 Good morning. Thank you so much for joining us on a Friday morning. We're very appreciative. I'm Deborah Laird, Executive Director of the Paulson Institute, and we are delighted to be partnering with Carnegie and my former colleague, Evan Feggenbaum, who is now the Vice President of Studies here at Carnegie. And we have a very hot topic this morning with Matt Sheehan and his new book, Looking at Technology and also the cooperation between China and California and how that is really a microcosm of what we're seeing in the bilateral relationship today. So without further ado, let me call Evan and Matt to come up and lead us in the discussion. Thanks. All right. Well, good morning, everyone. Thanks, Deborah. And we're delighted to do this with the Paulson Institute. I'm Evan Feggenbaum. I'm the Vice President for Asia here at the Carnegie Endowment. And I'm delighted to do this with Matt Sheehan, who's got a new book on California and China and who I've worked with before and is, in my view, just about the smartest guy on U.S. China, tech stuff around, in part because he lives in California and not here in Washington, where lots of people talk about technology issues these days, but are not as grounded in the industry as being a political town. So welcome to Washington. Thanks for having me. You'll find this is a place where everybody disagrees on pretty much every subject, except for one subject, apparently. And anybody know what that subject is? China. So since I can move back to Washington, I've found that Democrats, Republicans, all across the political spectrum, people seem to share a consensus on many issues and elements related to China's trajectory to what the U.S. posture was, should be, into the future on China. And that's probably a good point of entry to start talking about this because I have a working theory of the case. Which is that for about 30 years, there were a series of interest groups that helped push the U.S.-China relationship forward. One was foreign policy and national security policy elites in Washington who had a particular view of how U.S. engagement with China ought to evolve. Second was large multinational corporations that made things in China for export to the world. And the third were financial services firms that wanted to help integrate China into the global capital markets and financial system and set up operations in China for commercial banking, for investment banking, and so on. And if you've read the headlines or been paying attention to what's been happening over the last year or two, or actually more, you'd know that each of those constituencies in its own way has soured on the trajectory of the U.S.-China relationship. So you hear a lot from foreign policy elites in Washington about how we got China wrong, we need a different approach. Multinational companies have soured on many of the across and behind the border regulatory and other restrictions in China equity caps, joint venture requirements, and so on. And financial services, too. But my working theory of the case is that when you get 20 miles outside of this town, you encounter the fact that a lot of Americans now have very multifaceted and complicated relationships with China. So while those three big stakeholder groups have soured on the relationship or on elements of the trajectory, you have entirely new constituencies, agribusiness, tech. Entertainment. Governors. Mayors. And in many cases, governors and mayors, we've had at least one of them on this stage here at Carnegie since I got here, are still chasing investment from China as if what's happening in federal policy is almost not happening. And so to me, that's kind of a good point of entry into this because you look at U.S.-China relations, but also the way Americans and Chinese interact with each other through the prism of one state, albeit a very large one. And so maybe I think it would be a good place to start there, which is to have you talk a little bit about why you wrote the book and particularly what it was about California that you thought would provide the right lens. It's not just because you live there or there's something in the water. So there's a mix of industries that's interesting. So why don't you kick us off and talk a little bit about that. Yeah, I think that what you described there in terms of what for a long time has been a very high-level relationship between the two countries. I think of the first 20, 30 years of the U.S.-China relationship is functionally happening at those levels. Kissinger and Mao, it's multinational CEOs forming in some ways deep relationships with China, but also very much at a distance. So we're sending over capital. They're sending back cheap goods. But for the average American, China doesn't come into their lives. It doesn't come into their neighborhoods. It doesn't come into their schools. And what I found when I was working over there and coming back to California was that suddenly China was showing up in my neighborhood at the schools that I used to go to the mayor of my hometown. All these different sort of multifaceted parts of the relationship that were happening very much at like the grassroots level. So it's kind of moving down from the high level to the grassroots and it's also just diversifying. And so it happened across real estate, investment, education, technology, film, and California happens to be basically the number one destination for Chinese people and Chinese businesses across all those categories. So California is the top destination for Chinese foreign direct investment. It is the heart of the technology relationship, the heart of the culture entertainment relationship. It's where the Chinese people buy the most homes. There are the most Chinese immigrants and the most Chinese students of any state in the country. And so going back and forth between 2013 and 2018, I just found that where so many of the storylines that I had been sort of pursuing in China as a journalist were suddenly showing up in my hometown. The real kickoff to the project was I was back home resting up with a broken ankle. And I suddenly started seeing stories in the Palo Alto weekly, the local newspaper about Chinese luxury bus home buying tours. A bunch of wealthy Chinese people show up in Palo Alto, get on a Lexus bus hosted by a local real estate agency and kind of go house to house and say, yeah, I want that one. I want that one. Then we all drink wine at the end of the tour. In cash. In cash, yes. So, you know, it just it was showing up in a very real way and it was showing up to people who didn't previously have any like engagement or interest in China. It was affecting local real estate prices. It was affecting the local schools. And so that was my first cutting in point. And just over the next year months and then years, I sort of ended up investigating all of these different dimensions and trying to use California as a microcosm for what I see as ground zero of this new era of the relationship and where the experiment plays out. So could you, could you maybe maybe the way to do this then is to talk about some of those industries or some of those things that are distinctively California. So to me, one is tech, right? You've got Silicon Valley. Second is entertainment. You've got Hollywood. And then of course there's this, you know, frothy real estate thing in California as well. So I think tech would be the one that most people would be interested in starting with because it's so front and center in the debate here. And particularly in a Washington context, you hear a lot about people say things like it's not a trade war. It's a tech war. There's a new technology cold war between the United States and China. We're heading for a divorce and tech is at the core of it. But I presume if you're sitting in the heart of where technology is both hardware and software being developed, that may or may not look different, but also the implications and dynamics are somewhat different. So could you maybe take us on a little tour of how the interaction with China looks when you're sitting in the valley or when you're sitting in different, you know, on the hardware side or the software side and where that relationship has come from and is going. And especially in the face of this Washington discussion and Beijing discussion for that matter. What does that mean for industry? Sure. Yeah, I think that in the same way that we're setting up at the beginning with the sort of high level national stuff, which is very concerned about markets versus the more grassroots sort of multifaceted relationship, which involves sort of people, money, ideas, all these different kinds of exchange. What we saw is that over the last decade, all of those grassroots level relationships in the technology industry were blossoming at the very same time that the national level and even the market based relationship was sort of ice cold. So this is what I observed over say 2010 to 2018 is that across almost every dimension of people, money, ideas, there were free flows between the two ecosystems. So you had tons of Chinese engineers showing up in Silicon Valley, you had Silicon Valley executives going over to take the helm at Chinese companies. You had, you know, my view setting up labs in Mountain View right next to Google and Google setting up a lab in Beijing. And in terms of ideas as well, for a long time, the sort of ideas flow had been relatively one way basically Chinese companies looking to the US for inspiration, whether it's something to sort of directly copy or an idea to rip off of Alibaba sort of ripping off of eBay in a way that for a long time that relationship had been one directional. But in the period of sort of 2012 to 2018, it finally turned into a bidirectional thing. You had US companies like my friends at Facebook work on Facebook Messenger very much look to WeChat as a source of inspiration. How did they do that? How did they create a chat app that is also the center of commerce and also the center of so many functions of your daily life. And so it was in this period of time that we finally had these flows going in both directions. But at the level of markets and at the level of companies actually being able to sell services and products, it was still basically a brick wall on the US going to China side. That's of course the firewall on the Chinese side coming to the US. That's functionally they just couldn't get any traction here. And so I think of that as kind of the tension that has been animating that relationship for the past decade and what we're doing now is we're kind of in the process of trying to resolve that tension in some way. So we had free