This week’s episode is a special one. I have a chat with my partner and CIO of the Interplay Family Office, Chris Zhang, to discuss China's remarkable advancements over the past few decades and what its current status looks like.

Chris is uniquely positioned to opine on this topic. He was born in China and spent the first 16 years of his life there, moving to the United States for high school. Since his move, he has visited China annually until Covid-19 halted all travel. After a three year hiatus, Chris visited this past April and was astounded at the progress he witnessed, including how built up his hometown of Zhengzhou had become (known as the iPhone city since they’ve produced most iPhones there).

That’s what inspired this episode. By challenging outdated perceptions and showcasing China's progress, this conversation is meant to highlight the need for a nuanced understanding of China's current status as a global powerhouse.

Here are some of the main topics covered:

  • Education and work ethic: Chris shares insights into his rigorous Chinese middle school experience, highlighting the dedication and discipline ingrained in the system.
  • China's private sector contributes over 50% to GDP more than 80% of employment opportunities, fostering a competitive landscape and driving innovation.
  • China's middle class has grown significantly, with the number of Chinese citizens enjoying a standard of living comparable to the US increasing steadily.
  • Chinese technology companies are making significant strides, particularly in the electric vehicle (EV) industry, with high-quality, affordable EVs gaining popularity globally.
  • China's infrastructure growth has been substantial, with the construction of entire cities and urbanization projects transforming landscapes previously dominated by farmlands and villages.
  • The Chinese currency, the yuan, is gaining prominence, as demonstrated by its surpassing of the US dollar in Chinese cross-border transactions.


Transcript (this is an automated transcript):

MPD: Welcome everybody. I'm Mark Peter Davis, managing partner of Interplay. I'm on a mission to help entrepreneurs advance society in this podcast. As part of that effort today we're gonna have a very special conversation with my partner Chris Zhang, who's the CIO and head of the family office at Interplay.

Now, Chris's background is particularly unique, uh, in the topic we're cover, which is the rise of China because he is, was actually born and raised in China. Chris came over to the States when he was maybe 16 or 17 speaking literally no English. Uh, you'll hear more about his background as we kind of get into this conversation, but he breezed right through Penn, did a double major, graduated six months early, was one of the top performing derivatives traders at Morgan Stanley.

So when you hear what you're going to hear about the Chinese culture and discipline, you can hear it in the context of his relative. Success in America. Uh, Chris has been here for most of his life now. Uh, and he is, uh, very much culturally and integrated as an American. He's an American citizen. And so he's very much speaking from the perspective of an American who is going back to visit a homeland.

Now, the, the background for this story, which is gonna kind of lead into what you're gonna hear is Chris used to visit his family once a year going back from the states to China, uh, and then Covid hit. And so it's been for long years since he's gone back, and I think being away from the country for a longer period made the change that's happened in the interim more startling.

So he noticed a lot of change had happened in four years, and he was shocked by it. So he's gonna take us through what he experienced and the big headline, which I think Americans kind of know is coming at this point. We all know there's an if and when. China is at this, at kind of economic parody with the US and then may or may not surpass us.

Uh, the headline is, it's probably already happened. It's probably now. And so we need to, uh, one, understand that and throw away some of our, um, now dated stereotypes that China does, makes inferior technology or they're not operating at the same level. I think that's just the headline you're gonna hear from Chris is from his experience, that's no longer the case.

Part two is whether or not they're a little behind, a little ahead or a parody. It doesn't matter. We are now operating in a world where it's an oligopoly. America is no longer the leading and exclusive world power, uh, and we're sharing that seat with another organization. And so all of the ways we operate internally, think about international politics.

Everything has to adapt. There's pros and cons to all of this. But the goal of this isn't to make anyone afraid. Uh, it's more to make people aware. My great hope in all of this is there's a lot of sword rattling between the two countries right now. Just because another country has economic success doesn't mean we need to go to war with them.

There are a lot of differences in social policy and human rights and values. My hope is we can find more ways to reconcile and live together versus try to kill each other for really no productive end. So with that, I'd like to hand it over to a conversation with Chris Aang to get a very unique American perspective what's happening in China.

All right, Chris, we've got a big day today. I'm, I'm excited about this one. We've been talking about little snippets and bits and pieces of this story since you've been back from your trip. Uh, but to get it all woven together. And to share some of your insights and have a real deeper dialogue, I think is gonna be fascinating.

So, all right. Well take it away. Share your perspective on the latest news out of China. 

Chris Zhang: Yeah, I'm looking forward to this one. Let me, um, let me start with my own disclaimers this time. Um, the first thing I will say to everyone is first, I, I'm American. Um, I share the vast majority of the poli political beliefs, the values here.

And, um, I've spent a big chunk of my life in China growing up there. Um, I have, I left at a young age, so I've really, uh, my political beliefs and my value sets are, are more western than, than let's say, uh, versus the ones in China. The second thing, the second thing I will say is I'm not a historian of China and my family does not have any sort of insider access to the government.

We're sort of the definition of upper middle class. And my goal today is really just to be as factual and as objective as possible, but, but know that there's going to be some level of, uh, subjectivity to things we'll be talking about, because I'll be sharing through my own experiences what I saw as an, as an observer having spent, like I said, half, half of my life effectively living in China.

Um, lastly, I do run an ria and the SCC rules are very strict. So know that if I do end up mentioning some companies, I'm simply using them to illustrate a point. And by no means I'm, I'm advocating for, uh, you know, that the audience should buy or sell the company securities. With that, um, let's, uh, let's start the chat.


MPD: very clear. Um, and I, and helpful context because I think there's gonna be folks who hear some of this stuff and. Try to discredit it or just write it off as saying, well, he's from there, he is biased. And there's always that, but it's not, um, the context I think helps clarify that you, you're tending to, to communicate here.

