China Decode: China Is Beating the U.S. in Space?!

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“And then there's this sort of fuzzy hybrid domain,”

dual use, I suppose, that could be military, could be commercial. And the more you look at all of the space furniture up there, the more you scratch your head and think, "Well, could that be military, could that be commercial?" You know, there's a lot of introoperability.

Welcome to China decode, I'm Alice Heng. And I'm James King. In today's episode of China decode, we're discussing, China's huge strides in the space race, the looming $2 trillion generational wealth transfer,

and regulating dim sum automation.

That's all coming up, but first, let's do a quick check in with how the markets are starting the week.

On Monday, Chinese stock markets were closed and observance of the Labor Day holiday. The Shanghai composite ended the month of April up 5.66%. And the Shenzhen component surged over 12% thanks to strong PMI data and notable gains in several tech stocks. China's manufacturing PMI for April was 50.3 slightly above forecast,

suggesting expansion in the manufacturing sector. Shears of Xiaomi, the Chinese smartphone and EV maker closed 6.8% higher in the Hong Kong stock exchange today. All right, let's get into it. In last five years, they've landed a rover on Mars

completed a space station and collected samples from the far side of the Moon. We're talking not about the U.S. but China. And in 2025 alone, the country executed over 90 orbital launches setting a new national record. And in the tightening space race, China is also pulling ahead with innovations

like a giant robotic arm to service satellites in space. A space telescope with a wide of view than the Hubble and reusable rockets compete with Elon Musk's SpaceX. China is also actively developing rockets. They can take off from water-based platform.

James, we've talked about space in the last few episodes. And it seems like with Elon Musk IPOing SpaceX, we've made space great again. But China's also a key part of this. And some of the startling videos that I've seen,

like of that orbital arm in space, seem very futuristic. But it's what's actually currently happening. And certainly as with any kind of technology, it has direct contemporary use cases, potentially even military use cases.

“How are you seeing China's startling advancements in the space race?”

Well, yeah, at least I mean, it may be an obvious point. But I think China's space strategy is not primarily about space. It's all about planet Earth. And particularly how to dominate the global order on Earth, of course, by enlisting space to gain advantage.

And as you've just said, when you look at what China and, of course, the U.S. is doing in space, there's a military domain and there's a commercial domain.

dual use, I suppose, that could be military, could be commercial. And the more you look at all of the space furniture up there, the more you scratch your head and think,

“well, could that be military, could that be commercial?”

You know, there's a lot of interoperability. But when I was doing a bit of research on this, I must say, I came across one quote from a China military expert that really stopped me in my tracks. This was in a story by the financial times.

And it's written by, as I said, a military expert in a text book for Chinese military officers. So this isn't sort of for public consumption. This is something directed at the Chinese military, which I think shows that it's, it's pretty authentic.

And basically, this expert says that China intends to control the Earth by controlling space. Let me just give you the whole quote, because I think it is really quite startling. He says, looking up the skies today, we see that space is already shrouded

in the smoke of potential conflict. And then he continues by saying, the potential for high returns, the ability to control Earth by controlling space,

represents a powerful strategic and military incentive.

Therefore, the development of space warfare capabilities has become a focal point of the arms race. So I think that puts it pretty clearly. China sees space quite nakedly as a power game. And you've already mentioned the satellite with a grappling arm

that sort of cydels up to other satellites. And the US intelligence caught, I suppose, a space-based video over this, they saw this Chinese satellite with a grappling arm, sideling up to another defunct Chinese satellite, and literally picking it up and hurling it into what's

called a graveyard orbit. That all happened more than 36,000 kilometers above the Earth. The Chinese satellite with the arm is called the Shujian 21. And it didn't take long for the US military establishment to wonder, well, if it can do that with a defunct Chinese satellite,

then maybe it can do it the same thing to one of our satellites. And the US has more than 8,000 satellites in space, including 80 spy satellites, or around 80 spy satellites, some of which are trained on China's territory and literally monitoring every square meter of China's territory.

And you can imagine that China might not want one of those spy satellites to be doing that. So in 2023, the Office of the Director of National Intelligence in the US warned that this episode, the one that I've just described, proves China's ability to operate space-based counter-space weapons.