flows at all these levels but separated at the national level and or at the market level. You can resolve that sort of tension by either making everything free flowing or by trying to sort of lock everything down. I think we're now in this phase, the decoupling, whatever folks want to call it, is the phase of trying to pull all those relationships apart at the lower levels. Stop the flow of people, stop the flow of money and stop the flow of ideas between the two places. Can I push you on that? You know at the national level, one of the things that's striking is how economic integration didn't really produce any kind of convergence. So if your theory of the case on the US and China was that economic integration was going to mitigate security competition and obvious differences of political system. That hasn't happened, right? We're enormously integrated economically. $600 plus billion in trade actually I think it's closer to 700 now two-way trade. There's 100 billion plus of USFDI stock in China. There was all this Chinese money flowing here for a while, mainly M&A but some Greenfield and growth capital too. People to people so hugely economically integrated. But not only did it not mitigate the security competition, South China Sea, Korean Peninsula, you name it. But if anything, the security competition is intensifying. And now the security issues, particularly in the technology space, but also on capital flows and flows of people are actually bleeding back into what had previously been thought of as mainly economic. So integration between the US and China didn't actually produce convergence. And if anything, it's fueling deep divergence. So when you go from the national level, you get down at the firm level or at the laboratory level or at the innovator to innovator level. You're describing a situation where there's growing integration, people are looking to each other for ideas. So did it produce a convergence at the local level that we didn't see at the more national or global level? Because industry and innovation are either free from those dynamics or there's something about how American and Chinese innovators work with each other or not? I would say that there has been a kind of convergence at the local level, sometimes an alignment of interests, sometimes an alignment of products and services. But the idea that that was going to mitigate national level tensions I think is almost completely backwards. Across all these dimensions, as we saw greater face-to-face interaction, greater person-to-person interaction, I think the going theory, whether that was with students or technologists or immigrants and home buyers, the assumption was let's just sit Americans and Chinese down together. There'll be classmates, there'll be coworkers and all will go well. And it'll unlock new possibilities. But really what I saw over the course of researching and writing the book was that sort of the closer that these two places get the more in some ways personal the tensions can feel at times and the more sort of points of friction there are. So that doesn't always mean that every lab, every Baidu lab in Silicon Valley has really sort of tense relations between the technologists, but certainly happened in like the university system, it's happened in the neighborhoods in many ways. And what you're describing of kind of the local tensions filtering up to the national level is absolutely true in technology. I think about this was all sort of flourishing at the local level in the sense of greater integration and exchange. But I'd say about two years ago, Washington, D.C. appeared to sort of suddenly wake up to China as a technological power, as an innovative country. And the sudden realization that this has all been going on at the local level without any functional government oversight is what has led to the pendulum swing, this kind of panicked reaction of suddenly trying to put government hands on all these other areas of interaction, kind of rein them in and bring them under control. That's what I see a lot of the current set of sort of decoupling measures is dealing with. You think the innovation culture is the same in California as in China or are they different? There's this piece I read of yours a while ago called the Silicon Valley Paradox. And you said something interesting that you said, you know, the way you look at Silicon Valley is that it welcomes all these people from China or from India, but it's less open to ideas than it is to people. So you see Silicon Valley's problem is it's egocentric. And then you talk about Chinese innovation culture and you said, actually very open to ideas, wants to assimilate things that are happening in the innovation space elsewhere, but filled with actually Chinese engineers. So you had egocentrism here and then you called it ethnocentrism there. And each one had an obstacle to convergence and integration. But you've operated in both cultures, right? So is the culture of innovation the same or not so much? So that sort of egocentrism ethnocentrum was actually brought up to me by a friend who has worked at sort of the heart of some of the biggest Chinese tech companies and at the heart of some of the biggest American tech companies. And that was his observation across the two in that in China there was a huge willingness. They're constantly reading news about Silicon Valley. They're constantly like, I often get my news about Silicon Valley first through my WeChat moments. It'll be in translation in Chinese before I ever even see news about what Tesla is doing in English. So an openness to those ideas and a willingness to say, like, we have a lot to learn and we're looking to products and services overseas. But I'd say this is less about the technology culture and more about the sort of national culture and the business culture, the ethnocentrism of thinking that, you know, a foreigner can never really understand China. A foreigner could never really rise to the top of a Chinese technology company because there's a fundamental kind of othering of foreigners in China. And so, yeah, Chinese tech companies are very eager to gather these ideas, but they are going to have a very hard time onboarding international talent, whereas in Silicon Valley it's almost the reverse. There is a huge openness to talent from anywhere around the globe, but it has taken years and years for Silicon Valley to even sort of stoop to acknowledge that something worthwhile is happening in China that they could learn from product-wise or technology-wise. So that's the sort of egocentrism of thinking that everything happens in Silicon Valley and that's the center of the technology universe. So that's that divide, but it's, yeah, in many ways it's as much a cultural divide, specifically on the Chinese side, like a national cultural divide. When it comes to the nature of the innovation ecosystem, I think, yeah, there are in many ways starting from almost fundamentally different premises. And in the U.S. side in Silicon Valley, I mean, it's basically, you see it in the advertising, so much of the focus is around freedom of thought, freedom of expression, letting one's creativity kind of run wild, very much against imitation, against learning, against kind of looking to the best in class and trying to imitate that. It's you always want to break fundamentally new ground and that's what many people think is kind of the engine of Silicon Valley or the secret sauce. Whereas in China, and you can look at this from a bunch of, from a bunch of different reasons, cultural, political, etc., but there is fundamentally a sense that if someone has done something really well, your first job is to study that, imitate it sort of as closely as possible, sort of learn from the master or whatever that may be, and then there's no personal kind of shame in making a great imitation and kind of learning something by, yeah, by almost rote imitation. So that's a very kind of high level distinction between the places and you can trace that however you want, you can trace it to Confucius versus Socrates, or you can trace it to just 30 years of Chinese economic development where everything has been moving so fast that if you don't frantically jump on the new trend and all pile into the same industry and imitate each other, then you're kind of, you've missed the train. So I do think that there's a very kind of fundamental distinction how the two cultures even approach the question of, you know, what are we doing here? What is the valuable thing to do in building a company? Can I make you tell some stories? Because the book is, I mean, you're a journalist, right? So the book is actually built around stories of people. And the tech chapter, there, you tell the story of this guy, leader of faith, right? Who has a startup, does natural language processing, artificial intelligence. You've got people who are ex-Googlers and Nokia people. Could you make what you just said a little more granular, but maybe digging into a particular startup? Yeah, yeah, so each, as Evan said, each chapter of the book covers fundamentally a different industry, a different sector. And it tries to zoom in on the story of one individual person who, I think, exemplifies the, both the sort of possibilities and the tensions in this space. And so for technology, the person that I ended up following from 2014 to now, I just had breakfast with him on Monday, is a guy named Li Zhifei. So born in China kind of right at the dawn of reform and opening in 1978 in Hunan, I believe. And, you know, at the time that he is born in Silicon Valley, you have, you know, Steve Jobs and others, you know, inventing the personal computer in a garage. And in China, people are, government officials are debating whether or not you can sell vegetables for profit. Like, is that okay? And so the starting point for these two stories is just, you know, the gulf is vast. Li Zhifei grows up there, goes to college in Hunan, goes, ends up sort of working in China's first Internet bubble, which happened pretty much at the same time as our first Internet bubble, the late 90s, early 2000s. But when it pops on the Chinese side and the dot-com boom pops over here, he, you know, you kind of survey the scene and figure out where, if you're a, if you're a technologist, you're somebody who cares about being at the cutting edge, like where is the place to do that? At the time, it was pretty clearly United States. So he ended up coming to Johns Hopkins for a PhD in computer science, focusing in on, yeah, natural language processing and machine translation. So he spends 2004 to 2010, near here, studying computer science at sort of a top program. And