Um, I I think it might be helpful for folks before we dive into your recent experiences in China, just to start with a little bit of your background. Yeah. So you can have that context and the lens through which you're looking. 

Chris Zhang: Sounds good. Um, I spent the first 16 and a half years, um, I was born in China and I was raised there until I was 16 and a half afterwards.

I came here, I came to the states for education and, and, and later on became a, a US citizen. I've been a US citizen for, for over 10 years. I, um, in terms of my experience in China, I've given a lot of thought about, about this and I, I really trying to figure out the best way to deliver and describe what it was like, and it turns out.

I think the best possible way for me to do this is actually just through a snapshot of my middle school, let's say a day or a week, and what I was doing there, and I think that really encapsulates my whole experience. So if you don't mind, let me, uh, dive in and sort of describe to you, let's sort of from a first person perspective, what that was like.

Yeah, do it. Um, this is first of all a very special chapter in my life and perhaps this sort of, this is what this is when I was aged 13 to 16. Right. So this period, you know, thinking back is probably what shaped my understanding of sort of meaning and happiness in life. More, more than any other. Um, so I was in China at the time attending this so, so-called military Academy slash boarding school in Honan, my home province, which is about the size of the state of New York, but with 110 million people.

Uh, the school I attended was ranked first out of 5,500 secondary schools in the province. So, you know, smart kids, very competitive to get in. You get the idea. Uh, but at this point, you know, if you're picturing sort of, uh, fancy prep schools in Connecticut or up East side, let me, let me help you, uh, sort of destroy that in mental image a little bit.

The, the boarding school is situated about an hour and a half away from the city center where everyone lives every day. The, the wake up bell is at 6:00 AM sharp. Okay? Just, first of all, you have to really put yourself, think back maybe what you were doing back in when you're age 13 to 16. The wake up bell for me was 6:00 AM sharp.

We would then have exactly 15 minutes to fold our bedding into this perfect rectangular box, put on our clothes, clean up, run down, force, foot, floors, and sprint. Sprint, a quarter mile to this outdoor track area. All that in 15 minutes. What happens if you're late by a few seconds, you, you lose 10 points.

So what happens if you lose a hundred points? You get kicked out at school forever. Okay? That's, that's literally the system, 

MPD: a hundred points in one year. So you correct. If you have 10 slipups by a few seconds, you're out. 

Chris Zhang: You're out. That's, that's the deal. And after taking attendance, rain or shine, we would then do our one mile morning run every morning rain.

It doesn't matter what day of the year that is, uh, in military formation. And then we do breakfast and then classes. Okay? So every morning sessions like that, a classroom half, um, the size of, you know, a typical classroom. In the US we usually host about 70 to 80 kids. And class day, we run from 7:30 AM to 9:30 PM Okay?

Um, at 9:30 PM we would then usher back to our dorms, and then 10:00 PM 10:00 PM lights out. That's sort of a full day schedule. However, nine outta 10 days, the amount of sort of daily homework in middle school would be so overwhelming that we would have to basically continue doing them in bed wearing this so-called like, sort of like an l e d headland, sort of pictured, like coal miners.

Um, that's, that's sort of, uh, what was like, there was no hot water on campus, no showers, no air conditioning. We would have school just like that six days a week Sunday, 5:00 PM to Saturday, 6:00 PM and we'll exactly have 23 hours every week not in school, and usually seven or eight out out of the 23 hours that we spend at home is spent doing weekend homework.

So you might ask like, so how, you know you're a middle school kid, right? How does the school keep us, uh, on our toes economically? Well, uh, we would have those midterms, so monthly midterms across all subjects over 10 of 'em. And the school would then sort of total up your scores and rank all students from number one to the bottom one.

There are about 800 of us per class, uh, and publish that ranking to all students, all teachers, all parents, and sometime even local newspapers. So you would not have, you would then basically know exactly how your intelligence and potential quote unquote potential compares to everybody else at all times.

Okay. So it's, it's kind of forced you into this fixed mindset. Uh, mark, you're gonna say something. Yeah. So 

MPD: you're describing a pretty militant childhood boarding school dynamic, but you also mentioned this was the number one school out of 5,500. Yep. Correct. Were the other 5,500 schools like this too, or was this the outlier?

Chris Zhang: Uh, I can tell you this is not the outlier, so we were the number one mostly because of sort of academic achievement. But in terms of the structure to the school and how you spend your day, the amount of homework, all that is the same. Uh, but you know, if I were in your position, I would ask myself, like, for instance, why would anyone want to send their kids there?

Or, or, you know, why would anyone want their kids to go through this kinda experience when they're 

MPD: 13? Sounds a little too intense Exactly. In my American disposition, 

Chris Zhang: right? So, um, well, in a country like China, this is really where I really wanna dive in. Education is life. We were part of this one child policy generation and better education.

Not only this means better life outcome for yourself, but also for your family. So for the vast majority of the population growing up, there's just simply no other way to succeed. That's what my experience was like in China and it really encapsulates the whole, all of it. And basically minimal childhood.

Uh, forget about out there and playing. You're just studying, you know, 12 hour, 13, 14 hours a day, starting from when you're 10 is the exam after exam and you're carrying your, your whole family on your, on your shoulders, right? So I think if you sort of see every, um, person in China through this lens, you kind of maybe have a better understanding of why they are who they are and, and what kind of value that they might carry.

Um, yeah, so that's, that was my experience. Sounds 

MPD: pretty high stakes and like a lot of pressure is there. Yep. You know, it sounds superhuman. Did everyone rise up to this? Was there like a high suicide rate or did this, was it so, you know, something where this was so pervasive that. It was maybe nor quote unquote normal.