So in other words, weapons that can degrade US capabilities in space.

“And I think, you know, what we're kind of evolving into here”

is not only a huge commercial market, as defined by the number of satellites that are going up into space and all the different uses they have

and their crucial nature to the economy here on Earth,

but also an equally vigorous military-driven space race. How are you seeing it, Alice? Well, I can clearly agree with what you're saying, James, and what's interesting to me is the growth and spending that we've seen, just to give people a sense, the US is still leading

in the space-tech investment area. And this is accounting for both public and private investment. They did around $7.3 billion of space-tech investment last year. That's 60% of global funding by far the largest source of funding for space technology. But China is catching up.

“And right now, I believe it's somewhere around $3.8 billion”

that didn't invest in the commercial space sector in 2025,

for just for reference 10 years ago that was only about $340 million.

So we've seen a 10x rise, so to speak, in the last decade, and certainly I could see, you know, further growth moving forward, because it is very clear in, oh, so the five-year plan, as well as the March-A-Lalquay, remember, for you, recall two months ago, in the documents, there was a reference

to China being a space superpower, you know, a manufacturing superpower, a technological superpower, but as a space superpower. So there's a lot of attention being paid by the Chinese government

use technologies, James, that are being deployed in this ecosystem.

What was interesting to me, also, about that on orbit robotic arm,

“is that I believe it's a private company that is supplying this technology.”

I think it's San Yuan that is providing commercial space technology to the Chinese government. So there is a really a private public ecosystem establishing around space tech, there isn't too dissimilar from what we're seeing in the states. And this is all happening in a time where increasingly a Western investor's an observer,

is a really fixated on spaces, the next technological frontier. Everyone is going to be watching with Bated Breath for the biggest IPO in history this year, which is SpaceX. So I think this may become another political issue potentially between the US and China as people get more and more interested in space technology.

One other thing that I will say is that, you know, space was a big part of China's strategy going back to 2013 with the launch of the Belt and Road Strategies, referenced as part of China's broader Belt and Road strategy. So this has been a long time in the making and it will be interesting to see, you know, how it shapes up in the US China, not just talks coming up very soon,

but sort of longer-term strategic competition. Yeah, absolutely. And I mean, you know, it's hard to know who will eventually win the space race. It's clear that when it comes to commercial presence in space, the US is far ahead. It's got a much bigger share of the space economy,

which according to the space foundation is worth about $613 billion dollars.

So it's a huge market already. The US has currently about 55% share of that. And China's much much less at about 8%. But China's really, really moving now. You mentioned more than 90 orbital launches.

Of course, these orbital launches are sending something into space, like a satellite or a spaceship. The US is currently doing about 180 launches per year, mostly driven by SpaceX. But China's doing a lot of other things too.

They've had a few other milestones. They had a mission to the far side of the moon. That's the dark side of the moon for Pink Floyd fans. It's also completed its own low orbit space station called Tian Gong. There's a lot of activity going on in Tian Gong.

There are modules going up there meeting, you know, demand for further advances. My favorite space factor when it comes to China is that China is actually officially trying to find signs of aliens. China has a huge satellite dish. It's 500 meters across.

They call it Tian Yan or Sky's Eye or Heaven's Eye. And it's there in southwest China listening for signs of an extra terrestrial life.

“I mean, because it's, I think, the biggest dish in the world”

it probably has a higher capability of listening for that kind of life. And recently, well, in June 2022, there was a report in the Chinese science and technology daily that said that researchers had found multiple suspicious narrow band signals. So there was a great flurry of excitement.

Maybe the Chinese Tian Yan had found some sort of sign of an extra terrestrial life. But in fact, later on scientists in the US said that this was almost certainly radio interference. But I just sort of think that it just shows the level of China's ambition. You know, this is not something crazy. They really are listening for extra terrestrial life.

I think that just shows they're leaving no stone unturned. That reminds me of the book series. As you ever read at the Three Body Problem, Santi by your session. It's about these Chinese astrophysicists who are also looking for extra terrestrial activity.

And they come in the form of tricilarians, Haley, recommend the book.

“And one last point, it can't be overstated how important satellite technology is.”

