot.

And you see it again and again. I mean, now you see—and this is where I came up with this term like the sort of Swiss Army Knife companies—now you see these companies like XPeng get into like a whole range of industries, right? So not just EVs, but also humanoid robots, drones, flying cars even.

Huawei is probably the ultimate example of the Swiss Army Knife company, originally starting in telecom equipment, but then branching out into everything from sort of every aspect of consumer electronics—smartphones, tablets—into now AI chips. They’re a major player in semiconductors. For a while undersea cables. I mean, the list kind of goes on and on—EVs as well and smart driving, autonomous driving.

There was just this like burst of companies coming out of China that could do all these different things and branch out into new areas very, very rapidly. And it was like shocking to me how big some of these bets were, like Xiaomi making a multi-billion bet on a new already highly competitive industry, the EV industry.

But again, I think it all comes back to, in part, this foundation that was there in China—this like what I call these overlapping tech industrial ecosystems.

Grace Shao (17:17)I have so many thoughts I want to throw out. One is, I think to your point on Chinese tech companies going into EV, it’s really fascinating because to your point, there’s obviously this price war and this crazy competition in China.

But what I’ve heard from a lot of people who actually do purchase the Xiaomi cars and the Huawei cars and the Xpengs—they say that the technology itself is incredible. You have all the lights, the voice control, you have amazing AI-empowered functions. But that said, they’re not actually as good of a drive, like they’re not as smooth.

So like if you pick a traditional OEM like a Mercedes or BMW, their voice control usually apps the crap, to be honest. Like they go off—like you see the reviews online because we were looking at family cars and it was like the reviews were horrible. Like they just get triggered by really random sounds, they can’t pick up like accents, you know, they’re not really good with other languages.

And on the Xiaomi/Huawei/Xpeng/Zeekr side, they’re really, really good at this. But they’re not as good for driving yet. So it’s interesting that, like you said, what they’re good at in terms of day as the Chinese companies are the kind of technology that is quite recent and quite modern, but they’ve not really actually honed in on the craftsmanship or the, I guess, capability of building a really, really smooth driving car as Germans have—as they’ve honed the skill for over the last like four or five decades, right?

So it is interesting where they’re good at. And then in terms of EV, I had a question you mentioned earlier. Most autonomous vehicles are now—sorry—most EVs are now being tried for autonomous driving. Why is that? What’s the synergy there? Why can’t old OEMs actually have strong autonomous driving functionalities?

Grace Shao (19:00)Kyle, one thing we were talking about is the synergy between EVs and autonomous driving. Why is it that it’s better to actually build in autonomous driving functionality within EVs compared to like maybe traditional OEMs?

Kyle Chan (19:12)Yeah, so there it’s basically because you get a lot more control and precision. And you can have things like steer by wire where rather than sort of mechanical steering, you can have basically a signal be sent directly to the transmission or directly to the engine or directly to the brakes. So it’s sort of all.

And then on top of that, it’s helpful to have large battery capacity to handle sort of all of the different computing demands that would—including all the sensors that might be feeding data into the whole system.

So yeah, you basically—the two almost always go together: having autonomous robotaxis built on top of EVs.

Grace Shao (19:51)That makes a lot of sense actually. Okay, I never thought of it that way. You described China as building systems of capabilities and you kind of touched on this earlier with your Venn diagram. You talk about how China is not really just picking one winner or one winning sector, right?

So how does actually EVs, batteries, renewables end up supporting each other? And then how does that actually extend out and spill over into the AI era with robotics, physical AI, or even the consumer AI products we’re seeing out there today?

Kyle Chan (20:18)Yeah. So at one level, there’s an underlying driver here that’s almost not even specific to China per se. It’s something more about these technologies themselves and this broader convergence across them.

So, I mean, I pointed out Swiss Army knife tech companies in China, but to be fair, right in the U.S., you have companies like Tesla that are going into many different areas, or even Google with probably one of the world’s best autonomous driving companies.