Chris Zhang: Um, this is, this is very normal. And I would say that from a very young age, this idea that, that your life is now your own. It's, it's your whole family. It's your whole community that you're living for is really drilled into you. So, frankly, a lot, I can tell you definitely a lot of mental health problems, uh, from all of that.

But suicide rates as far as, I don't have the numbers in front of me, but as far as I could remember and I could tell is very, very low. Cuz you're, you're just kind of happy to carry it through. This is what life is about and your parents went through this, why not you? Right? So that's the sort of the mentality that everyone had.

Um, yeah, that, that's my experience. And then from that to, to the US where I went to, to sort of, uh, Connecticut for a, a public school, high school, and then later on, um, to UPenn and, and Columbia for, for business school. I would say that the, the hardest period of my life was, was, was at the, you know, when I was in middle school, but also sort of, that's also the same period that, that really taught me a lot about, uh, what family means to me, what education means to me, and, and sort of reset my entire value set.

So that's my very own, my own subjective experience. I kind of maybe, uh, wanna talk about more objectively what China was like, uh, 25 years ago in numbers, in using statistics. Statistics. So, I, I, you know, I looked through, I did some research and here's, here are some numbers I wanna share. The first thing is China's GDP per capita p p P adjusted back in 1998.

Can you define P P P please? P PPP stands for purchasing power Parody. So GDP per capita is a, uh, I think everyone understands, but. You really have to adjust that number by P P P, which is really just a basket of goods that, um, uh, so, you know, in simple terms, it's sort of your living expenses is your actual living cost, right?

It's, it's not enough just to measure what you produce on a per, on a per capita level, but also what that means, uh, to a day-to-day life, right? How, how much an apple in China doesn't cost the same, uh, in, in the us and it could be one 10th the cost, but you, you ingest the amount of calorie, so you really have to adjust for that living expense.

The GDP per capita, P p P adjusted back in 1998 in China was $3,000. The world average for the same year was 7,300. So about 40% of the world average. And in the US for the same year was 30, $37,000, right? So China was, I don't know, uh, 1 13, 1 14 at the time. The next thing I would say is healthcare. So I'm just trying to give, you know, sort of a broad spectrum of, of numbers so people understand what, what was it like, and you can sort of, the prior 

MPD: stats.

What, what year are you giving the data for? What, what is that? 

Chris Zhang: 1998. So I picked a 25 years ago. That's exactly 25 years ago. I just thought that's a, that's a good accurate number. This is, by the way, um, for those of you who probably don't know Chinese history as much, 2001 is when China joined DW t o. And that's when really it's a, it's a turning point for Chinese economy world trade.

You know, China officially entered into center stage, so really anything before 2001, it's really a different era. So 1998 I thought was a pretty, pretty good year to pick in terms of healthcare. So I used H aq, which is Healthcare Access and Quality Index. This is in 1990. Close, you know, around the same time, uh, China had a score of 49.5 versus US of 73.7.

And just so people understand what this thing measures, it's basically a scale from zero to a hundred that's measuring effectively the death rates from 32 causes of death that are, that could be avoided by timely, effectively medical care, right? So it's a proxy for how good the healthcare SY system is.

China at the time was, was scored at 49 and half the US of 70, 74. So quite a bit of it. Again, um, that's the next thing I wanna talk about is education and literacy. So this is a, a pretty big shocker. So in 1982, China had the chin Chinese literacy rate was 65%. Okay? So 65% of the population or literacy, 79% for men, 51% for women.

The Chinese tertiary education or higher education rate at, in 1990 was 3.4%. Okay. So basically nobody, uh, went to, went to, went to sort of, uh, college or, or above. That was what the country's like. The country was mostly a farming state and, uh, with summit manufacturing capacity, not really self-sufficient, dependent on a lot of international partners.

Okay. This is the country, this is the sort of the China I lived in back in the eight nineties. That's really, you know, I, I wanna paint, paint a picture of what China was like, and that's, that's that. And I really wanna talk about, um, sort of the next big topic was what, what is China like now these days? Um, we can u we can maybe start with some of the same statistics I just mentioned and then pick a few sort of areas that I really, that really sort of shocked me when I recently visited.

Um, let's start with the numbers. So g d P per capita p p p adjusted same data in 2021. China stood at 19,500 with a little bit of rounding, uh, versus the world, which is that 18.6. So remember, China was 40% of the world average. Now, China has surpassed the world average. The US is at 69. So China on paper is still right around one third of what US, US is currently.

But this is the part where we had a chat internally about this. Um, this is not what I felt when I visited, when I visited, just so everyone know. Um, I couldn't visit the country during the pandemic. Um, the, the country expected shut this borders from all foreigners. Um, I couldn't even visit family. There's no such thing as a, as a family visit visa.

So there's, you know, before the pandemic I used to visit every year, so I would see these incremental improvements. But there was a gap this time, four, four years to be specific. And what I saw when I visited recently, uh, was shocking to me on multiple fronts. The standard living in a nutshell, the standard living has really, really improved.

So when I saw this number, this GDP per capita p p p adjusted, it didn't really make sense to me. It didn't feel like that, that you, that, you know, Chinese standard of living is about a third of us. In fact, to me it felt like pretty equal. So then I, I did some digging. Um, turns out P p P doesn't adjust for services, okay?

Adjusts for a basket of goods, which is really half of what our life expenses like. It does not just for healthcare and childcare, it does not adjust for, uh, transportation. It does not just for education. It does, it doesn't adjust for a number of things, which you can imagine are a huge component of, of, of life expenses in the us.