when he graduates from that, he ends up going to Google to work. This is now 2000 and it's exactly the same time that Google is pulling out of Chinese markets. Li Zhifei is going into Google and he works on machine translation. He's a bit of a rising star there. But when he wants to found his own startup, he decides, and this is 2012, he decides that he wants to do that back in China. You know, he's had a sort of a taste of elite U.S. education, a taste of elite U.S. innovation culture. But if he wants to start his own ventures, he's going to do that back in China. So he moves back to China and founds a company called MobFoy, a Chinese named Chuman. Go out the door and ask around. Functionally, it's a Chinese language Siri for Android. And fundamentally, the reason he's able to do this is because in going back, he's crossing the firewall. And he's entering a market where services by Google, his former employer where he kind of built up some of his technical chops, are blocked. And so Google voice assistant, anything like a smart watch to a Siri-esque Android thing, can't go in there. And so you've got this open space in terms of market because of the firewall, and there he starts building up his company. And I think of MobFoy as a perfect example of this kind of integration at all the lower levels while things are stuck at the national level, or at the market level. The products and services of Google are blocked. So he has a free market, but the founders of his company are Chinese who spent time at Microsoft, who spent time at Stanford Research Labs, Tsinghua, Baidu, kind of the best of the best from both markets. And they found it, it takes off. They build a smart watch ecosystem at the exact same time that Apple is releasing the, on the very day that Apple is releasing the Apple Watch, I went with them on a hackathon outside of Beijing. I sort of tagged along while the whole company did a 24-hour hackathon to build out their own smart watch app ecosystem. And at the same time, they're looking to Apple, they're learning from Apple's mistakes, and they're trying to define their own Chinese version of that. So like when I was there, the apps that I remember folks around building were, you know, when the Beijing air pollution goes above 250, like send me a, you know, a wrist alert or something like that. It's a very sort of Chinese in their use case, but in many ways looking to and learning from the US in terms of what's the product. And I found Mobvoi, that company, fascinating and just like a lot of fun to hang out with because it's one of those situations where people who have spent time in China, especially in Chinese tech circles, you'll find the sentences kind of just flowing seamlessly between English and Chinese, where they'll just be like, I don't know how to do this back end. Why not? And it's just this kind of, it's this really twisty world where your head kind of ends up spinning and, you know, you could close your eyes and listen and you're in Beijing, or you could kind of look at what everyone's doing in Silicon Valley. And eventually I thought, okay, so he left this former employer, went back to found a company that kind of only exists because his former employer is blocked in this market. And I was like, what does Google think about this? Do they, you know, do they take ire with this? But Google, very shortly after I started finding the company Google first invested in Mobvoi, it was their first investment in China since pulling out in 2010. And then they partnered with Mobvoi to turn Mobvoi's smart, the wearables app store, the app store for watches and voice assistants and stuff to become basically a Google proxy. Google couldn't run its own app store in China. And so Mobvoi basically ran one for them to kind of control the Android app ecosystem. And it's gone on like this since then. Leisure Fave functionally is constantly moving back and forth between the markets. They're still drawing on people from both ecosystems. They're partnering with Volkswagen in China, partnering with Google. But when it comes to the products and services, they're still in some ways a wall. He does sell his smart watches here and actually has pretty good market share. But when it comes to Google or anyone going over there, that's just a dead end. And so I see that as what you mentioned earlier, Silicon Valley's China paradox. This locked out at the level of actually making money in many ways or entering the market and yet incredibly deep integration at all the other levels in companies like Mobvoi and things happening in Silicon Valley. That's a really blunt question. How do people who thrive in a startup culture like that operate in the current political environment in China? Yeah. Which doesn't seem that conducive to that kind of... So specifically the Chinese political environment, not the Chinese U.S. political environment. The Chinese political environment. Yeah, which seems less conducive, decreasingly conducive to the kind of things that we associate with startup culture, globalization, independent thing. And increasingly thinks about technology almost in a mirror image of here through a prism of indigenization. Yeah. I think in a lot of ways it very much depends on whether you're a content company, a content startup or a technical startup. If you are in content, whether that's entertainment or social media or anything like that, obviously everything is just getting increasingly fraught. That doesn't mean that companies aren't growing rapidly. Toe Tiao, aka Bite Dance, is like one of the most successful Chinese startups and that's a news aggregator. And they're still able to kind of work and thrive in a Chinese environment at the exact same time that restrictions are coming down closer and closer. But content startups are only really a small fraction of it. So they make... Mavoi makes voice assistants functionally. They're telling you where is the closest Sichuan restaurant, what is the pollution in Beijing today, giving you route information. In that sense, there is not that kind of direct rub that a lot of people might... We might expect over there. In terms of the globalization and other parts of it, I had a chance, yeah, very recently to talk to some CEOs. I guess this isn't the globalization, it was a domestic security component about what they think about, say, putting AI into surveillance technology in Xinjiang and just asking very bluntly, because these are people who have sometimes spent years in the US, been educated here. You think you go back and you can really just kind of go full bore engagement and cooperation with the government in tracking an ethnic minority. And yes, I have not heard anything terribly encouraging on that front, that there's a lot of... We're in this system, we're in this environment. If I'm interested in technology, if I'm interested in computer vision, this is all I can do right now. And so that's kind of sad, but it's also very much reflective of that kind of, I think Chinese cultural, the realism of Chinese culture where it's just, this is the environment, this is what I have to deal with, I'm going to deal with it. So in the push and pull between business constraints and ethical dilemmas, you're saying that your punchline is the business... the business side tends to win out. That's what I've seen so far, but we're also in pretty, I'd say, early stages of all this over there. I mean, if you were part of a computer vision start-up in China in 2015 and 2016, you were working with Alipay to do sort of facial recognition to confirm that you're the right person making a payment and all that stuff, and suddenly there's all these contracts flooding in for government stuff, and probably the biggest thing that I notice when talking to start-up people and tech people is that your world is so small. Your world is, what do I need to do to keep this company alive for another six months, another 12 months, and I think that works to both on an ethical front but also on kind of a geopolitical front. It leads to a certain level of kind of blinders, like in the very early stages of the trade war. I would talk to Silicon Valley Company and I'd say, you know, like, you guys been noticing what's going on? Like, are you thinking about moving your supply chains? Are you thinking about what you're going to do when you can't have Chinese researchers in your labs? And I'll just like, you know, honestly, we're just trying to get through February right now and we'll deal with that, you know, we'll deal with that when it comes. And I think a lot of the current moment, both on the Chinese side and the U.S. side is recognizing Silicon Valley or the tech community over there realizing that there are these, they're no longer operating in a sort of business-first environment and that they do have to pay attention to what's going on in D.C. They have to feed their own insights and knowledge into what's going on in D.C. in hopes that what's coming out of here, what's coming out of Beijing over there does not, you know, suffocate their enterprise. You mentioned artificial intelligence. So could you, I know you've followed that for a long time and you worked with Kaifu Li and you've been kind of in and around that industry for a long time. And when people talk about U.S.-China technology competition, they tend to hone in on a few industries, right? Those like quantum computing, 5G, it's always the same, three. 5G telecommunications, which gets you into Huawei. Quantum computing, artificial intelligence. And AI to me in some ways is the most interesting one of those because the technologies themselves are so multi-use and they're going to change the future of work but they're also going to change the future of warfare. They're going to change the way you live but they're going to change the way you do other things. And the U.S. and China both have companies but also a lot of government interest in that. So it has a strategic dimension, a corporate dimension, a technology dimension, an ethical dimension, even here. How people think about AI in three parts, AI in China, AI generally, how it's developing and then how we should think about that competition against the backdrop of this U.S.