The China Memo

10. DeepSeek and China's AI Moment

In January 2025, DeepSeek R1 — a reasoning model from a Chinese quant hedge fund spin-off — topped global app store charts, rattled US tech stocks, and was immediately labelled China's "AI Sputnik moment." This episode interrogates that framing from both sides. The steel-man of the sceptical case is genuine: DeepSeek trained on American chips, the six-million-dollar cost figure is a single training run, and open-weight release is not a market position. But the counter-narrative — that export controls are holding and the gap is intact — is also insufficient. DeepSeek's Mixture-of-Experts architecture emerged in part from hardware constraint, and may be more durable under future compute restriction than the brute-force approach it competed against. Three markers to watch: whether the efficiency advantage holds across model generations, the hardware trajectory as Chinese labs respond to chip restrictions, and whether the hedge-fund-backed research-first organisational model gets replicated. REFERENCES * Wikipedia — "DeepSeek." https://en.wikipedia.org/wiki/DeepSeek * New York Times — "DeepSeek Owner, China AI." https://www.nytimes.com/2025/01/28/business/deepseek-owner-china-ai.html * Wired — "DeepSeek China Model AI." https://www.wired.com/story/deepseek-china-model-ai/ [https://www.wired.com/story/deepseek-china-model-ai/] * The Guardian — "Who Is Behind DeepSeek and How Did It Achieve Its AI Sputnik Moment." https://www.theguardian.com/technology/2025/jan/28/who-is-behind-deepseek-and-how-did-it-achieve-its-ai-sputnik-moment/ * BBC — "DeepSeek AI." https://www.bbc.com/news/articles/c5yv5976z9po * TechCrunch — "DeepSeek Gets Silicon Valley Talking." https://techcrunch.com/2025/01/26/deepseek-gets-silicon-valley-talking/ * CNN — "China DeepSeek AI Success." https://www.cnn.com/2025/01/28/china/china-deepseek-ai-success-tech-intl-hnk * FuseAI Tools — "History of DeepSeek AI." https://www.fuseaitools.com/news/history-of-deepseek-ai * Issarice — "Timeline of DeepSeek." https://timelines.issarice.com/wiki/Timeline_of_DeepSeek * OurChinaStory — "What's the Story of DeepSeek and Its Founder Liang Wenfeng." https://www.ourchinastory.com/en/14046/What's-the-story-of-DeepSeek-and-its-founder-Liang-Wenfeng

09. BYD: From Battery Maker to World's Largest EV Company

The standard critique of BYD is straightforward: at least 3.7 billion dollars in documented government support, a protected domestic market, and government-steered early customers in bus fleets and taxi programmes. This episode takes that argument seriously — and then shows where it stops being sufficient. By mid-2024, BYD held 23 percent of the global EV market, more than double Tesla's share, across over 100 countries, built on a battery architecture competitors are still trying to replicate. The policy frame has reached its explanatory limit. The pivot point is the Blade Battery: a cell-to-pack design that improves space utilisation by roughly 50 percent, lowers cost per kilowatt-hour, and substantially reduces fire risk. That's the output of 25 years of battery chemistry development — not a subsidy programme. We close with three markers to watch: whether overseas factories in Hungary, Thailand, and Brazil reach genuine production scale; whether Blade technology gets adopted by non-BYD manufacturers; and whether BYD's profitability holds as it moves into markets where brand, software, and after-sales service matter differently than in fleet procurement. REFERENCES * CKGSB Knowledge — "How China's BYD Grew Into an EV Business Giant." https://english.ckgsb.edu.cn/knowledge/professor_analysis/how-china-byd-grew-into-an-ev-business-giant/ [https://english.ckgsb.edu.cn/knowledge/professor_analysis/how-china-byd-grew-into-an-ev-business-giant/] * Drivetech Partners — "BYD and CAR Inc: Powering China's Green Mobility." https://drivetech.partners/360/byd_and_car_inc_powering_chinas_green_mobility [https://drivetech.partners/360/byd_and_car_inc_powering_chinas_green_mobility] * Tridens Technology — "BYD Sales Statistics." https://tridenstechnology.com/byd-sales-statistics/ [https://tridenstechnology.com/byd-sales-statistics/] * Autovista24 — "BYD Enjoys Significant Lead in Global EV Market." https://autovista24.autovistagroup.com/news/byd-enjoys-significant-lead-in-global-ev-market/ [https://autovista24.autovistagroup.com/news/byd-enjoys-significant-lead-in-global-ev-market/] * Electrek — "China Gave BYD an Incredible $3.7 Billion to Win the EV Race." https://electrek.co/2024/04/12/china-gave-byd-an-incredible-3-7-billion-to-win-the-ev-race/ [https://electrek.co/2024/04/12/china-gave-byd-an-incredible-3-7-billion-to-win-the-ev-race/] * Nomad Semi — "BYD Semiconductor Deep Dive." https://www.nomadsemi.com/p/byd-semiconductor-deep-dive [https://www.nomadsemi.com/p/byd-semiconductor-deep-dive] * BYD EU Blog — "BYD's Revolutionary Blade Battery — All You Need to Know." https://www.byd.com/eu/blog/BYDs-revolutionary-Blade-Battery-all-you-need-to-know [https://www.byd.com/eu/blog/BYDs-revolutionary-Blade-Battery-all-you-need-to-know] * BYD Auto Belgium — "Blade Battery." https://www.bydauto.be/en/blade-battery/ [https://www.bydauto.be/en/blade-battery/] * Ufine Battery — "BYD Blade Battery Comprehensive Guide." https://www.ufinebattery.com/blog/byd-blade-battery-comprehensive-guide/ [https://www.ufinebattery.com/blog/byd-blade-battery-comprehensive-guide/] * Atlantic Council — "What China's BYD Really Wants from EV Investments in Mexico." https://www.atlanticcouncil.org/blogs/energysource/what-chinas-byd-really-wants-from-ev-investments-in-mexico/ [https://www.atlanticcouncil.org/blogs/energysource/what-chinas-byd-really-wants-from-ev-investments-in-mexico/] * Forbes — "Top 5 Trends to Watch in Chinese Energy During 2026." https://www.forbes.com/sites/wesleyhill/2026/01/05/top-5-trends-to-watch-in-chinese-energy-during-2026/ [https://www.forbes.com/sites/wesleyhill/2026/01/05/top-5-trends-to-watch-in-chinese-energy-during-2026/] * Carbon Credits — "BYD's Billion Dollar Surge: Dominating EV Sales." https://carboncredits.com/byds-billion-dollar-surge-dominating-ev-sales-and-driving-the-green-revolution/ [https://carboncredits.com/byds-billion-dollar-surge-dominating-ev-sales-and-driving-the-green-revolution/]