So I try my best and win in and adjust for that myself. Basically, I'm not gonna go through all the numbers here. I think that's, that's a bit, a bit more in nuance and detailed. But my conclusion was once I adjusted for just the headline services, childcare, healthcare, transportation, um, tax differential savings, the difference now comes down to less than 10% between China and us using this proxy for standard of living.

That would be more sense to me. So 

MPD: the, the one third number we see is misleading because the cost of labor and, you know, in all different parts of their life is lower. Yes. And so the average person there, you're saying, is living a very comparable life at this point to an American? Yes. Right. So you're, you're in town and I'm sure it's not the same brand names, but people are jogging in Lululemon, taking their dogs, sitting at brunch.

It, it's the same story. Yes. It's no longer this agrarian. Yeah. There's not enough, you know, medical care situation that you left. 

Chris Zhang: Yes. China, for instance, China has universal healthcare and you pay nothing effectively. You go go for a doctor, you pay on average. The average yearly expense in China for medical related and childcare is $300.

Us, the, the, the, the same figure in us is, is is more than 20 x that. Right? So that's just a simple example. And transportation is as a huge one. People commute to work here. That people com com, you know, pay for gases and pay for gas and, and, and trains and subways in China, all of that is, uh, subs subsidized by the government.

And you, you pay one R, one r and B, which is about 13, 14 cents us. And you can travel anywhere in the city, in a mega city. That's, you know, 10 x the size of Manhattan. 

MPD: So a way to read this is these KPIs may not be indicative, but if you look at kind of the social advancement, the technological advancement, the quality of life advancement.

Yep. China is more or less in the zone of being on par with American standard of living. 

Chris Zhang: Correct. But that's just standard. That's sort of just from a cost perspective. Right. I mean there are other areas considered, for instance, healthcare. I just mentioned previously the same index H AQ index in 2015. I couldn't find anything more recent than that.

But in 2015, which was almost a decade ago, China's has gone from 50, remember the score back in 1990 to 74.2 and the US has US, has stay at 84. So this is almost a decade ago. And China's already within striking distance in terms of quality of healthcare. Right. Um, some other statistics, crime rate. So that could be a huge part of standard living.

By world population review crime rate per a hundred thousand, right? This is all crime rate, violent or not, in China is 30.14. In the US it's 47.7. So according to this one statistic, China is safer. But of course, uh, you know, you can question the ability of the data, you know, how it's measured. All these things, according to this one statistic, China is safer and it frankly felt that way when I was there.

Ok, let's talk about infrastructure. This is the, this is the big one. I really felt the difference in the level of infrastructure when I was there this time, specifically when it comes to renewables. And so, you know, transportations, roads, subways, high speed bullet trains, airports in numbers US in 2022 spent.

Over a hundred billion in infrastructure. I try to really adjust, make it capital to apple. So it's by this metric US spent over a hundred billion in 2022, China spent over 2 trillion US dollars in infrastructure. Now, a lot of that was just so that they can boost the economy because of pandemic and all that, but that's a 20 x difference in infrastructure spending.

Right? And, and by the way, not a, not a lot of it didn't go to like the simple stuff like building new roads or a lot of it went to renewable energy. So solar, EVs, like you name it, right? All the sort of technologies that the big powers in, in the world are competing with each other against, right? It's not just the old technology, it's the new technology that's being built.

Related to this. I wanna mention private sector because this is one of the bigger misconceptions. I think, that people think that private sector doesn't exist in China or is small. That is not true. More than 50% of GDP from China came from private sector and more than 80% of the employment from China came from private sector and infrastructure alone, over 90% of it is outsourced to private sector.

Right. So there's a huge collaboration between the government and private sector, just like in the us. How, 

MPD: how do those ratios compare to the states in terms of private 

Chris Zhang: sector employment? Oh, of course the states is, is definitely way ahead, right? I mean, I can, you can, I don't know, I don't have the exact, cuz I couldn't find it, the apple, apple one, but I could, I, if you tell me that the states have over 95% GDP in private, private sector, I will believe that.

I think that's the reasonable assumption. But China is just as big in terms of private sector spending and contribution. Right. So that's the part I want to just adjust. Um, people with mindset on there is a huge and blossoming private sector in China. Right, 

MPD: because it might be half, but the population's three or four times larger.


Chris Zhang: yes. And the opportunity set as well. Right. That's, you know, when if you're, you know, an immigrant, uh, and you're trying to weigh in your head where to go and where to start a company, throw away everything else policy, right? Like in terms of the opportunity set, China is huge, right? So that's life in China now in numbers.

But maybe, you know, I think what, what we should go next is really pick a few specific sectors based on what I saw this time when I visited, and really just give you a sense, um, what the current lifestyle is like in China. So, as I mentioned, I've really, I just came back from China. In fact, I visited and my hometown is Jojo Hunan, which is sort of this.

In US newspapers, it's actually known as the iPhone city cuz that's where Foxcon has the biggest factory on planet, where over 70% of the world's iPhone is produced. Um, over 85 or 90% of the iPhones in the US are produced basically from there. Is there a comparable 

MPD: city in America that you might relate it to in terms of it's not the biggest or not the smallest?

Like is there a parallel you could draw to help us understand what this is? 

Chris Zhang: Uh, wow, that's a good question. I would say probably like the Detroit. Okay, so it's like 

MPD: mid, mid-tier, proper urban 

Chris Zhang: environment. Yes. It's very hard to draw parallels. Not top three 

MPD: city, but a real, a legit 

Chris Zhang: city. Yeah. It's, it's a capital city of, or like a, it's, it is a capital city of, of the hun province.