-China. Kind of a narrow question. Do you want to make that any broader? Make it as broad as you want. Or as narrow as you want. So I guess maybe I'll zoom in on one part which is what I've been focusing in on for much of the last year plus which is trying to get a sense of U.S. and Chinese capabilities in artificial intelligence. I think whether it's on the capabilities front or the ethical front or the international relations front we're kind of, we've had about a year to two years of kind of, I don't want to say panic but just like suddenly infinite amounts of buzz, Washington and Beijing suddenly waking up to this technology is so important. It's so powerful and it's the future and we have to do something about it and China rising quickly and we're going to fall behind. And I think we're really at the time in this sort of study of this field to really be drilling down and trying to come up with actual metrics to define our terms, to define our important questions and move from there. So specifically in the capabilities front this is a lot of what I see my current project as is figuring out a way to systematically look at U.S. capabilities, Chinese capabilities and ideally come up with data that underlies each of these sort of subcategories. So the framework that I'm working with right now is trying to break AI down into say it's four key ingredients one way or another. So that's talent, the engineers, the research scientists. That's the data that goes into these systems that is the semiconductors that in many ways power them and then that is the sort of government regulation and government integration with the private sector component. And looking at each of those trying to come up with a metric by which we can make comparisons between the U.S. and China and then use that in some way to work towards a broader understanding of where do we stand in relation to one another. So what I've zoomed in the most in the past year is on the talent front because in many ways it's the most directly quantifiable and measurable. So me and my colleague Joy have been working on basically looking at the top AI research conferences, the top publications at those top conferences and figuring out how many of the authors are Chinese nationals, how many of them are U.S. nationals, how many of them work at Chinese institutions, how many work at U.S. institutions as a way to make a sort of first cut at the balance of talent between the two places. And what we find broadly speaking is that the U.S. in terms of where this research is coming out of, the U.S. is far, far ahead. And I think it's in our last count from December 2018 it was 60% of the best of the best research, the top 1% AI research was coming from authors who were at U.S. institutions right now working for U.S. institutions. But you also need to kind of look at it another way. You have to look at where did this talent come from and where is it likely to be in the future. And if you look at it that way, the U.S. where it was 60% for the U.S. and literally for the top, top research, 1% coming out of Chinese institutions. But if you look at where did this talent come from by sort of our best proxy for nationality the entire thing becomes a lot flatter. Half of the U.S. top talent here comes from overseas and the top sending country for that talent is China. So functionally what's happening is China is experiencing a large brain drain in terms of AI talent and the U.S. gains tremendously from that. We're kind of the number one winner from that. But this piece right here, the flow of where people live and work is one of the most fragile and easy to change type of flows. This is something that's affected by a visa policy, by education policy, by the sort of broader environment in the U.S.-China relationship. And that's one of the kind of key areas of concern that I'm looking at is what are the odds that this turns in that the flows functionally reverse and that not that all American scientists are going to work for Chinese companies, but that China sort of regains its own people and that sounds kind of possessive. That many people who grew up in China end up heading back to China, like Liedrich Faye did, or where do people from India, Pakistan, Iran, Europe go with their AI talent? So this is kind of my area of focus now is coming up with metrics for each of these, for the data, for the talent, for the semiconductors, and then trying to give us a kind of a well-grounded assessment of where do we stand. Yeah, so that's interesting. That idea of things that flow and whether or not you can interrupt them or enable them is kind of an interesting way of thinking about U.S.-China relationship, including for California. If you go back to where we started when we were talking about how they're integrated, what integrates the U.S. and China? It's flows of goods, it's flows of capital, it's flows of people, it's flows of technology. And on each of those, because of policies on both sides, they're being interrupted in one way or another. It's flows of goods, you've got tariffs for reciprocal and retaliatory tariffs, which for a state like California, which if I'm not mistaken, for example, is the number one producing agriculture state in the United States. It can't be good if you're a farmer or a rancher sitting in a state like California. On top of all the manufacturing products. Capital, there are a large number of sectors in China, equity caps, joint venture requirements, all kinds of ways in which China makes it hard for foreign investment and foreign capital to get in in ways that foreign capital would like to get in. And now you have the foreign investment modernization steps here, the firma and further steps that are in some ways directed, they're largely directed at Chinese acquisitions and Chinese money. So you have interruption of flows of capital. Then flows of people, you mentioned visa policies or choices that people in science, technology, engineering and mathematics may make about where they want to go. And then technology, entity list, bands on certain technologies, whether it's in your backbone or somewhere else. If you take away flows of goods, capital, people, technology what's left of the U.S.-China relationship it's security competition and different political systems. So those flows are really important. And through a California lens you can kind of see how each of those is being interrupted in one way or another. So if you get away from technology to other things that matter for let's say entertainment can you just kind of pull that thread a little bit and talk about what does it mean for a state like California to have ties to China interrupted in that way or not? So for Hollywood which means greater Los Angeles and it means U.S. soft power in many ways but the Chinese box office was kind of its savior in some ways over the last decade. And this is something you really see across almost every industry I look at. You date things from the financial crisis to 2018. This is a period of time when local actors across U.S. industries public sector are suddenly they're seeing their revenue dry up. This happened in the University of California system a higher education industry it happened in Hollywood due to sort of stagnation in the box office it happened in FDI and funding infrastructure projects in real estate all of these flows of capital sort of dry up domestically around 2008, 9, 10 or at least pause for a period of time and everyone kind of looks up around and says where are we going to get this money from and many of these actors settled on China in one way or another. In Hollywood this because at the very same time that stagnating or dropping the U.S. China is kind of booming across every one of these sectors the Chinese box office is growing by about 40% every year from 2004 to 2012 something like that and fast on its way to becoming the largest box office in the world and so you have Hollywood kind of casting about for its next great source of money and many of them settle on China despite many of the restrictions that you alluded to in that are mirrored in entertainment so in the same way that there is FDI and sort of joint venture requirements the exact same requirements apply to Hollywood films so there's a limit a cap on the number of international films that can be shown in China on a revenue sharing basis and the only way to get around that cap is to do what's called co-production which means functionally you work with a Chinese company, a Chinese investor you have actors and actresses you weave in Chinese elements and you make a sort of joint venture of a film and so this is what Hollywood and China were dealing with over the last decade this kind of Hollywood banking on a Chinese dream of gobs of cash that it just hasn't uncovered yet and sometimes it was making along the way and China trying to leverage these same restrictions and the same way they have in technology in other sectors to gain knowledge to get sort of Chinese messages and Chinese elements into broader popular culture and the two sides are kind of a friend of mine who's a producer in Hollywood and in China put it this way said Hollywood has a China dream, China has a Hollywood dream, what's the what's China's Hollywood dream they want their stories told they want Chinese characters, they want people to kind of feel good about China what's Hollywood's China dream just money it's like okay yeah that's sort of sums it up and in many you had a similar sort of parallel thing happening across this and that from 2008 to 2017 2017-18 there was this ongoing hope that they're just going to kind of reach a like perfect beautiful synthesis Hollywood makes all its money trying to sort of steps up and then it was hit by restrictions on the Chinese side by a backlash on the US side and they're currently in the we're in the process of watching this kind of fall apart for Hollywood and for China but with China sort of coming into its own in the industry so for a long time Hollywood assumed that you know China functionally can't make a real blockbuster without us China needs transformers 15 to make any money in the Chinese box office and you know in many ways it was the same thing that was felt about technology that if they don't have that secret ingredient freedom of expression freedom of speech then you can't really do what we're doing over here whereas Chinese government and Chinese filmmakers kind of took the typical what I think of as a Chinese cultural thing of just kind of muddling through just bring in enough enough people enough money build the film sets buy the cameras have some interaction with elite sort of talent from Hollywood and eventually something like creativity or a global blockbuster will emerge and that's sort of what has happened in the last couple of years there's been a run of Chinese mega hit movies that are at least hugely popular and hugely successful in the domestic market there's Wolf Warrior 2 in 2017, Operation Red Sea in 2018 and this year The Wandering Earth and this new film Nudra which you finally in the process you see Chinese films kind of looking