And we've definitely seen that being used in Russia crane. We've seen it being used more recently in Iran.

And it's been critical for the supply of intelligence and tracking used to guide precision

missiles and ICBMs. So just to apply it to the current day, China having capabilities to really append American satellites at and space can materially affect the outcomes of current battles that we're seeing in Russia crane in Iran and potentially even close at a home. So I thought there was worth definitely worth flagging.

Okay, we'll be back with more after a quick break. Say with us.

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For the first time in its modern history, China is grappling with what to do about a massive generational wealth transfer, and the fact that almost none of it will be taxed.

Chinese citizens with fortunes above $5 million are expected to pass down roughly $2.1 trillion

over the next decade. By the country, only really allowing entrepreneurship and adore way to wealth since the 1970s has no inheritance tax at all, and limited property tax and tax on accumulated wealth. This is coming at a time when the government could use the additional tax revenues.

James, an economist focusing on China, it's been quite interesting to see the decline in fiscal revenues. I know this sounds very wankish, but it's really important to understand where the government is today is the huge decline in fiscal revenues largely driven by land sales declining and property values declining. So, last year alone, we saw a 15% decline in land sales revenue going to predominantly the local

governments, and we've seen just fiscal revenues as a share of GDP continued to decrease. China's fiscal revenues as a share of GDP are one of the lowest in the world, it's only about 15% just for reference the OECD average is around 34%. So, just to give people a sense of how cash strapped the local governments are,

“I think really indicates the shape of things, and this is why the new five-year plans”

discussion about tax reform in particular, the capital gains tax and the inheritance tax is super interesting. Why do you think it hasn't happened yet? And what it could mean moving forward for society and economy?

and I've been looking into it a bit, I really do think that it's indicative of so much in China,

“and I think at the middle of it is a bit of a mystery, at least an ostensible mystery to me,”

because when you look at China, you find what is one of the world's most unequal societies, and yet this is a country still controlled by the Communist Party of China. Of course, we know that it is only communist in name, egalitarian communism went out at least a couple of decades ago, but if you look at the numbers, China is more of an unequal society than any of the capitalist G7 nations, Canada, France, Germany, Italy, Japan, UK, US.

It's more unequal than any of those countries. I'll come to the statistics I'm using,

but my main point is here, why has it taken China so long to come up with an inheritance tax? When it could use an inheritance tax to take money from the very rich when the patriarchs and the matriarchs of the rich families die, they could use an inheritance tax to redistribute some of that enormous wealth to other people who need it much more, and yet, as you said, "Alice, China hasn't done this." I really do wonder about this. At the center of this topic to me,

anyway, is a big question mark. I don't know what your reflections would be, but before I throw back to you, let me just give you some numbers. The way in which wealth inequality is measured in the society is this "genecoefficient." And there are various different data sets that come up with this, and the Chinese government also used to publish the "genecoefficient" from China. And in 2021, the "genecoefficient" showed that China was over what is 0.45. That is put simply

a threshold that shows high inequality for a society. The U.S. for comparison was about 0.4, so that's lower than China, and places like Canada and Germany and Sweden were hovering around 0.35. So you can see that according to the numbers, China is genuinely one of the most unequal societies in the world, in spite of the fact that it is still ruled by a communist party, at least one

“that claims to be communist in name anyway. But let me, could I throw it back to you, Alistair?”

Why has China taken so long to move on this or to consider moving on this very important topic of inheritance? Well, I look at the history of taxes, and what is interesting, I think it is a legacy of the Soviet system, is that China is very good at recording and taxing and some degree controlling the supply side or the production side rather than the consumption side. So historically, if you look back to the 80s onwards, a lot of the policy is about subsidizing or

spurring or even to some extent price controlling the supply side. And really only in recent years have we seen reforms to really understand the consumption side of things, so we had reforms very recently on value added tax, which is effectively shaping consumption related outcomes. And there was talk in the last few years on going talk about property tax, but that is pretty much gone, and it wasn't in this year's five-year plan, even though it was mentioned many times

in the previous one, because the government understands that that is going to provide very little in terms of revenues given that were 15, 20, even potentially more per cent down relative