So this is really second secondary, second tier city, but it's historically important. Uh, a lot of manufacturing, a lot of farming, massive. It's hard to draw complete parallels because the concept of suburban, like a suburb, it doesn't really exist in China. It's either mega city or countryside. And countryside where it's super rural.

It's farmers stuck in, you know, 20 years ago, uh, in terms technology, lifestyle, but vast majority population, basically entire middle class, uh, and, and above live in the cities. Um, so I will show, I think I'll, I'll share the screen a bit about, you know, just to give, give sort of a sense of the scale and, and, and, and how it compares to US cities.

But, um, let me, let me maybe talk about sort of these specific sectors in that, that I want, I wanna mention there is a huge misconception, uh, I think I really wanna, uh, correct here, which is, and it definitely was true before, but I'm just saying it's not true now. Chinese technology is a carbon copy. Or a boot like version of US technology.

MPD: I hear this all the time. When this conversation comes up, everyone's saying, Hey, they're just copying us. Technology. And I, I can't pronounce the name of the company, Hawaii. Can you pronounce it for me please? Huawe? 

Chris Zhang: Yep. Which stand by the US government. Yeah. Right. 

MPD: Uh, you go on their website and it looks like a clone of Apple, right?

Yep. There's FaceTime. It's called Meet Time. The icons are almost identical. Yep. Right? Everything top to bottom, it's apple, uh, clone. Correct. And I'm assuming Apple came first. Pretty safe assumption. And it's not subtle. Yes. Even the, all the iconography, it's like slightly changed. They're not even trying to hide it.

Chris Zhang: Yes. Especially the design, like you mentioned. It's just so, so it does 

MPD: reinforce this clone technology argument. The narrative we hear all the time when you g glance Yep. 10 seconds on the website. It's obvious. Yep. 

Chris Zhang: Okay. So ag agreed. 

MPD: So everyone's saying they're just cloning the technology. They can't actually make anything.

We have nothing to worry about. I've heard that argument a bunch. Where do you come out on that? 

Chris Zhang: And I, I would argue that that statement is definitely truthful. Um, let's say for the period between early to late nineties, up until 2010, say two 15 or so. That's basically in my own understanding, my own experience, exactly what, what's happening, right?

Chi us comes out with a great product, China's copies, it uses own labor and, and technology, you know, basically swaps some of the components, but make it 50% cheaper and that's how they, so do these companies stay competitive? Um, what I'm trying to argue is that's no longer the case. Now it is quite shocking to me, frankly, um, because that was my own, my own understanding as well.

Um, That's, that is no longer the case. The innovation cycle in China has really shortened, and you are seeing now that in specific sectors, which we'll talk, talk about better innovation, better quality, potentially, definitely lower cost and better customer service, all wrapped in one, in a Chinese made product with no components outsourced.

That's the part that's shocking. Like, you know, it's not like the Toyota of the world or, or, or the German manufacturers where, you know, in, in cars specifically where they outsource, you know, uh, 99% of the components and it's sort of due to design and that, that's it. These components are made in China and in fact they're exported out to other different, um, manufacturers.

And there, there's design in China and they put together in China, and they're sold to, uh, Chinese consumers and also global consumers. So EVs, phones, technologies. So, uh, you know, of course computers, traject, air conditioners, you name it, right? These, these home appliances and, and, and cars is what really shocked me the most.

This time I, for, you know, the slimmers I mentioned previously, being running an r i, I can't really talk about specific companies, but I strongly, strongly, um, suggest and the audience to just, just to go on a hunt, maybe just do a quick Google search. What are the top EV cars ev companies in China? Oh, by the way, there's a recent Shanghai Auto Show, which is on YouTube.

You can, you can take a look and just go on their websites and take a look at these technologies, uh, for EVs, for hybrids, for La, Huawei, for instance, the company. And you men, you mentioned salami, another sort of, uh, uh, used to be known as a copycat of US technology company. Just look at, go on their website and look at what they offer and the specifically compare stat by stat to an iPhone or Samsung and, and come to your own conclusions which one's better.

And then at the end you adjust for the price. I guess it makes 

MPD: sense. Yeah. You know, we, I if you look at the last decades Yep. We had an innovation here or other countries, everyone went to China to build it. Yep. They developed all the factory tooling, technologies, infrastructure know-how. Yep. And the design component, which is high science often Yeah.

Is the most learnable in some ways, cuz it's, it, you, you have a generation that studies it. Yep. And then you go to your own factories and turn the speed up. That's right. 

Chris Zhang: So I, I. Obviously, I don't know how, uh, that sort of was progressed. Maybe, uh, uh, uh, you know, it makes sense that some of the, some of these, these technologies, designs and and whatnot, um, were sort of, uh, espionage are sort of stolen over time and Sure.

Now they have their own repertoire of knowledge. Right. That's totally possible. I have no idea. But the fact of the matter is today's technology, today's design, and the quality of the design, right. That's the main thing. I sat in those cars myself and I experienced what it's like. Um, it's not what you would think.

It's, it's very high quality material, very good in design features, um, technologies that you'll see in cars that are usually in a 200 plus thousand range in a car that's actually gonna cost you 40,000, um, in China, and people are buying it left and right, uh, not just in China, but Middle East. Yeah. Would you say 

MPD: it's on par?

With high-end US technology ahead or behind where, where, where would you, where's your intuition telling you based on your experience? And I know you drive a Tesla at home, so you're, you're living fairly frontier us, 

Chris Zhang: right? Um, yes. I've, I've owned that Tesla since 2018. I've been a huge fan of Tesla ever since.

Um, I would say in terms of the core technology, in terms of battery drive, train, all these things, my argument is China is actually ahead, uh, not by a hundred miles, but China is ahead. Um, in terms of interior design, Chinese interior design and quality materials is on par with luxury segments in, in, in, in, in Europe and us.