good looking really good for the first time since the kind of art house era of Zhang Yimou and Chen Kaige and stuff like that they just they don't look so hacky the storylines are not so wandering and weird and you see the first inklings of what could be a sort of a global Chinese blockbuster at exactly the same time that the relationship with Hollywood is kind of deteriorating and being separated out So you tell the leader face are there individuals that exemplify that entertainment relationship? Yeah so a couple of the folks that I follow in that story were Janet Yang who's the producer in Hollywood in China and Wang Dianlin the founder of Dalian Wanda these are in many like Wang Dianlin which bought AMC theater so Wang Dianlin the founder of Dalian Wanda functionally a real estate development company who in 2011 2012 decided you know the next thing is entertainment culture and I need to get involved but he in many ways took a route that appeared very backwards you know we think you want to get involved in film you want to get involved in creative industries that's about the talent that's about the storylines he was like no like the way I'm going to get involved in this is by buying the largest movie theater chain in the world I'm going to build more movie screens in China than you could ever imagine and that's like how I'm going to get my foot hold in it so he came to AMC the story that was told to me by a former Wanda employee was that literally his entry into his decision on how to enter the film market was he said hey you know assistant go print me out a list of the top 10 biggest movie theater chains in the world like literally print it out a list he goes down the list to the first privately owned company and says that's it we're buying it and goes and buys AMC for $2 billion which at the time was the largest ever overseas purchase by a Chinese company but it's one of those where if you kind of look a little bit closer you kind of peek behind the curtain of what's happening at Wanda and what's happening in that part of the Chinese film industry and it ends up being pretty ringing a bit hollow so his big sort of coming out party was in 2013 he held the opening for the groundbreaking ceremony for what he said was going to be the Hollywood of China it's going to be the largest film production studio and a theme park and a restaurant and a hotel and a museum and everything involved in Qingdao and he basically he was using this as his way to get his sort of pull on both sides so he the order that he gave to his employees that I learned about he said you know bring me to A-list American celebrities to Qingdao and they got a few of them they got Leonardo DiCaprio they got Eyes Wide Shut what's the female Nicole Kidman apparently he's a huge Nicole Kidman fan apparently had a very awkward breakfast with Nicole Kidman this is what I'm told so he kind of gets this list of A-list celebrities out basically by paying them by paying them large sums of money and then so in many ways he's using them to pitch to the Chinese government like I'm the guy I've got Pull in Hollywood I know all the people and that means you should give me favorable land deals and I'm going to do your soft power thing I'm going to make movies happen I'm going to make China a movie powerhouse so he's kind of like putting the foreign stars on display for the Chinese officials and then for the Hollywood folks he's like look look at all these Chinese officials if you want to get anything done in China I'm your guy and he tries to kind of position himself as this two way ambassador between the places but yeah there was no actual kind of creative film substance behind so he would go on to he would invest in some American movies he apparently expanded of his American partners that they guarantee him an Oscar for a movie that he was financing you know it makes sense if you grew up in his world that that could be done and he financed the Great Wall which was kind of like the great you know the great hope of co-production Matt Damon the Great Wall Zhang Yimou total disaster impossible to watch and basically he sort of fell victim to what many Chinese executives who kind of fly too high fall victim to so he became he got caught up in first off the currency control so many he had to abandon many of his overseas purchases because the money stopped flowing he's constantly kind of under suspicion for some thing you know he was in Dalian when Boi Xi Lai was there so there's a whole dynamic and he's sort of had to basically abandon his like personal entertainment dreams and just retreat to building more Wanda complexes so yeah it's not that's not the most successful China Hollywood story but there was a lot of money and some funny things involved I'm going to give the audience a crack at you but I want to ask you one more thing so you you talking about Li Drafay and you did in the end is there some American that exemplifies the California-China relationship so flip from a Chinese to one or two American who on the American side kind of exemplifies this relationship so one of my favorite sort of characters and storylines that I follow in the book was of this town in Southern California called Lancaster it's towned outside LA it's a desert town and it has a very very interesting and eccentric mayor named Rex Paris so he is a personal injury lawyer extremely wealthy Republican who is obsessed with climate change and thinks that China is going to be his partner in solving climate change and also boosting his local industry so in Lancaster as a town it was a kind of military industrial town during the Cold War it's near Edwards Air Force Base and was very much reliant on Lockheed and stuff like that but through basically the 90s and 2000s those industries fell off the town fell on hard times it basically became known as a center for meth it was involved in a lot of white nationalist skin head sort of battles that's another weird threat to the story but basically it's a kind of a down and out post industrial town and mayor Rex Paris saw China as the way that he would both that he would bring in green investment that would like make a gain traction on the climate front but would also bring like good manufacturing jobs back to Lancaster and so the way that what he ended up sort of latching on to was BYD the Chinese electric battery turned electric vehicle company and it very much follows this sort of the same trajectory of 2008 at the same time that the US financial crisis is kind of wiping out local job markets unemployment in Lancaster went up to about 17% at the time and but on the Chinese side things are booming and specifically China is pouring tons of money into renewable energy and electric vehicles so you have BYD this a private company from Guangdong that suddenly says you know we've won at home and it's time for us to like march abroad and they're looking for a place to set up a US manufacturing facility and Rex Paris the founder of BYD ends up at a dinner with some Los Angeles local officials Rex Paris is there any kind of you know corners the BYD founder and ends up talking him into not talking him into that is the spark for a ongoing investment relationship so eventually Rex Paris is able to recruit a recruit make Lancaster the center for BYD's factory for building electric buses those electric buses the reason they had to do it here in many ways was because of made in America provisions in the financial stimulus package so a lot of US cities want to buy electric buses but those come with the tag that has to be built in America so that's actually why they set up a facility in the US to begin with and he things are in some ways they're looking good but it quickly gets mired in all kinds of scandal and it's like it would take forever to explain all of Rex Paris' different schemes basically BYD has a confrontation with California unions it ends up getting raided by the California Labor Commissioner for allegedly bringing in Chinese workers and paying them $1.50 an hour when they should be hiring Americans allegations actually turned out to be not true it was kind of it was part of an ongoing battle with labor out there but Rex Paris he crossed his kind of personal line when he tried to turn Lancaster hospital into a center for Chinese birth tourism he this is a period of time when there's a lot of Chinese folks who want their kids to have American citizenship you can of course fly here have a kid and birthright citizenship they'll grow up that way and a lot of that does happen or a lot of that at the time was happening in Los Angeles, San Francisco places like that it's not illegal many there are it can be illegal elements but fundamentally it's not illegal and what he thought is our hospital services a low income population many of the people who come here can't pay for it so what we're going to do is we're going to build another wing of the hospital we're going to build a hotel across the street from that and we're going to say you can come here we'll put you up you will put yourselves up have a baby here take your time and then we'll see you back to China and we'll use this as basically a funding a funding source for the hospital it's another thing where the hospital functionally it was deep in debt it was getting its credit rating continually downgraded and he and the chief of the hospital Lebanon both saw this and they're like oh perfect you know Chinese people they got money they want American kids so we'll have them here and then we'll have the kids and then go back to China and then we'll have money and we'll run the hospital this is where he like crossed the line and so there's a huge backlash locally there's cartoons in the local newspaper of you know like the PLA PLA soldiers marching into Lancaster with babies under their arms and it's just like a hot a hot mess and so despite all these ups and downs the BYD part of it has turned into a success story they run a factory there that hires I think they're probably now upwards of 800 employees like one of the biggest employers in town they just on this past Monday announced a major agreement with local labor unions to build a new factory which will build their they're gonna build some kind of a light rail system that they want to sell and so I mean they've produced over a thousand electric entirely electric buses that have been sold across North America they employ 800 plus local people in Lancaster and once sort of Rex got past the birth tourism stuff they the factory itself and sort of employment effects that he was hoping for have basically paid off and he's still the mayor he the last time when I talked to him in 2017 just as