Summary

Eoin Gleeson began by outlining the main subject of the call: China’s crackdown, the industrial plans that Xi Jinping has laid out very closely over the last few months, and its vast new industrial reset.  China’s plan is very much focused on collecting as much information as possible from the Chinese population & beyond borders, learning how to source it, refine it and then make it machine readable. They also have ambitious plans for including quantum computing advances in artificial intelligence and communication satellites that go up to 6G.

Xi Jinping now has accumulated more power than anyone in China since Deng Xiaoping and nigh on as Mao Zedong. He is a product of the turbulence of Chinese communist power and is said to have iron in his soul. Xi has a revulsion for conspicuous consumption and the recent behaviour of new breed Chinese billionaires, reflected very much in the regulatory crackdown. This is the third great revision, designed to rebalance the economy after the excesses of the period of frantic growth which led to great inequality, pollution, and much corruption. The One Child Policy and 9-9-6 working week amongst other things have contributed to the demographic crisis which China faces. This disorderly expansion of capital, as Xi calls it, not least in companies such as Alibaba and Tencent did prove fruitful in one sense, however: they accumulated vast amounts of data. Now, China is seeking to launch a more orderly expansion of capital away from downstream internet applications, instead upstream to the development of foundational technologies upon which China will rely in order to become the industrial superpower it so desires to be.

Where it was once oil, machine readable data is rapidly becoming the control point of world power as far as China is concerned. To deliver that you need pervasive wireless networks of sensors to generate the data and you need AI systems to refine the data, and you need broadband technology to transmit it where it needs to go. Huawei is the world’s leader in telecoms equipment and the development of broadband technology, experimenting with a 6G satellite while most of the world are catching on to 5G. China is pushing the world into separated zones, as the Beijing hub spreads along the digital silk road into Eurasia, Africa and Eastern Europe. China have the BeiDou satellite system and developing quantum internet, through NISQ systems. They are also pushing now to bridge the gap in terms of being able to develop their own next gen chips, an area in which they are already the dominant buy-side influence. In quantum, China is in the vanguard if not the leader in the field. Nor are they lagging in space technology any longer, having been the first to visit the dark side of the moon while also having visited Mars.

In terms of companies, Tencent, BeiDou and Alibaba will not share the fate of DiDi because they are front and central of China’s global strategy as huge repositories of technological ability with huge resources behind research and development. The orderly expansion of capital will go to companies developing China's semiconductor industry, and to companies developing China's AI capabilities, especially in areas like autonomous vehicles and robotics. One such company is SMIC, a semiconductor foundry upon which China will depend upon as a leader for producing chips. They have already made rapid progress in getting down the nanometre scale. CATL, is the world's leading battery company in terms of lithium ion and lithium phosphate batteries. Tesla is increasingly operating out of its Shanghai plant with their batteries. CATL is expanding into Europe with a close relationship with Daimler while also building plants in the US.  China has virtual throttle holds on that global supply chain of industrial grade battery materials.

In terms of Chinese biotechnology, they will not be matching the US in producing novel molecules anytime soon, but serious progress is being made. China developed BGI in Shenzhen using Illumina's sequencing technology before bringing in the necessary expertise to build up its massive genetic sequencing project, which continued with great urgency during the pandemic. China collects vast amounts of information on cancer treatment, with its 4.3 million patients a year, and exports that medical intelligence to the rest of the world in combination with American companies who are participating in these studies. Beyond Spring is one example, with Chinese and US offices. Their lead asset, Plinabulin, designed to treat neutropenia, a side effect of chemotherapy has just successfully completed phase three of its trial in a matter of 2-3 years at a cost of about $30 million, a fraction of time or cost to conduct trials in a Western market.

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