So think of the BMWs, the, the, the Mercedes in the above a hundred K range. Right, but remember, but in terms of cost, in terms of the actual cost of this car in a vehicle, it's nowhere near, it's 30 40% of the cost of the us. So it, it makes for, it's a strong argument to buy these, to me, when I, when I saw it personally as a consumer to buy these Chinese made vehicles.

If you're a European, if you're a middle somewhere living in the Middle East, and they are buying those vehicles, if you look at the stats, how much, how many cars they've sold, uh, as opposed to the Tesla and you know, even some of the Korean manufacturers. Yeah, I, 

MPD: I I was under the impression Israel, which obviously very tech advanced country, most of their automotive comes from China at this point.

Yes. That's what they're buying most of their cars. Um, is it what's causing the price efficiency? Is it they've just got all the manufacturing there, they don't have to ship it because decades of developing the manufacturing sector, or is it. Labor costs are lower. Why, why is the pricing 

Chris Zhang: so advantaged?

Yeah. I mean, historically, China had to basically import a lot of technologies with tariffs and a lot of components of MCG abroad. And now everything is, as I mentioned, is manufacturers and design and sourcing domestically. And then there's of course, that labor cost component. And, and then the companies are so, they're such a, such a competitive landscape out there.

They're competing on very thin margins. So these companies are not making a lot of money, right, uh, versus Tesla. But if you compare them to Tesla maybe five years ago, then that's more comparable, even though they have better market penetration. So, um, I think over time it, it's gonna get even, even more competitive from here.

It's just, it's the technology's becoming com commoditized at this point, and it's, it's really competing on the, on the thin margins and, um, just, just fascinating sector to, to sort of follow and watch. So that's just EVs. I mean, we, we, we, I, I felt, frankly, I felt like a little kid again this time when I was in China.

Every room I walk into, I kind of just filter around with different things. Like, what does this do? What does that do? Because you just don't, don't see them here in, in the us you know, like projectors, like things like this. Just in, in a home compliance world. It, it's, it's, that to me is where the standard living part that we talked about in China has really, really improved.

You know, everything's automated. There's no cash anymore. You pay everything on, on, on this app called WeChat. And, and you, you, you, I didn't seen a single bill or coin, uh, the whole two weeks. I, I spent there and, you know, so it's, it's just a different lifestyle at this point. I think it's, it's worth mentioning maybe some, uh, you know, this is going back to where we started, which is my life in, in China, and talk about this thing called, called work ethic.

Um, This is the part where I really want to make sure the audience of this pop, like understand is that, you know, my experience, you know, working so far as a middle schooler was not an exception. That was, that was just sort of everyone else's like, right? So coming from that kind of childhood, by definition, you're gonna work hard.

You're trained to do it that way, right? You're, you're there, there are no after hours, you, you get it done. Right. That's sort of the mentality, uh, in China. And, and I think if you're, if you're, if you've gone to school here in states and you, you, you probably met a lot of international students and some of 'em from Asia and you know, uh, you've probably seen their sort of work ethic and what they do.

And, and, and that to me is not surprising whatsoever. So work ethic is, there's a real differentiator here. And why does that matter? Well, You know, maybe when people talk about the rise of China and when people talk about the potential dominance superpower it could become in the future versus the us I, I was strongly encouraged, you know, folks to, to look deeper and, and, and to go into the why.

It's not as simple as, oh, having a huge population and, you know, uh, uh, the central government driving everything by themselves and forcing people to do certain, certain things they don't wanna do. It's, it's not as simple as that. It's, it's a lot of it to me, fundamentally can, can trace, can be traced back to this mentality and this work ethic, um, which really just permeates through all different sectors from education, early childhood to later on.

The, the last 

MPD: major thing that comes up in this conversation when I'm talking to people and I'm no expert, but I'm infinitely curious about everything. Yeah. You, you know me and you know that. Yep. Is when you bring up China, everyone says, look, they have the one child policy, they have a net aging population.

It's the shape of the population based on age demographics is really imbalanced. And no society has ever survived that. Right. It's, yep. It's tectonic pressure. The, the, the economy's gonna topple over at a certain point. Yep. Um, what the way most countries tend to solve those dynamics is through opening the borders for immigration.

Yep. You're painting a very attractive picture for a quality of life that people from around the world would probably want to pursue, but, uh, I don't believe China's had very much of an open immigration policy. Yep. Is that something you see on the horizon to solve the population issue? Or is the population gonna undermine all of this great progress or, Is there some other thing we are not seeing in this?

Because this is the one of the few strongholds that people use, and I'm not saying the right or wrong as, as counter-arguments for why China's not not gonna be it. 

Chris Zhang: Yeah. In fact that, you know, I share that view myself. Um, I'm gonna go back to what we, we've talked about many times, which is what is the number one thing the Chinese government care care cares about?

And that is stability, everything, stability first, everything else comes second. So for that reason, opening up the border and, and really having a, a sort of a similar immigration policy as the US to me is a, a, a last resort type of tool that the u the central government in China can sort of turn on if, if I, I think that's a low probability event, but they might be forced eventually to do that.

I think, you know, based on the current policy sets, you know, if you, if you sort of look at what they're trying to do is. The government is trying in China, trying to their absolute best to turn around this, you know, aging population and encourage people to have more kids. And there's a policy I wanna mention, which is really shocking to me.

I learned about it this time when I came back, is, um, you know, the government has decided that the reason people are now having kids in my generation is because of education is it's way too costly for people to have more than one kid and support them through all different schools. So what the government decided to do is outright ban all after school activities.