things were starting to deteriorate he was trying to build a giant Buddhist statue in town to serve as an investment attraction thing at another point he was trying to get China power to come and hook into the local electric grid for some kind of green energy product that did not happen but yeah he's a he's a he's a schemer right so like I said I talked to where I started which is Americans come into contact with China in very multifaceted ways now and there are a lot of people who think they have a stake in in China and in the relationship in some way so that's a good place to open it up so we have a microphone that's gonna go around and if you could just identify yourself and say who you are but wait for the microphone because we're here let's start here who has the mic oh you do here right here thank you very much great presentation I'm a superhero now it's Sardvair Binin question almost for Evan when you started off the way you framed the discussion the different stakeholders and constituencies in terms of divergence now divergence what do you see next in terms of potential they taunt friendly competition unfriendly competition or continued diversion not to exclude Matt but how do some of the you know relationships that you've developed in your research feed into Evan's paradigm let's take one more so we get more questions from Matt right here Marvin Ott, Wilson Center and Johns Hopkins I don't know what the current number is in terms of Chinese students in the U.S. and there's some secondary school like college but somewhere north of 300,000 so you get this you have this really extraordinary number of call it China's intellectual elite and my understanding is 80 plus percent of these students will return to China correct me on that if that's not right so you have this very large infusion back into China of students that are have had a real immersion in American culture one way or another I have them in my classes at Hopkins what happens with these students you know they've been acculturated you would think that would have a big effect this would get you outside your lane a little bit of these sort of the political effect would be the most interesting yet very little evidence of that as far as I know after 25 plus years of this what's going on and just a quick sidebar this is really not fair but somebody I knew from way back when Chen Xiaolu died recently under mysterious circumstances I just wonder whether you had picked up anything I'll come back around if you don't mind I'll come back at the end on the student question that's one of the things that I find the most interesting and it's always kind of the most fun to report on hanging out with college students and I guess I would make two sort of adjustments to the larger framing one which would be about and these both have to do with the periods of time involved so the biggest evolution in Chinese students other than the fact that the total number has grown is it has gone from in the 80s and 90s it was very much the intellectual elite and they were entering the US for PhDs often in science technology and in mathematics fields and also the vast majority of them stayed here as of 2003 people who graduated Chinese nationals who graduated their PhDs in 2003 84% of them were still in the US 10 years later we had this we had intellectual elite coming here for graduate study and staying here in huge huge numbers and the transition that in many ways I sort of follow in the book happens around 2000 starts around 2008 where it's no longer necessarily the educational elite they're often coming here for undergrad and they're not necessarily staying here in the same numbers as before so that has kind of implications across all of the levels that we talked about in some ways because they're coming here for undergrad they're bringing a lot more money with them you know they're not leaving an incredibly poor country and coming here and just kind of subsisting as grad students they're leaving potentially from wealthy families or middle class families at least coming here and sort of subsidizing our public university system during hard times post financial crisis and after they graduate it's much more up in the air whether or not they stay or go so it's not the 80% number I don't think that that would be accurate at the moment there's basically there's no really good number on that China claims that globally 60 to 70% of students come back but we don't have a parallel number here in the US and if I had to estimate I would put it at something like maybe 50 to 60% eventually heading back to China and 40% staying here for the time being at least but that's a bit hand wavy and the area where I have zoomed in and got actual data is specifically on the high end talent in artificial intelligence specifically so for those students from the samples that I've pulled which are admittedly small samples based on top conferences we keep about or about 70 something percent of the top level AI talent worked at a US institution after graduation so in some ways it goes back to the motivations and the push and pull for these people if you are a maybe an average student who comes to the US because parents can afford it and they want to send you abroad and international experience but after you graduate you can kind of stay in the US and can maybe scratch out like a middle class life or maybe your parents own a rug manufacturing empire in Jiangsu and you can go back and head that up or you could go back and just get a normal job in PR at Alibaba or something like that in some ways the attraction and the possibilities of living are so much higher in China than they ever were so that is what has kind of led in many ways to this shift now it's being sort of accentuated by our visa policies our H1B policies and all that but there is also I would say a natural flow and when it comes to the political implications of this and the social implications of this this is something that I track very closely at a kind of interpersonal level a lot of these people are my friends I've sort of watched what happened when they came here when they went back and I guess maybe I just put a couple of markers down one is that it's the environment that they enter and how integrated they are with US society when they are here is in many ways affected by how many students are here in the 80s or 90s if you were a Chinese student at a US university you pretty much you had to learn English you had to associate with Americans or you have almost no friends so it's kind of enforced integration whereas now in the present day in many of these universities the Chinese student population has hit sort of a critical mass where you can operate almost entirely in Chinese circles do Chinese social activities go to boba shops kind of live in that world and that very much affects what you do and don't pick up about American society this is I mean interestingly sometimes it can sound nefarious but it can sound very negative on the Chinese side this is exactly what Americans do when they go to China you know you have a small portion of them who become really dedicated learning the language integrating making friends the vast majority go over there do their day job speaking English go home at night go to the bar with Americans and pick up Chinese culture kind of in passing so we're kind of seeing a mirror of that in many ways but yeah it's also very much the political environment and where you like if you entered if you were a Chinese student who entered America in your freshman in the fall of 2016 and you lived here for these past three years you know what is your impression of the American political system how functional is it you know the nature of leadership partisanship all this stuff like you have a very different impression of things whereas if you came here in the 90s and Bill Clinton was the president and you know whatever it's just a much more happy go lucky time I think well 90s had their darkness to it I guess yeah so that's what I would say in terms of the transmitting of American values back there it's partly about the number of Chinese students it's partly about what America are they seeing and what China are they seeing do they see China as a you know are they increasingly proud of a rising power and assertive stable whatever you want to call it power I think many of them are and I guess just the last I'd put down is that it's very early in this story it's only in the last ten years that we have had significant flows of Chinese students back to China and with many of them not necessarily being in engineering or science people who came here and studied business political science and sociology going back there and so these people are still at most like 30 years old and I still maintain a degree of optimism about the long-term 15 20 30 year implications of having such a large portion of probably wealthy probably influential people having spent time in the US but it's down the road a couple more I got one in the back actually let's take the two from the back and then I'll come back thank you very much Mark Manier with the South China Morning Post so excuse me I came a little late so if you covered this my apologies but one thing I'm interested in would be the Chinese American community and how that interacts particularly given that there are so many divisions within this community from mainland and those who have been here several generations and may have a more liberal view and how they're in some way being racially profiled as the tension builds before between Beijing and Washington any thoughts on that thank you and let's take the question that's right in front of you also Emma Raphaeloff with the Information Technology Industry Council I see being basically in the tech sector and looking at Asia policy there's a lot of as you mentioned like concern about the Chinese students who come here and go back and like the technology transfer implication and this has also fueled quite a bit of the discussion about decoupling between the United States and China there's also this sort of growing concern about US like startups particularly in the tech sector that are being funded by Chinese capital and those are like whatever the composition the workers are some of them are going to be US citizens but there's still concern there also about like forced tech transfer or just general tech transfer and I would just be interested to hear your thoughts like in all of your research like how how you would respond to those sorts of concerns and like what is actually the realm of realistic because I think that there's a lot of kind of jingoism involved in the don't let Chinese