So I think there’s something deeper happening here where there is this convergence of what we might have thought of sort of like lower end, like smartphone technologies or consumer electronics. Again, the lowly battery, right? Something so simple. This innovation in lithium batteries, making them cheaper, more reliable, and being able to scale up production—like that alone unlocked so much in terms of basically any kind of electronic device.

And so I think that’s why we are kind of seeing this emergence of this like whole new technology cluster.

And then for China, I think there is an awareness of the sort of synergies across different industries. And you can even go back further to China’s earlier industrial policy efforts, right? Take Made in China 2025, which came out in 2015.

And some of the target industries there were chosen not just because they might in and of themselves be useful or important, but also because they had broader spillover effects. You think about things like telecom equipment, IT infrastructure, anything related to energy, or anything related to communication in general.

Also CNC machines, right? So these are sort of like—they may not be like general purpose technologies in the way that electricity itself or computers are, but they might be sort of like multi-purpose technologies with broad applications in a range of different areas.

And so by making that bet on those types of technologies, you know, whether or not you succeed in becoming a global leader in that area, it will help feed into everything else that builds on that kind of tech stack.

So that’s what I see happen again and again, where for China’s approach to technology, where it’s not just about a single bet on a single technology, but trying to find these parts of the value chain that have large spillover effects and trying to support those—even if they in and of themselves might not be totally economically viable or the best businesses to invest in from a pure return on investment perspective, but they have these broader economic and technological spillovers.

Grace Shao (22:57)Yeah, and I think to your point on like a lot of the planning from top down, it’s not like they were just more strategic in like picking the right track.

But when I spoke to David Fishman a couple of weeks ago, he was saying China’s strategic planning on building electricity capacity is actually not because they foresaw like AI, the AI boom and data centers. You know, electricity is just simply urbanization actually was driving increase of energy demand as well.

They knew that in the future, a lot of things had to kind of move from traditional coal to renewable to kind of actually even have the capability to power what is needed of the future. So it was a grander vision versus just like, I know AI is gonna come in 10 years. I’m gonna build up renewable energy and the renewable energy is gonna help power data centers. So it’s not like there are profits or anything. So that’s interesting to hear.

I think I wanna understand how has that shift in ambition with like—

Kyle Chan (23:42)Totally.

Grace Shao (23:49)really China’s desire to move away from low wage, low margin, that trap into like higher value services and really like how has that shaped and driven the AI innovation that we’re seeing right now coming out of China.

Kyle Chan (24:01)Yeah. So I think what’s really interesting is, on the one hand, you have like a lot happening within the AI sector itself. You have obviously this like very vibrant ecosystem of startups, of big tech companies, even down to servers and data center construction firms, and even the major state-owned telecom operators involved in data center construction.

You have all these applications and developers trying to build on top of this whole set of foundation models, for example.

And that’s sort of just within the AI industry, right? And then on top of that, you have the fact that in all these other sectors, whether you’re talking about manufacturing, you’re talking about biotech, healthcare, there’s a lot of investment and progress in trying to move up the ladder in each one of those industries.

And so then you see people finding ways—either from those industries or from the AI side—trying to find ways to incorporate, to integrate AI.

And actually there’s something that I really love about your work where you’re highlighting those areas where it’s not just about like the latest benchmarks on the latest models and this sort of like endless race, but about like, how is AI like actually being deployed? How’s it being integrated into existing services and platforms in a way that would really boost, say, drug discovery or would really, I don’t know, improve tutoring and education services for students.

So I think that’s what’s so interesting here. And yeah, some of it might be supported by policy efforts. I think of some things like compute vouchers, for example, where startups—AI startups—might have trouble getting access to compute.

So we’re not talking about like the Alibabas and Tencents of the world. We’re talking about the little guys who may not be able to afford to build a giant data center dedicated just for them. And then local governments might offer compute vouchers—subsidized compute—basically access to public infrastructure, essentially, to help them sort of get off the ground and have that little bit to deploy on and develop with.

