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I'm John Betts with Gordon Chang, and our conversation was
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Steve Yates touching on the APEC meeting forthcoming, the G20
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meeting before the end of the year, and the contest
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between the People's Republic of China and the United States
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for supremacy in all matters, but especially when it comes
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to the highest end, which is artificial intelligence. The moon
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race replaced by the chip race. And The Jensen Wang,
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Alice Wang scandal spilling out over headlines over these last days.
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The question is what is to be done with the
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clarity now that the Chinese Minister of State Security, that's
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the secret police, have targeted one of the leading industrial
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names in artificial intelligence. Jensen Wang is described by his
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investor class as irreplaceable. He is the man who created
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the conditions for the graphics processing unit, the GPU, to
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be so advanced that the United States, through the offices
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of Donald Trump, have denied export to China of the
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highest-end NVIDIA chip, which is made on a machine created
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in Europe by ASML and then made on a machine
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installed in Taiwan, TSMC. Those three companies, ASML, TSMC, and NVIDIA,
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describe the sun, the moon, the stars of the present
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manufacturing ambitions of the United States and China. And yet, Steve,
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I come to you. I won't tell any more of
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the story. But this appears from the headlines we have
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now to be a hostile act by the People's Republic
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of China. Will Xi Jinping pay a penalty for this?
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Well, John, there's a lot of, I think, head scratching
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and disagreement about what to make about all that is
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in this soup. And it comes from a lot of
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different quarters. From my mind, there has been this ongoing
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debate that really has been led in a way by
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NVIDIA and its CEO that for America to win the
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AI race, we need China to become addicted to American chips.
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And so they want to sort of populate the Chinese
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ecosystem in a way that
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they become as dependent on
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our chips as we have been exposed to be dependent
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on them for rare earths in recent times. It's an
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elegant argument on paper. The problem with it is that
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Xi Jinping has particularly and publicly made clear that they
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are reducing dependencies and advocating national brands. And I don't
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think that there is a path to achieve this vision.
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There's another thing that's been going on that's somewhat debated
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about whether China is catching up because of their ability
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to invent and adapt and innovate because they have a
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tremendously educated workforce in this area and they have scale
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in a number of different ways. But I think the
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evidence is pretty clear that the American system is beating
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the Chinese system as long as we don't stupidly help them.
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And I think that's exactly what we've done. In essence,
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what they do is try to draft like a NASCAR
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driver behind the lead car. And as long as drips
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come out that allow them to be good enough and
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advanced enough, they can out-compete us in some key areas
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and increase these dependencies. And so the big allegation in
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this to me is who knew that that they were
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actually enabling the diversion of controlled chips and technology to
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a competitor that has proven a willingness to use leverage
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against us and in a space that is front and
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center in the revolution in military affairs that is reshaping
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what the global battle space looks like. And I think
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that these advanced technologies, chips, and even some of the
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software have to be treated the way nuclear and missile
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technology has been treated in times past. It's a strategic good,
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and it is very, very central to survival in a crisis,
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theories of deterrence, and it is front and center in
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mutual assured destruction, whether it's mutual assured economic destruction or
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mutual assured real destruction in a classical war sense. So
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I think that's front and center. And the company that
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this woman was a part of is central to this.
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There's copious research that seems to indicate some pretty strong
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evidence of the diversion. And it goes back in time.
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I can't know who did what with whom. But my goodness,
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there's a lot that says this is definitely worthy of investigation.
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And there's a lot to answer for.
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Gordon, you have a question.
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Steve, just to pick up on your last point, both
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Bloomberg and New York Times reporting from Monday would indicate
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that there were crimes committed by various parties. And I
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think that that reporting is going to, after people sort
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of get over the shock and are no longer willing
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to talk about the spy aspects of this, I think
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we're going to have a national conversation on what Bloomberg
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and the New York Times reported on Monday.
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But I will restrain myself.
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And I want to just sort of ask you, when
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you look at Congress, do you think that there will
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be legislation restricting chip sales to China?
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I think that it is too easy and gratuitous a
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move for them to resist, in a sense, because you
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have a new majority and And this goes front and
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center to a key thing that I think that majority
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is going to want to fight back on. And that
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is the general political sense that President Trump has led
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a reorientation in America's dealings with China, largely in the
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direction of competition and some degrees protection, increasing the American
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ability to meet this rivalry. And that sort of is
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a narrative that began in 2016 through that campaign. And
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through his first term, it is dulled a little bit
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with the perception of what the summitry has been so
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far in the second term. But 2025 was certainly filled
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with big tariffs and sort of the reset of things.
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And Democrats have wanted to regain a bit of the
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public mojo of competing economically and being somewhat hawkish on
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these things. And so I think that they will move
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in that direction. There's been a lack of consensus on
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outbound investment, where to draw the lines. The key deterrent
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to actually drawing these lines comes out of the hugely
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Democratic base on the Pacific coast. And that is where
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the tech bros are not majority Republican. There are a
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lot of Democrats. And one of the leading voices of
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that is Ro Khanna. He is a very senior Democrat
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who may chair the select committee if it continues. But
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under all circumstances, will be a pretty big voice in
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the Democratic caucus where they go on this.
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I'm watching, Steve, right now, the understanding of Washington to
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this threat. Are they tossing it off as what you'd
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have to say, man of the world? it happens every day,
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no big deal? Or are they digging in about the
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threat from China? How does Washington, there's always a sense
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of how you're supposed to conduct yourself at luncheon in Washington.
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How are they doing it?
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Well, I think, unfortunately, not to be too prudish about this,
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but the ooky factor among Republicans and Democrats going back
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for far too long has been that people in politics,
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Wall Street, tech, whatever, They have been easy targets for
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the honey trap or salacious activity. It's repugnant at a
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number of levels. It's irresponsible when you have national security,
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commercial security, tech security responsibilities. But I think it's a
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glass house where few can throw stones.
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30 seconds, Steve. So glass house meaning it happens every day.
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I think the better target for them is the export
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controls or outbound investment controls, because when it comes to
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the spy scandal, there are Republicans and Democrats who have
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made themselves vulnerable on that front. And I think that's
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why they'll be uneased to pursue that conversation too much.
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Steve Yates of the Heritage Foundation, Gordon Chang at Gordon G. Chang,
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the podcast of our conversation about the upcoming APEC and
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the unknowns of NVIDIA. Available to Apple, Amazon, Spotify, Spreaker,
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and other distinctive venues, I'm John Batchelor.