“to pre-cracked down trend in terms of property valuations. So the discussion now I think has been”

revived after so many years, because right now I think the central government is really scratching its head to figure out where else it can generate revenues, especially now that it can't really rely on land sales. It can't really rely as much on corporate tax and income tax in a period in which growth is slowing. And it remains reluctant, although this has been touted as one policy choice to do reforms to the export tax rebates, effectively getting rid of some of the subsidies

on the taxes for Chinese exporters, because they ultimately don't want to harm and hinder China's

export machine, basically they want to protect the Chinese manufacturers. So what else can they do? I think this is pretty low hanging fruit for them to really target what is going to be one of the biggest wealth transfers in contemporary history and certainly in Chinese history.

to have to pile this in certain cities to see how it works. And then they're going to have to figure

“out the division of fiscal revenues between the central and the local governments. And here I think”

maybe the local governments might again be screwed because the central government feels that it probably needs to replenish its coffers. We have a overall fiscal deficit that is nearing 10% potentially this year, which is a historical high. So I think this is all coming to a head because predominantly there are little other choices in terms of tax sources, tax revenues for the central and local governments. And I predict that next few years will probably start to see

some of the piloting of these inheritance taxes. But it's interesting because I remember reading a couple of years ago Thomas Piketty writing about how China needed to have these inheritance

taxes because ultimately what he called Patramonial capitalism was going to be very bad for China.

And so in their recall james doing my own historical research on the genie coefficient in the last two to three decades, it has actually expanded since really reform and opening. And it's been you know, a flip side to the story of high level growth is that a lot of inequality has sort of settled in the top echelons of Chinese society. But it's interesting because, you know, the government also does care about equality. I do believe, you know, hence the terminology

common prosperity that Xi Jinping coined. There was also a discussion a couple of years back about an olive-shaped economic distribution as opposed to an upside-down triangle, meaning that you would try to create a bigger middle class like in America and elsewhere in the developed world. But it's hard to see that happening and maybe maybe having this wealth tax could be a step in that direction, although I'm somewhat skeptical. Yeah, well, I mean, they've certainly got

plenty of billionaires that they could tax when obviously those people die. Those numbers are China has about 539 billionaires according to Forbes magazine this year. Their total net worth is estimated at about 2.2 trillion US dollars. That, by the way, is equivalent to the size of the entire Australian economy. And this is obviously, it's quite a lot less than the US. The US has 989 billionaires according to Forbes magazine. But China is the country with the second highest

number of billionaires. So there's a lot of fat that the Chinese government could tax if they

“decide to go down this road and I think you are of the opinion that they will. My sense of this,”

when I was thinking about why China hasn't done this much earlier, is that I think China wanted to create a kind of doggy dog, go get a economy where winner takes maybe not at all, but winner takes a lot. And those that are left behind, they're left behind and they're hungry because they've been left behind. That's my kind of back of the envelope explanation, but I do find this a rather

curious topic actually, similar to why China hasn't had a property tax. I've never really been

able to understand that. And I do wonder whether there is some political reason for this that none of us know about, whether there's some power struggle at the top of the Communist Party with some people pro, some people anti and nobody finally making decision. But as I say, that is just speculation. I have no evidence on this. Yeah, I had back in the day the rumours that some interests that a connectivity developers didn't want to have property taxes and there was a debate or tension

between the localities and the central government as to who gets what part of the property

“tax revenues. So I think it all becomes political at the end of the day, one last thing that I'll”

end on that I think ties into modern-day Chinese society is an argument that I hear a couple times from my friends in China, which is that Tang Ping has become an issue again, this idea of lying flat in China, or taking it easy. And I'm hearing that this kind of wealth transfer for the next generation who will largely only children because the one child policy means that they don't have to worry too much about working or striving and working really, really hard like their parents

do. And that there will be okay because they have all these assets and the wealth transfer from their parents all concentrated in this one child. And so it all connects to society and to contemporary events with Gen Z at the end of the day. So we should definitely watch this space and how it affects Gen Z unemployment, the Tang Ping movement. Okay, let's take one last quick break, stay with us.