And so that’s an example of an area where you do have some government intervention stepping in and not trying to do it in a heavy handed way, but just trying to offer kind of like a tailwind of support.

And ultimately, and this is one thing that I think is sort of special about software and the AI industry in general is, I mean, a lot of this is sort of like, you know, this creative explosion of different ideas from the private sector—from all these entrepreneurs—like trying to look in areas that are related maybe to their own areas of expertise or just kind of like scouring: where can we plug in AI? Where can we make improvements, even very small ones into existing industries?

Grace Shao (26:45)That’s really interesting on compute bit, where I just met someone at Google in Singapore a couple of weeks ago, and he was saying that in some ways, the big tech in the West are actually operating in that capacity. Instead of incubating them and just taking another part of equity, and instead of just giving them capital, they’re giving them compute, essentially vouchers for these startups.

So I guess my question is, how do you see the relationship between startups and big tech in China versus startups and big tech in the West? And in what way, I guess, in what way do the state actually play a positive role or negative role in all of this in the whole ecosystem?

Kyle Chan (27:17)Yeah, that’s a question. I mean, in some ways it is a similar story, right? You have China’s own hyperscalers providing AI cloud computing services to a whole range of different players, you know, be they AI startups or, you know, large corporations or other, you know, maybe hospitals or other state-owned enterprises, for example. So that part might not be so different.

But I think what might be a little bit different is the sort of like extra on the margin support that the government in China—or especially local governments in particular—might offer.

Yeah, compute vouchers is one. Also these industrial parks where—and this is going back to like an almost an older model applied to like the age of AI—where, you know, AI startups, they still need office space. They still need help setting up a business. They might need help figuring out how to network with new customers.

And those are other areas too, where local governments in China might play a more active role in troubleshooting, trying to bring startups up to speed, trying to connect entrepreneurs.

And that’s something that I think is quite different than in the US system, where yes, you might have the large hyperscalers like Google or Microsoft providing that underlying infrastructure, that service for access to compute, but you won’t really see that kind of intervention or stepping in from the local government side, at least not so proactively by any measure.

Grace Shao (28:46) Yeah, I think definitely the West what you hear more about is like applying for fellowships or acceleration programs within whether it’s VC funds or like you said the big hyperscalers. Whereas even in Hong Kong here, like the Hong Kong government offers startups like staff support, back office admin sharing, teams to share, then like even offices in like Cyberport out like, you know, in Pok Fu Lam.

So like definitely the state plays a more active role and I think it’s kind of sometimes misunderstood by the West what that role means. It’s really many times it’s just like an incubator, a parent to someone, or even a mentor.

So we talked about you living in many, many different cities across the world and you study industrial policies across different developed economies. You mentioned that you lived in India, then you studied obviously China. So from that perspective, that international global perspective, what do you think China has actually done differently compared to maybe other developing nations that started in similar circumstances maybe say three, four decades ago?

Kyle Chan (29:46)Yeah, that’s a great question. So the thing that China has done that really has stood out to me, that really makes it so different than I would argue most other developing countries, is a very deliberate effort to basically build up industrial capacity and to move up the value chain.

It wasn’t like, you know, if we invest in education, if we invest in sort of these general factors that go into development, that over time, you know, you would eventually sort of get there. It was like: how can we bring in foreign companies to form joint ventures with our own domestic firms and share that kind of knowledge? How can we build up world-class research programs and build interesting scientific collaborations with the Europeans or the Japanese or the Americans even?

It was like: how can we try to like find those bottlenecks in the process?

And I think this kind of goes back to your point where it wasn’t like, this is the one direction we’re going to make this huge bet and that’s what turned out to be correct. It was more of these sort of— you know, to use like a sports analogy—like kind of like the ground game, right? It was like oftentimes kind of more tactical things trying to backfill areas.