So classes for math, uh, English, uh, science ban, all of them at once across the whole country except for sports and art, which is such a minority of classes that people will attend in my generation. So, And that way they, they wanna basically e equal the playing field and make sure the poor parents can raise just as many kids as, uh, more sort rich families, right?

So it's, that's how drastic, as an example, the government is trying to turn around and have more population and least a civilized population. So until they exhaust all of these sort of steps, right, to, to, to try to turn around domestically without opening the border, they won't turn into immigration policy, in my opinion.

But can they turn that on to say themselves? Absolutely. And if they do, and I hope I've made a good argument so far, they will attract people. Uh, you know, if, let's say imagine you're, you're, you're a kid having the opportunity to choose from, you're from India, you're from uh, Africa, you're from, uh, the more developing part of the world.

And you say, oh, do I go to the us? Do I go to China? 20 years ago, that wasn't a question. Right now, that's becoming more of a question. Um, even in my own shoes, like would I, you know, if, if I were born 20 years later, 25 years later, would I choose to come to the US again? I don't know. I frankly wouldn't know that.

I would have to really think about it. The, the 

MPD: American knee jerk there is, but you're trading your freedom, right? There's this sense that, hey, look, it is a, arguably a capitalistic autocracy. It's not a communist state anymore. Yep. It's capitalism as an economy, but it, it all answers to kind of up to one person.

Right. Uh, and that's different than what you have in the 

Chris Zhang: States. Yep. Um, 

MPD: so the, the, the, the Western sensibility is, that's untenable. 

Chris Zhang: How do you react to that? I, I, first of all, having lived the second half of my life here in states, I, I couldn't agree more that the, the freedom, freedom of everything is so important and, um, But I think this is a bit of a luxury.

This is something I think we all have to adjust mentally because you, if you, if you're really thinking about this exact question with intellectual honesty, you have to put yourself in a mindset of a potential immigrant from developing countries. Do you care about making a living more or do you care in, in that position, at that time, more about freedom of speech.

I could tell you back, if I really tried to trace back my memory at the time, all I could care about is be successful, make a living, and make my parents make my family proud and, and, you know, succeed in that way. And then when I achieve that, then I worry about freedom speech and freedom movement, right?

So to me that's my personal view. And, and of course there, I'm sure there's a segment of the population in the world where this is a, it is just a no-go from the get-go. But there's also a segment of the population. That will care about that more so, uh, care about the economic success more than, than anything else.

And by the way, the last thing I will say is you really don't feel it that much. Growing up, this wasn't really a concept to me. Yes, the government is definitely monitoring everyone's phones, WeChat, whatever. But in your day-to-day, if your goal is not to turn over the government and start a revolution, and, and, and, and if your goal is just to, you know, work hard, make a living, become rich, uh, become successful, the government encourages you to do it.

And there have no reason to shut you down. But if you become like the Jack Ma of the world and where you, you have billions and assets and you're, you're openly on a world stage criticizing the Chinese government, yes, they will take you down until there, you know, it's, you don't really feel it as an average citizen.

MPD: Also, from a human capital perspective, it's a false choice for some people. The US isn't welcoming everybody and they're not welcoming everybody with talent. Our immigration policies are difficult in some ways. So for folks who don't have a lot of options, the US may not be on the table. And so it may be China status quo or other.

Yeah. Um, so, you know, there are a lot of really talented, capable people around the world who are not in the us who are not in a western democracy, who are not in an advanced economy. Yes. And they just, they just didn't win on that lottery, that birth lottery. Yep. The quality of life. Yeah. And, you know, rational thinking is presumes a good chunk of those people would make a 

Chris Zhang: trade.

Precisely. And the US now has the sort of the luxury to choose. Right. Who we wanna take in. Um, China doesn't have to start there. China can start with more aggressive taking everybody, and eventually, as its problem being is being solved, it can then sort of close it border gradually and, and choose a certain set subset of the population just like what the US is doing right now.

So, yeah, I, I, you know, this is how I would think, but the, the population, you know, aging population's a real, is a real problem. Um, that is the strongest influence factor that will slow down the growth of China and, and prevent it from being a, a world dominant power. But they sounds 

MPD: like they're aware of it and they're taking action.

Could you, could you do the visuals before we wrap up here? Yes. Just so people who are watching the YouTube version of this can see a little, bring this to life a little bit. Let's do it. 

Chris Zhang: Great. So this is my hometown. This is, uh, sort of, uh, where I grew up. Two things I will say. So first of all, let's, let's sort of put a scale around this, right?

So, uh, I'm not sure if people can see the bottom right. There's a scale right here. It says two, two miles, and I pull up a Manhattan map also with the exact same scale and just so that people have, can compare it, right? So this is Manhattan, it's roughly call it two by eight. So 16, 16 square kilometers my province, uh, now, right?

It's roughly about eight by eight. Okay. So 64, so roughly four x the size of Manhattan. And ju then this by the way, is just sort of the, so-called the, the, the Manhattan equivalent, right? The downtown, I'll call it. Right? 

MPD: And this is not the number one city, this is, oh no, 

Chris Zhang: this is, uh, this is Detroit, correct?

This is Detroit, yeah. This is sort of, this is, yeah, this is an important city. Uh, but it's a, you know, nowhere near, it's the middle of the pack, secondary city. Uh, and so that's, so people give a sense of scale there. And secondly, I wanna say, so I wanna mention it here. This, if people can see this, the entire top right corner, this is about a, a fourth.

So basically more than a Manhattan worth of the city. Wasn't there a decade ago. It was farmlands, dirty rivers, villages, nothing. I never even visited for the first 17 years of my life. Okay? This entire Bo top right, and in the past four years. So the last time I visited pre Emmic, this portion right here, okay?