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thousands of businesses have made the switch. So why not you? Try Odo for free at Odo.com. That's OdoOo.com. Welcome back. We end today with dim sum, namely the increasing automation used in dim sum production across China. The making of the delicate dumplings and other bite-sized dishes has long been considered an art form, especially in southern China where the practice originated. Starting May 1st in Guangzhou, tea houses will have to disclose whether their dim sum is handmade or produced

via non-traditional means, otherwise known as manufactured. There are also reports that restaurants in eastern China actually using AI robots to cook dishes and save costs. It might all seem trivial, but in some ways, these changes to the food industry are indicative of a broader trend in China. The increase in regulation around AI and robots as these industries rapidly develop. James, I did research on this and what was interesting to me is these two cases that just happened

in the course of the last two years, one in Beijing and then in one Hongzhou where they separately rules that the companies couldn't fire their workers, simply on the grounds of AI. They sighted

China's labor contract law from over a decade ago and basically said that the company's decision

is to fire their employees in question, did not constitute quite major changes in objective circumstances, which is a clause that is normally reserved for natural disasters or shut down

“unexpected shutdowns. This I think is interesting and it could be a precursor for further regulation”

in the AI labor realm, which is really I think at the first of its kind globally, but it hits the nail on the head when it comes to some of these concerns, people have a job displacement of AI automation and of increasing unemployment concerns. What's your take on this and do you think we're moving into a realm where China could be a leader in globally in AI labor laws? Well, just going back to dim sum briefly before we get back onto that one. You know, Alice,

I went to a couple of cooking schools in China to learn how to make dim sum and I must admit that nothing I made came out looking remotely like what you would get in a restaurant. One of my teachers memorably said that I was no good at making dim sum, but I was good at making didn't sum. So I know that you as a former contestant on the TV show MasterChef, you probably make a very mean dim sum am I right? I do, I do practice the art of her folding.

Yes, I enjoy that. I have to say that I had heard that maybe you maybe you had heard this at

you go to a dim typhoon chain anywhere in the world. They have people doing the folds of the dim sum.

“But I think that they have mandated globally that you need to have 18 folds and a 21 grams”

per dim sum. That's just a side to side note. Wow, it's amazing, you know that that was the

top of your head. Yeah, but anyway, back to AI and AI taking people's jobs. I mean, obviously it's broader than AI. I think it's amazing that a robot is now dexterous enough to make dim sum. That's basically my point. I mean, it is hard to make dim sum. It really is hard from a sort of frick for a human being like me. Maybe a clumsy one like me. You know, so a robot can now do this with got AI, which obviously has a cognitive ability, which is now superior to human beings in many

different planes. We've got robots that are now dexterous enough to make dim sum. We've got robots that are now beating the world record holder in half marathons by nearly 10 minutes. And then we've got factory

automation all over the park in China. I'm not surprised the Chinese government is getting

really concerned about people's jobs, the big job shock that's coming on my recent trip to China, everybody I spoke to who wasn't in the AI robotics industry seem to be genuinely worried about this. So I'm really not surprised the Chinese government is getting concerned. And, you know,

“my sense of it is to be quite frank, I think China's going to lose this. I don't think China”

can put this genie back in the bottle. China is coming up with all kinds of rules and regulations, and it's even proposed setting up a global body to regulate AI, known as the world artificial intelligence cooperation organization. And the aim of a lot of these Chinese rules and regulation

is to prevent the job shock from AI and automation of robotics onto society. But frankly,

I can't see how they're going to do it. Because once a technology is available to do something much more efficiently and cheaply, then my experience of the world is that that is what generally happens. I think what will be interesting is whether or not the central government is going to step in an issue of regulations. I mean several years ago it did offer pretty sweeping regulations on deep fake technologies AI algorithms, data transfers. And, you know, I

“maybe I take the opposite side of the button. I think that there will be a momentum for the”

central government to sort of come in and start to mandate the threshold by which certain people should lose their jobs due to AI. Because if to your point, James has happened so quickly in the genius out of the bottle, this is going to create a huge crisis. And historically, when a crisis happens, I think Beijing tends to intervene or come in very quickly. I mean, we saw that, obviously, during COVID, but even on the flip side, when things get too hot in an industry, we see them move.