Like let’s say for batteries, right? You need to have access to lithium. And so building a global network of lithium processing facilities and supply chains was really crucial to feed into EV batteries and then the EV industry itself.

And yeah, so I think that’s something that I see other countries do like a little bit, but really for China, it’s sort of at a very deep level: this effort to not just sort of hope that you got most of the pieces right and then let the story unfold, but to proactively find ways to support industrial development and technological development.

Grace Shao (31:44)What was actually, more personal, what was the most memorable thing living in Beijing and then commuting in New Delhi and then moving around the world so much over the last few years?

Kyle Chan (31:54)Yeah, I mean, there’s so many things. Yeah, I mean, I can tell you from a research standpoint, I interviewed government officials in both countries. And I can tell you that it’s much easier to get access to government officials, at least at the central government level, in India.

And so some of my sharpest memories are of long conversations over chai with railway officials in India, where I almost was kind of like a therapist for them in some ways, because they would have these complaints about the bureaucracy, about, frankly, their colleagues, about many thoughts about their country, about China, that they were just like very generous in sharing with me.

And it was like really fascinating to kind of like see the world from their perspective. I think in particular in India, there is a bureaucratic elite, there is a civil service elite who are highly educated. They often have to go through extremely competitive national exams to sort of like get to their positions.

And I think in some ways, I found this group of people to be both very proud, but also oftentimes very frustrated by some of the bureaucratic hurdles that they faced.

On the Chinese side, yeah, like when I did get access to government officials, sometimes even getting access, right, like it might take a while to get to like a genuine conversation where people can kind of open up more.

And it was so interesting because like I have my own theories about why say China was able to build high-speed rail so quickly, but it was always interesting to hear people’s own perspectives. To see like, what did they think was like really, you know, the thing that moved the needle.

And I heard like sort of everything from, you know, that China is just a much more sort of like coordinated and aligned system across the board to cultural explanations to, I mean, you name it. But it was always fascinating to hear like from people within the system.

So like to the extent that I was able to get that, and then I got to visit—I got to actually visit like the construction sites for like ongoing railway projects. And that was really cool.

So yeah, I mean, there, there’s so many. Like the two countries are so fascinating and you could spend a lifetime in either one and feel like it’s not enough, in terms of exploring and getting to see different parts.

Also, I did get to travel a lot. And like India, I don’t know if many people know this, like India has like the whole Northeast region, which is sort of like very distinctive culturally in terms of geography. It feels very different from the rest of the country.

And, you know, like you could explore that whole area, or you could travel to the South and there’s like a big sort of North-South cultural divide that anyone from the North or South will tell you about.

So yeah, it’s just like—I mean, these are sort of like continental-size countries. And I think they have that kind of continental-size complexity to them.

Grace Shao (34:51)

Definitely, I would love to visit India one day.

Do you think what we’ll see India kind of become the next China, if you must put it that way? Because for many years people said, oh, Vietnam’s going to be the next China, right? And obviously all the talent, all the capital, all the interest in that right now moving to India, as well as even a lot of the supply chain, right? For a lot of the big companies in Europe as well as the US, what should we expect of India in the next maybe decade or so?

Kyle Chan (35:14)Yeah, that is like the big question. And I will highlight some factors that are very much in India’s favor, and then I can point out a few challenges.

So in general, the India story is like really fascinating because if it weren’t for China’s high growth story—like if you kind of remove that from the equation—India would have been the envy of the world.

I think in many ways they have already proven to be able to have high rates of sustained growth over multiple decades now. So like in that sense, they’re already getting there in some ways.

The other things that are really working in their favor are: there is a big focus on manufacturing, on trying to build up industrial capacity in a way that is very reminiscent of China. There’s a huge push in industrial policy targeting areas like consumer electronics, the automotive slash EV industry. There are big ambitions for the semiconductor industry in India.

And the third thing I would point out is that there, up until recently, was a bit of a geopolitical moment for India with different companies trying to move away or diversify from China to some extent, diversify their supply chains.