08. China's Rare Earths: Chokepoint or Overstated Risk?

Half of the world's rare earth reserves sit outside China's borders. Almost none of the industrial capacity to process them does. That gap — between where the ore is found and where it gets turned into something a factory can actually use — is the case file this episode is built around. China holds roughly 50 percent of global reserves, but around 90 percent of global processing, 91 percent of separation capacity, and 94 percent of the permanent magnets that go into EV motors and wind turbines. For heavy rare earths like dysprosium and terbium, the share of Chinese separation capacity approaches 99 percent. The chokepoint is not geological — it's industrial and chemical, built over three decades of state investment, and it sits in the midstream, not the mine. The episode weighs two competing readings: permanent structural chokepoint versus transitional industrial lead that erodes with enough capital and time. The evidence currently favours the first. Closing the non-Chinese processing gap is estimated to require over 100 billion dollars in capital by 2035 — against roughly 5 billion currently committed. Meanwhile, China's export-control architecture has been expanding steadily since 2023, growing more granular and extraterritorial with each iteration, explicitly mirroring the logic of US semiconductor restrictions. The October 2025 rules extended Chinese licensing jurisdiction to foreign manufacturers using Chinese refining technology — meaning supply-chain diversification may not mean what companies think it means. We close with four things that would genuinely move the needle, including the November 2026 expiry of a partial suspension agreed ahead of the Trump-Xi summit, and what to watch in non-Chinese midstream investment pipelines. REFERENCES * China Tungsten Industry Association (CTIA) — "World Rare Earth Reserves Data." https://www.ctia.com.cn/en/news/37559.html [https://www.ctia.com.cn/en/news/37559.html] * CEIC Data — "China's Dominance of the Rare Earths Industry." https://info.ceicdata.com/ceic-article-chinas-dominance-of-the-rare-earths-industry [https://info.ceicdata.com/ceic-article-chinas-dominance-of-the-rare-earths-industry] * Mining Technology — "China Global Rare Earth Production." https://www.mining-technology.com/analyst-comment/china-global-rare-earth-production/ [https://www.mining-technology.com/analyst-comment/china-global-rare-earth-production/] * Wikipedia — "Rare-earth industry in China." https://en.wikipedia.org/wiki/Rare-earth_industry_in_China [https://en.wikipedia.org/wiki/Rare-earth_industry_in_China] * Discovery Alert / LinkedIn — Rare Earth Processing Analysis. https://www.linkedin.com/posts/discovery-alert-australia_china-controls-85-90-of-global-rare-earth-activity-7412325569192710144-J_eF [https://www.linkedin.com/posts/discovery-alert-australia_china-controls-85-90-of-global-rare-earth-activity-7412325569192710144-J_eF] * InvestingNews — "Rare Earth Metal Production." https://investingnews.com/daily/resource-investing/critical-metals-investing/rare-earth-investing/rare-earth-metal-production/ [https://investingnews.com/daily/resource-investing/critical-metals-investing/rare-earth-investing/rare-earth-metal-production/] * Gulf News — "World's Rare Earth Giants: Top 10 Countries with the Biggest Reserves." https://gulfnews.com/business/energy/worlds-rare-earth-giants-top-10-countries-with-the-biggest-reserves-1.500467937 [https://gulfnews.com/business/energy/worlds-rare-earth-giants-top-10-countries-with-the-biggest-reserves-1.500467937] * Global Trade Alert — "Chinese Export Controls on Critical Raw Materials." https://globaltradealert.org/blog/chinese-export-controls-on-critical-raw-materials-inventory [https://globaltradealert.org/blog/chinese-export-controls-on-critical-raw-materials-inventory] * Skillings Mining Review — "China's Export Controls: What's Next for Rare Earths, Gallium and Germanium." https://skillings.net/chinas-export-controls-whats-next-for-rare-earths-gallium-and-germanium-supply-chains/ [https://skillings.net/chinas-export-controls-whats-next-for-rare-earths-gallium-and-germanium-supply-chains/] * CSIS — "Consequences of China's New Rare Earths Export Restrictions." https://www.csis.org/analysis/consequences-chinas-new-rare-earths-export-restrictions [https://www.csis.org/analysis/consequences-chinas-new-rare-earths-export-restrictions] * US Trade Representative — "US Wins Victory in Rare Earths Dispute with China." https://ustr.gov/about-us/policy-offices/press-office/press-releases/2014/March/US-wins-victory-in-rare-earths-dispute-with-China [https://ustr.gov/about-us/policy-offices/press-office/press-releases/2014/March/US-wins-victory-in-rare-earths-dispute-with-China] * USGS — Mineral Commodity Summaries, Rare Earths. https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-rare-earths.pdf [https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-rare-earths.pdf]