I would say quite quickly and retroactively, as opposed to proactively, to crack down on a sect. I think about, you know, for instance, the 2021 tech crackdown and tech crackdown on platforms. So, I wouldn't be surprised if we start to hear a lot of stories about unemployment about job losses that the central government is going to start to issue regulations that really try to protect workers. Because at the end of the day, unemployment to your point on previous

episodes, James is a huge, not just economic but political social concern for the government. And when I was in China, I heard from a pretty good friend of mine who's very plugged into these things. And he said, look, you know, you thought EVs were big. Robotics are going to be even bigger from China. You know, EVs at their height, you know, were about a thousand now it's went down to a hundred, under a hundred, EV different makers. Robotics, we're looking at the

hundred thousand or even more. And rather than having, you know, these general purpose robots, these are robots that are going to be finely tuned for specific tasks, like to your point, a specific robot for folding dim sum, a specific robot for running races, a specific robot, you know, painting cars, for instance. So, I think we're in for a real shock globally, when we see the influx of robots that might be even bigger than the influx of each

Chinese EVs that we're currently living. But how did you find it on your trip recently? No, I mean, I was absolutely amazed at that very point. I went to an exhibition center in Southern

I sort of in my mind, I thought of it as speciation of robots. So, you don't have a general purpose

“robot that can do everything. You have a robot that's able to do surgery, have a robot that's”

able to hand people at the chemists, the drugs that they need. You have a robot that's able to score goals in soccer. You know, you have a robot that's able to shoot hoops. You have, you know, all of these robots are designed for specific tasks, which is going to mean that they're much better at doing those tasks. And the humans have less and less chance to compete with them. And of course, robots don't eat, they don't sleep, they have natural advantages,

that humans simply will never be able to match. And so, this is why I left China really,

very concerned. I mean, obviously, I was thinking about China in this context because China's so far ahead of the rest of the world, it's moving into this brave new automated world quicker than any other country. But I'm also concerned about our countries. You know, in the West, this is coming to us next and it's not going to be long. And I feel that here in the UK, for instance, we're completely unprepared. No, we're completely agree. All right, James, you know what

time it is. It is prediction time. As you peer into the future this week, what do you see? Well, Alice, my prediction is a kind of breaking news prediction today, in fact, because the news is just coming out that even though the world cup, that is the world football or soccer cup, is only weeks away. FIFA, the governing body of football worldwide, has failed so far to sign a commercial deal with China. This is a massive story because in the last world cup in 2022, China accounted for

49.8% of the total TV hours. Well, not only TV, but other platforms as well, total visual hours, worldwide, from that particular world cup. So if China doesn't sign, it is a huge blow to FIFA, and we are right now at the 11th hour. So I'm going to stick my neck out and give a bit of prediction

“here. I think that FIFA will have to suck up whatever global offer the Chinese are offering”

because they're desperate. And this will probably be very painful for FIFA. But I think China's got the whip hand on this one. What are you seeing, Alice? My prediction is more in the realm of the upcoming Trump visit to China. It's clear that a couple of items will be in the agenda, trade, technology, even Iran, potentially, I think North Korea might even come up on the agenda.

But I think more importantly, my prediction for the second half of the year, after a series of meetings

between Trump to see that I believe will happen. Not just the Trump visit to Beijing. She, I think, will go to the U.S. towards the end of the year. I think that will be a big push from Beijing to get some kind of a landmark deal in the form of a Chinese green tech investment in the U.S. And I'm thinking of particular some kind of JV structure. Maybe it's a BYD Ford whereby there's a major announcement of a Chinese green tech factory being set up in America,

manufacturing effectively EVs on American soil. And even although there are some interests in

“Washington that would push against this, I think that it might be enough incentive on both sides”

to have some kind of a strategic deal to point towards. And certainly it was referenced many times in my China trip and it seems that a lot of Chinese factory makers are jumping at the bit to get presence in America. They do want to create factories and bypass these tariffs and restrictions that they currently facing as exported from China. So that's my prediction. We'll have to see if it bears out as well because it's very much subject to the U.S.-China relationship as it develops.

All right, that's all for this episode. Thank you for listening to China decode. This is a production of Prof. G. Media. Make sure to follow us wherever you get your podcast so you don't miss an episode. Talk to you again next week.