students come in but then you do get to some other points of concern reality yeah okay so let's take those two and then I'll come back here in the next round okay I'll try to be a little more succinct so the Chinese American question at first this is actually the last chapter before the conclusion this book is about the interaction between different generations of immigrants from China specifically in politics I found it completely fascinating because it was a world that I just hadn't entered before but you can think of it very much in terms of different waves of Chinese immigration when did you enter US society and kind of at what position did you enter US society and some of the biggest earlier waves were post 1965 Immigration and Nationalization Act where many people entered society as working class people they entered right during the era of the civil rights movement Lyndon Johnson and so their entry into America they often ended up on the left or maybe the moderate left a lot of Chinese American activists who you know are very sort of in favor of coalitions across ethnic groups and progressive politics and all that and the next big wave comes sort of 1980s and beyond all the way up to the present day is immigrants who are predominantly from mainland China they often enter here as potentially educational elite or just wealthy people and so they enter US politics with a much different set of concerns and a much different set of you know different ties back to China in different ways so this really came to a head in 2014 through 2016 first you had kind of a basically an awaking of Chinese American immigrant politics new wave Chinese American immigrant politics around it started in California it was a bill to basically reintroduce a form of affirmative action into college admissions in California and everyone thought California, liberal state this is going to pass easily and blah blah blah and basically the relatively new Chinese immigrant population was up in arms because they felt that this was specifically targeted at or would directly impact their kids Asian American students Chinese American students make up huge portions of the UC University of California system and they felt that this was going to kind of place inherent quotas on them quote unquote their spots were going to be given to other ethnic minorities or to white students and this was the kickoff of a very intense period of conflict between these two sort of different generations of immigrant groups, immigrant activists first it was around this affirmative action thing which the new Chinese American immigrants mobilized for put intense pressure apologies thank you they put a lot of pressure on local California legislators and they basically defeated the measure and then it came up again during the 2016 election when this very loud and proud group that had a lot of overlap with that earlier group became very pro Donald Trump I encountered this for the first time I had just moved back in 2016 it was kind of like getting my bearings again in American politics and I was just like why is everything so why is everyone so mad all the time so I decided to go to some political events on I think it was like Tuesday I went to a Bernie Sanders rally in Palo Alto and the next day I went to a Donald Trump rally in San Jose and that was the first time that I saw at the Trump rally in San Jose people with these Trump who the North American Chinese Trump supporting group and they had t-shirts they were handing them out they were in the front row the first woman I saw was holding up her t-shirts she eventually got her Chinese t-shirt signed by Donald Trump and they became very active in get out the vote stuff they went to the long doors they went to Pennsylvania they went to a bunch of places they would fly these airplanes above major cities on days that Donald Trump was in town with a tailing a big banner that said Chinese Americans hearts Trump and they became a very interesting sort of little side story in that general election and it became a very very divisive thing within this community it was down to some technology things one of the big differences was that the new activists organized on WeChat they got their information on WeChat they organized themselves on WeChat and it became a very effective organizing tool and you had a lot of older immigrant activists people that I grew up with feeling like they couldn't even pierce the bubble they couldn't even get into conversation with these people because they're not in the WeChat groups they don't read the same articles maybe they don't read Chinese at all but in the interest period of time there's some sort of bright spots going forward on this front of people trying to engage and stuff like that but that's the main way that I sort of looked at and covered that the whole issue of racial profiling and stuff in the present moment is a whole other can of worms but I only have so much voice left so I'll go to the next question which was on technology transfer and students and yeah I'd say this is the realistic in both directions I think Silicon Valley for a long time has taken the all exchanges good welcome all types take money from wherever it comes from and let's just do our business here approach and that does come with a certain amount of naivete about both the geopolitical dimensions or the potential influence of say the Chinese Communist Party on people who are living in China or coming out of China so there was definitely a naivete on the Silicon Valley side and there are examples of this that I can point to or a friend who was considering taking on money from a major Chinese technology company as an investor and sort of in the investment pitch meeting she said her boss told her not to pretend and understand Chinese and so the team the Chinese company team is she can hear them talking and basically get them to show us that slide again get them to go back with it I just want to look at that diagram again an actual example of really trying to interact in a kind of predatory way and that is a reality in some areas but it's very much it's only one part of the picture and I think that in the same way that there was the naivete on the Silicon Valley side I think the Washington policymaking side has a naivete about how these things actually play out on the ground level so that story is one example but often with with stuff like the it was the DIUX report was the big government report kind of sounding the alarm about Chinese venture capital investment over here and what in many ways led to China and new restrictions on Chinese capital and while I think the report was good in kind of giving an early heads up like hey China does want technology and they're trying to get it in various ways it was just not it got a lot of things very fundamentally wrong about who the Chinese actors are in Silicon Valley how much pull, how much influence they have and what they're doing there like it misnamed basically yeah there's so many details Hacks, yeah so one example that I thought was kind of the most egregious was they were talking about all of these nefarious Chinese venture capital companies that are coming to kind of suck the blood of Silicon Valley and in it they named this one company called Hacks or short for Hackscelerator and basically what it is it's a company founded by or founded and funded by an American run by a bunch of Europeans that's located in Shenzhen and it helps hardware startups from around the world who want to develop a prototype quickly come to Shenzhen immediately plug into the hardware ecosystem there where you can just develop hardware products so much faster in that environment there are 10 factories that make every little sort of module that you need for your robot and the sort of the short hand that a startup founder there gave me was spending a week in Shenzhen developing a hardware product and so Hacks is trying to fundamentally give US and international companies this access and then they build their prototypes and they go back to the US raise money whatever and the report identified Hacks as a Chinese venture capital company that was getting its hands in the US startup ecosystem and it's just that's a really kind of baseline fundamental factual error that spoke to in many ways not understanding who the players were and yeah I think when it came to the venture capital side specifically most of the Chinese companies that were sort of listed in the reporter that are cited as being state funded investment vehicles they honestly they are they do almost nothing in Silicon Valley nobody really knows who they are nobody really wants to deal with them they can't get into any deal worth happening that was kind of the biggest takeaway I had from looking at Chinese VC investment so much venture capital is about you know you're giving them money or you're taking their money but you're also hoping they can be a mentor they can make connections for you they can sort of guide you through this process and if you're a bureaucrat from the suburb of Hangzhou somewhere who just shows up in Silicon Valley with money and says you know I'm here to invest you're not going to get in any good deals you don't have any networks you don't have any reputation you don't have any black record even some of the very good reputable venture capital companies in China that showed up in the US similarly they couldn't get into good worthwhile deals and they just were not a large player in the ecosystem and the places where they did play were like the companies that did take on funding from these institutions were often either companies that were so bad that they needed money wherever they could get it from so kind of who cares or companies that needed a connection in China to execute on their business plan China China they needed to manufacture in Shenzhen and they wanted someone to guide them through that process they wanted to sell their robotic pipetting system to Chinese universities and they needed someone with connections to sort of make all those introductions and so yeah that it's that I'm looking at specifically the VC component there's all there's also students there's also the big companies all that stuff let's say it's just an example of an area where the information there's like naivete on both sides there's a lack of communication on both sides between DC and Silicon Valley and we really need to combine the top-down perspective that comes from here saying what are the national level goals of the Chinese Communist Party with a perspective from the players in Silicon Valley are saying like this is what I'm seeing in my daily life and then being much