And this was really quite an opening for India where you saw, like for example, Apple was able to shift a fairly large share—I think up to like a quarter—of its iPhone assembly was shifted to India. And with that also began a process where some of the suppliers would start to follow. And so I think that was actually honestly, to me, surprising how quickly that happened.

So those are some factors in their favor. But on the other hand, there are some very deep structural constraints. And one is that the bureaucracy, especially around anything related to labor, is very, very tricky to navigate.

And I think for companies who want stability, who want sort of like a certain stable business environment, it’s harder to operate, and there’s a lot of regional variations. So some of the southern states like Tamil Nadu, Karnataka tend to be seen as more business friendly, open to foreign investment, open investment of many different kinds. And that is where you see the electronics industry really growing quickly.

But overall, there are some bureaucratic issues. And then at a more fundamental level, something that China has been able to do is often reform its own internal organizational structure—sometimes pretty quickly, sometimes shockingly fast.

And sometimes it takes a while, like the railways did take a while, the railway ministry. But for India, I think there are some problems that everyone knows exist in a policy sense, but nobody knows how to address and break, say, like a political deadlock. That happens a lot. It probably also happens—I mean, I know it does happen in China as well. But I do see it more clearly and especially in the areas that India is trying to target for growth.

Grace Shao (38:10)And do you see actually a lot of the Chinese companies we talked about earlier, like the Xiaomis, BYDs and Huaweis of the world—are they exporting to India or even exporting their know-how and their supply chain and manufacturing? Because I know a lot of these Chinese companies have been doing that, like moving their talent, their know-how and also selling to consumers in Southeast Asia. But what is kind of the South Asia market looking like for these Chinese companies?

Kyle Chan (38:35)Yeah, I think from the Chinese companies perspective, they would be eager to reach one of the largest markets in the world, right? And then South Asia more generally.

And I think you see other areas like Pakistan and Nepal—Chinese, say, EVs or other smartphones or other consumer goods—like really taking off.

India and China specifically, though, have a bit of rocky geopolitical relationship. And so that definitely cast a chill over cross-border investment and business flows for a while.

And more recently, it seems like things are warming up, maybe gradually, and I think this is taking years. But I think there’s a recognition, certainly from the Indian side, that it helps to bring in that expertise and know-how—to have Chinese engineers, technicians, and managers participate in India’s own industrial development process.

I think, I don’t know if we’ll see those days again when you had, say, Alibaba invest like, you know, hundreds of millions in PayTM, which was India’s sort of equivalent of Alipay. I don’t know if we’ll see those days again, but maybe there is a sort of warming up of relations between the two countries and we might see greater sort of business flows following that.

Grace Shao (39:48)Yeah, because it seems like India has their own ecosystem of like FinTech as well as their own ecosystem of social media. So it’s not like they really need China’s software export.

But I think on the hardware side, it was really interesting reading Patrick McGee’s book and he was saying how back then it was the Taiwanese and the Americans that actually had to—well, the Americans first trained the Taiwanese and the Taiwanese came to train the Chinese.

And now it seems like if the supply chain is moving over to India, I’m sure the business will be business and, you know, it would make sense for the business to actually have the Chinese now train the Indian factory workers to really take over that new labor demand, right? Yeah, but geopolitics aside, that is.

Let’s talk about AI quickly. You know, in your conversation with Heath Yap—also I love his show and a good friend of mine—really grateful for Keith connecting us actually.

In your conversation with Keith, you said that you’re always careful to hedge. I kind of chuckled when I heard that. You’re talking about China’s rise and China’s rise in AI. You’ve obviously been quite vocal talking about how China has done some things right. But yet, obviously, as an American, you are saying it from a perspective of what we can learn as Americans.

And what are the scenarios where your own projections—China’s technological rise—don’t pan out or that could derail this story, right?

Kyle Chan (41:00)Yeah, that’s a really good question. So there are some ways that this story can turn out differently.