07. Three Winners, Three Playbooks: Inside China's Auto Giants

Three Chinese automakers now produce or sell more than three million vehicles a year each — putting BYD, Geely, and SAIC in the same conversation as Volkswagen and Toyota on scale. But they got there through fundamentally different architectures, and those differences matter far more than the headline number. BYD owns roughly seventy-five percent of its components in-house — batteries, chips, motors, software — making it closer to a vertically integrated manufacturer than a traditional automaker. Geely built outward through acquisitions, using Volvo, Lotus, and Proton to buy organisational capability and market access it couldn't build alone. SAIC turned decades of joint ventures with Volkswagen and GM into a springboard for its own export machine, with MG now selling in over a hundred countries under a Glocal strategy designed to produce inside tariff walls rather than export into them. This episode uses the three as a lens on what a genuinely competitive global auto model looks like under simultaneous pressure from electrification, a domestic price war, and rising trade friction. Scale is necessary but not sufficient — the qualifier is whether a company has a defensible mechanism for securing the inputs that matter: batteries, semiconductors, and manufacturing access in the right geographies. We close with three signals to watch: where new plants get announced and what ownership structure they carry, which badges gain sustained traction in Europe and North America versus the Global South, and how governments respond not just with tariffs but with content requirements and security reviews that increasingly determine who can sell to fleet and public-sector buyers.

06. One Billion Consumers: A Deep Dive into China's Spending Story

In 2000, roughly 1.2 billion people in China lived below the threshold where genuine discretionary spending becomes possible. By 2030, roughly the same number are expected to sit at or above it — the largest migration into the global consuming class ever recorded. Yet at this same moment, eighty percent of Chinese consumers say they are actively choosing cheaper products than before, savings rates are up, and the phrase on everyone's lips is 消费降级 — consumption downgrade. This episode works through that contradiction across the full arc: from the ration-coupon shortage economy of the pre-reform era, through the appliance boom and the property decade, to today's phase of value-seeking, deleveraging, and what Chinese researchers are calling the third consumption era. The property bust is the pivot point. With residential property representing roughly seventy percent of urban household assets, and the bulk of paper gains since 2021 now gone, the spending pullback has a structural foundation — it is a rational response to a genuine wealth shock, not a temporary mood. But running alongside that caution is something more interesting: the rise of Guochao, domestic brands chosen not just for price but for cultural identity, particularly among younger consumers in lower-tier cities who carry less debt and more optimism than their urban counterparts. The picture that emerges is not a single consumer curve but several running simultaneously in different directions — and aggregate data hides all of it.