more sort of strategic and tactical about how we do that decoupling to cut off the interactions that are predatory while not cutting off US companies from working in Shenzhen not cutting them off from working with Chinese scientists who they are learning from and yeah that's sort of my take on it. Okay let's take a last couple and then I wrap it up by coming back to that question I was asked yeah please just wait for the mic you talked about real estate and home buying a little bit could you say more about that yeah so in real estate and home buying I found you had China showing up in like two very different ways in US cities that often had very different implications for home prices so one sort of main avenue was what I described earlier private Chinese home buyers they want to emigrate or they want to send their kids to the US they buy really buy multi-million dollar houses with cash in wealthy suburbs and another big way that Chinese money ended up in US real estate was through private companies leading large developments so in San Francisco the largest master plan real estate development since like the great earthquake of 1906 was funded in many ways by Chinese EV5 investors downtown Los Angeles, downtown San Francisco almost all of the major new high rises that are going up are taking on Chinese money in some way or they were now many of these flows have been cut so you had these two different trends you have private people putting a lot of money into single family homes that are in many ways driving up prices in the suburbs and you have companies building towers in the center of cities that are in cities like the San Francisco housing and part of why our housing prices are so high so by bringing all these new units online some of them being low income units some of them being in sort of conjunction with the city that are in many ways bringing down prices at the city level and so you had these two different trends going and they both kind of lead to their own tensions Palo Alto there was a bit of a backlash against all the Chinese home buyers coming in and buying our homes and driving up prices and in the cities in the chapter on real estate I followed this one development in the last predominantly black area of San Francisco where the Chinese development is launching a major redevelopment that is going to bring a lot of homes online onto the market but it leads to all the same tensions over gentrification you know redevelopment without really understanding the local situation and so yeah it's one of these where you have two conflicting pressures both of which lead to tensions but both of which also lead to some new possibilities one more before yeah if there is one okay we'll take you'll be the last one just wait for the mic and then I'll I'll say something at the end now right here down for Malin shown with Shinkuan news agency I think you just mentioned about decoupling I have a follow up on that so there seems to be more signs of decoupling as of the national tension so if you take a longer perspective looking ahead do you see decoupling especially in the technology front just happen in adversely or do you still see there are forces that could somehow put back things together if there is could you share thoughts on that thanks I'm going to put a humpty dumpty yeah I think on the decoupling front we're not we're fundamentally not going backwards there's we're not going to return to a period of time when Chinese venture capital money is welcome in silicon valley at least not in the near term and when the you know Google can set up an AI research lab in Beijing without a major backlash like that that kind of stuff isn't going backwards my main sort of hope looking forward is one that we can do this in a thoughtful and strategic way kind of what I was describing in terms of relationships in silicon valley where we cut off things that are deemed predatory but keeping open like sort of mutually beneficial ones but beyond that the one area where I really hope there is effort made to maintain a certain set of ties is on the intellectual scientific front specifically as it relates to the safety and security of new technologies I think over the next decade 15 20 years the the combination of things elisted AI quantum computing 5G are going to raise an entirely new we're opening an entirely new can of worms when it comes to what these technologies can do how deeply integrated are they with our military systems with our economic systems and there is an emerging field of research that tries to functionally deal with these make sure that the systems are reliable their trustworthy we know what they're doing and we know how to sort of keep our hands on that and this is an area where I think you know supremacy in a narrow sense does not equal national security racing to build the more powerful AI system that the more powerful lethal autonomous weapons system does not guarantee security on both sides you need both actors in the system to keep developing systems that are safe that are reliable under control that you can understand and interpret what you can understand why the algorithm did what it's doing and we can make some judgments based on that and my sort of big hope in the decoupling phase is that even as we pull apart many of these other areas we are able to keep scientific exchange on these specific fronts open whether it's at international research conferences ensuring that safe workshops on AI safety and security is something that is still a two way discussion or when it comes to quantum computing or 5G similarly building in it's almost like building out a new not necessarily an arms control apparatus but new apparatus for global technology if not shared governance at least ongoing communication when it comes to safety and security so I'll end this by answering the question I was asked where's this US-China relationship going because I think it actually brings it the way I'd answer that brings it back around nicely to California personally especially as somebody who just parachuted back to Washington after being away for a while I think we're heading in a much more confrontation direction and that has to do with policies in Beijing and it also has to do with policies in Washington and I just think that's inevitable that's where we're going you hear it in our politics you see it in our security documents the national security strategy the national defense strategy you see it in choices that are being made every day on both sides and we're not going to go backwards on that so we need to adjust to that new era but having said that I often hear that the United States therefore needs a new national strategy for dealing with this more confrontational era and the thing about a national strategy is to be coherent to be coherent a strategy can be simple like in a democracy a strategy especially a national strategy also has to bring people behind it and so when I look ahead I kind of see three disruptions one is as I said and as I said in the setup to this event and I think as you've heard Matt talk Americans increasingly interact with China in just very diverse and multifaceted ways the mayor of the town in California you talked about a labor union that was working with the Chinese company PYT so when you have that diversity it's hard to assemble a coherent political coalition in this country on anything so if you want to do that amid that kind of diversity when you have that many stakeholders that's going to be a challenge both to strategy but also in our politics second if you look at the polling the public's not there there's Pew polling you know views of China are much more negative than ever before they're particularly negative among Republicans but they're negative among Democrats too but when you look inside that top line numbers actually the data on individual issues whether it's how do you feel about the trade war how do you feel about this or that tariff do you think we should sell arms to Taiwan actually the data is much more complicated in terms of where Americans are so if the public isn't there then the public either needs to be brought there by leaders and politicians or somebody needs to figure out how to adjust public expectations and political realities to the strategy conversation that's happening in Washington then the last thing I'd say is we have a very unique individual as our president now and President Trump and President Trump may or may not strike a trade deal with China you can debate whether it's going to be a skinny deal or a large deal a simple deal comprehensive deal but I just want you to pull that thread and play that out in your head for a second and make some kind of trade whatever it is in the next year to a year and a half before the presidential election my expectation is that President Trump will be talking about it out in the country to the audiences that he connects with and he'll be holding rallies in places like Appleton, Wisconsin and Grant's North Dakota and he'll be saying look at this deal that I just struck with China and why in my view as your president it's good for American farmers and ranchers and for the American industry look what I did that my predecessors never could do with the bad deals that they struck and if you don't think that's going to have an effect on the political conversation of this country my view is you haven't been paying attention to the dynamic that President Trump has created out in his rallies out on the campaign trial out in states so what's happening in California what's happening in states that are politically very different from California states like Nebraska for instance where the Governor Pete Ricketts is a big supporter of number four agricultural producing state in the United States after California, Texas and Iowa and has taken a hit from the trade war with China so so as I said I think we're heading into more confrontational direction but what these kind of local angles on things whether it's California or generally show is that amid all of that diversity I think the political conversation hasn't quite caught up with where the public is or isn't yet and so amid all of that confrontation I think our politics are going to possibly produce an interesting story okay with that Matt this is a great book actually I've read it and I encourage you to read it sorry we're not selling it but you can order it it's a fun book stores everywhere and online and it's a great book because Matt was a journalist it's an easy read it tells stories so I encourage you to buy it and read it then hey Matt thanks for thanks for coming to watch so please join me in thanking Matt thank you