I do think that China has been able to benefit for a long time from especially international partnerships. And I think the extent to which there might be skepticism or even suspicion about those sort of international partnerships—that could affect, say, research collaborations or business partnerships across border.

At the same time, though, I guess at this point, I can point to areas outside of AI where there is a lot of interest, say, from German or European automakers in partnering with Chinese ones, trying to learn some of that know-how and technology. But that’s a big wild card.

And then another big one is also the extent to which there is a bit of a trade backlash, right, to Chinese exports and to what extent other countries might push back and maybe put up more tariffs or maybe even just demand greater investment and localize manufacturing in their own countries. So that could change things, not necessarily in a worse way, perhaps, but it could change things in some ways.

And then I do think that the relationship with the US is really crucial. And I think for China’s development, the instability in the relationship—I mean, it doesn’t help anyone, I think. So that’s sort of another wild card in all this.

And then from the US side, I mean, it’s sort of interesting to think about American AI development right now, because I literally like every day my feeds are like talking about bubbles and talking about like, you know, circular investment deals and things like that.

And at the same time, like there’s still so much enthusiasm and the data center build out is like seems to be still going full blast. So here’s like where I will offer like a hedge perspective where it could go in many different directions.

It could be a bubble and we might see a pullback and it might turn out that these investment deals just don’t pencil out. The economics just don’t work out.

But it could also be that we’re not—that this talk about AGI, I don’t know if like AGI per se will be achieved—but that broad-based artificial intelligence like computers that can do a huge range of tasks, not just coding, which is already impressive, and not just writing and things like that, but really sort of a broad range of tasks—that could take off.

And the United States huge investment in compute capacity could give it an edge in the long run.

So those are different ways things could pan out. And then the other wild card is like embodied AI and robotics and how that will pan out.

Because I think there’s like different approaches being taken by different companies, by different countries. I think some companies are looking to a version of AGI for robotics, kind of a universal foundation model for robotics that can operate across any different sort of hardware platform.

And other companies—I think about like Unitree—are focused on just deploying fast, like building tons and tons of like quadruped and humanoid robots now that have become kind of like the new hardware platform for many robotics developers, including in the United States.

So there’s many different ways things can go.

And then like more recently, there’s like, I have this tweet about like highlighting like street cleaning robots and just like very practical, like immediate real world use, right? So that could be another area where, you know, maybe we won’t get the AGI robots, but maybe we will have many, many different types of robots doing more specialized tasks.

And that could be transformative for either country. These are all areas that I’ve followed closely. Yeah, at this point, if I had a crystal ball, maybe I would be in a different job.

Grace Shao (44:57)

I think he definitely touched on something I feel like it resonates with me. Like is when I speak to people in the US—not really just the West, but really just in Silicon Valley—I feel like exactly to your point, there’s such a polarized kind of take on where AI is going.

It’s either it’s such a bubble or it’s going to burst. It means nothing. This is complete fad, right? Or it’s—or even, you know, people are like, this is going to ruin our lives. We must stop it right now.

Or it’s a very polarized view, which is like, OK, this is like the best thing that’s ever happened to us, like, you know, AGI or nothing.

And in China, when people ask me about what’s happening on the ground, it does feel like—I’m not sure pragmatic is actually the right word anymore. I don’t like using that word anymore because I feel like it’s now overdone. But I do feel like it’s a bit more, I would say centered.

As in everyone kind of feels like it’s just another wave of technological advancement. Whether how it might pan out—to your point—it might not be AGI, it might not be this crazy intelligent being that will take over our thinking capabilities, but it might be something that will transform how we humans interact with each other, how we work, how we actually increase productivity.

And I think it might have some—it might lean on the fact that frankly China really did see this kind of technological advancement driving productivity gains only just recently, within the last generation. Whereas in the US, you haven’t really seen this kind of crazy gain for the mass in a while, right? Since the Industrial Revolution. So people don’t feel it as much and there’s more fear around it.

Now I have another question on this. Just to kind of wrap everything up: you look at a lot of the industrial policies and you look at how the state works with the private side in the AI sector right now in China. How much are we seeing that is actual genuine market pull versus state-driven push?

I think you kind of alluded to the fact that like Chinese government does work with helping talent and raising capital. But right now with the big names—like the Unitrees, the UP techs, the deep CXC, Galabots and the whatnots, right?—that we’re seeing, are the state behind this or like the West often seems to think that way. How do we understand that?

Kyle Chan (46:56)Yeah, so I think it’s a complex relationship. So I don’t think it’s sort of like a top-down, the government is sort of like dictating what direction these companies need to take.

And I think there are probably national priorities where I think Beijing or local governments would want to see companies focus on more.

And ironically, like there’s a very strong convergence right now on wanting to make progress on AI more generally from the public and the private sector.

And then I do think that some of it comes down to problem solving on the ground. So this is something we talked about earlier: trying to figure out what issues the private sector is running into, what issues certain firms are running into, and then trying to troubleshoot and support them in some of those areas.

And then, yeah, overall, sort of like offering this broader roadmap or this broader set of like this broader package of sort of like a policy support, whether it’s sort of like a robotics-specific national strategy plan.

And part of it is just about even signaling that there is state support for these sectors, that these are areas where if you venture in as a private business, like you will not have all your problems solved, but you could at least have ways to have some of your sort of like more day-to-day issues addressed.

Grace Shao (48:17)Kyle, if you look at the AI sector today in China, how much do you think we’re seeing genuine market pull versus state-driven push? And especially now we’re also seeing the AI plus policy being pushed out. Is that diffusion driven by the state or is it driven by the actual entrepreneurs, especially amongst the Unitrees, the UP techs, the DeepSeeks and the MiniMax, Moonshots of the world?

Kyle Chan (48:39)Yeah, so that’s a great question. And I think what’s interesting about this moment is there’s a strong alignment between the public sector and the private sector, where clearly Beijing at a national level, and then many of the local governments want to see a booming AI industry in China.

They want to see China as a whole make progress in applying AI to all different parts of life—support economic growth and improve social services and improve education and all these good things.

And at the same time, you have so many different private sector firms from the big tech companies to the smaller startups really jumping in and also eager to innovate.

And I think one thing that’s really sort of exciting about all this is you can really like drill down into like subsectors or different aspects of China’s AI industry and just see how vibrant the startup ecosystem is now in terms of all the different, say, new coding tools that are emerging or different efforts to try to expand overseas or interesting ways to integrate AI into e-commerce or social media or EVs or advanced manufacturing—you name it.

And so right now, I just think that there’s just like this huge sort of creative explosion of different ideas and an eagerness, especially in this sort of post DeepSeek moment, to try new things and take that risk.

Grace Shao (50:04)Super interesting. Kyle, I really appreciate your time today. And for listeners, we actually had a few technical glitches today. That’s why we’re going to have to chop up the conversation a little bit. It might sound a little jumpy than my usual podcast.

My last question for you, which is a question I ask everyone: what is one differentiated view or non-consensus view you hold? I guess your New York Times piece was a pretty strong opinion and you really publicly put it out there. But is there anything else you think that, you know, you think differently or you have a different kind of view on that compared to your peers maybe?

Kyle Chan (50:35)That’s a question. I do think in general that my take—maybe it’s becoming more mainstream—that there is a role for very creative and very thoughtful policy intervention in supporting strategic sectors, in boosting technological innovation.

I think that’s something maybe perhaps widely accepted in other countries, but at least in United States, still something that a lot of Americans are not quite comfortable with.

And there are certainly risks along the way, but I think also to keep in mind, there are risks of not doing anything and of not trying to support R&D, scientific development and all these different things and to leave it purely to the market. That’s sort of my slightly left field take.

Grace Shao (51:21)Thank you so much, really appreciate your time and your insights again. Thank you, Kyle.

Kyle Chan (51:24) My pleasure.