This is about, uh, I don't know, I'll call it a third of that top right corner. Wasn't there again. Farmlands, dirty rivers, villages. And all of a sudden when I visit, it became a city. It became part of the city, fully integrated with a full infrastructure built in the size of a Manhattan, okay? The size of Manhattan was built.

In a matter of four years from the ground up, from the foundation up in 

MPD: the not most important city. Correct. In the country. Yes. Which is a side project. They built Manhattan on the 

Chris Zhang: side. Correct? Uh, definitely not important from multiple angles. Uh, you know, it's, it's not, it's centered in China, but it's, it's, it's not on the, on the, on the coast.

It doesn't have a lot of international population. It's just, you know, a middle Pac secondary city. So what does it even look, look like? Uh, this is what it looks like. This is, that, that exact area that I mentioned that wasn't there four years ago now looks like this, this entire river that you're seeing is manmade, wasn't there before.

Okay. So just again, just so that people have a sense of scale. Okay. This building right here is the same size as, as, as the M G M grant in Vegas. I visited this building, it's a con, it's a conve convention center. And these buildings, you know, that you see on the side, they're all 40, 50 stories. Right. So the typical story, typical building you will see in, in Manhattan and for the, as far as you your eye can see.

Okay. This entire region was built shortly in the last 10 years. Vast majority in, in the last four years. Okay. And, and they're not this, these are not ghost towns, so, okay. That's people, people think, oh, these are, you know, ghost real estate people. Everyone is living there at night. It's, it's fully lit on every apartment as far as you can see.

MPD: Yeah. We've heard the narrative that they've, the government's done a top town real estate build. There's these ghost cities, no one's there. It's a financial crisis in the making cuz there's no revenue against all the development costs. Yep. Does that re does, how do you reconcile that narrative? 

Chris Zhang: There's definitely a, a, a.

Some of that's definitely true, right? Um, what I'm, the only thing I'm trying to say is that's not as true. It's not a full-blown, uh, depression in real estate market. That, and these are ghost towns. That's not true. Like a lot of it happens in sort of more primary cities. You know, Beijing, Shanghai, the world where there's such a hype over the years, and the per square footage has is two three x of Manhattan.

And there's, you know, just so much demand. So the real estate, um, developers, obviously it's flooded those markets and built a lot of houses barely in, in the city, and a lot of people bought this real estate and they're real ghost house, right? But for a secondary city where the population is 20 million or more, these are properties that people own and they live in.

They live in it, right? These are not sort of, uh, business building. These are residential buildings. Most vast majority of them, and people do live in them. They're not ghost towns. It's very vibrant. You, you walk on the street, you, you get a sense of that. So, For those of you who are maybe planning to visit China, my, my biggest advice is don't go to Shanghai, don't go to Beijing, don't go to Hong Hong Kong.

These cities have been developed for decades. If you really wanna see, get a sense of what actual life is like in China and, and just get a sense of the development or the past decade, and get a sense of the technology and infrastructure. Go to a city like this, go to a secondary city, middle of the pack, and there are, there are many of 'em out there.

And, and just, just, just take it all in. Just, you know, spend a few days and take it all in. So, that's it, that's what I wanna show on, on visually. Okay. 

MPD: Do you wanna wrap it up and leave us with the headline here? Yes. I, what did all this mean 

Chris Zhang: mean to you? I wanna, I wanna talk about one last thing and then, and we'll wrap, wrap it up, which is the, you know, the rise of the Chinese courtesy.

I think this is the part where it's also hugely debated in, in, in, in the us And, and I also wanna provide some real basic statistics. Okay. This is by the way, from I think Reuters or, or Bloomberg. Um, or Bloomberg, I think as of March this year. So a month ago, the Jan, uh, the Chinese currency in its own, in Chinese, in China's own cross-border transactions for the first time in history has sur has surpassed the dollar.


MPD: people are accepting Chinese currency in a trade, correct. From China. And they used to say, Hey, pay 

Chris Zhang: us in dollars. Yes. Correct. I'm not talking about global between US and European partners. I'm talking about between China and IS and Chinese partners. For the first time, the UN has transacted in more volume and than, than the dollar 48% of it versus dollar, which is 47.

Right. So that's just happened last month and you see all the headlines, you know, Argentina, Brazil, uh, certainly a lot of countries in Middle East and even France has joined this. Uh, or in the process of join this pack to, to basically transact in, in, in r and b and Russia for sure, like, you know, for, I'm not gonna get into the politics, but because of the war, you know, it used to be all dollars now because the sanctions and everything, it's all in all in r and b now.

So the Yuan is taking center stage, um, uh, or definitely in the process to, to do so, and that challenges the reserve currency status of, of, of the dollar. And will the dollar ever, my view is, will the dollar ever become a currency of a cares bell? No. It, it, it will still be a play a major role, especially in the West.

But will Chinese VR become a, a major competitor? Absolutely. Especially regionally, which is such an important part of the world in terms of manufacturing, in terms of, you know, trade. Um, And the thing to watch is energy, right? As energy gets sort of, you know, with Saudi Arabia and all these important energy countries, do they transact in, do they transact more in dollar?

That's something ongoing concern I think for us on monitor. That's, that's the last thing mention before really we wrap it up. I mean, the overall message I think I wanna send here is, it is wrong to ignore and to keep the same misconceptions, to, to not adjust your own understanding of what China is like today.

And to have, uh, the same understanding of what China is like today, as if it was, it's stuck in 20 years ago. China's not the same country. It is advancing on multiple fronts. It is posting a challenge to the west, and the last thing we should do is ignore it. So everyone should be, should be, should educate themselves on all these new developments.

And, and just stay hungry, stay, don't be, don't be sort of content and, and just, uh, uh, you know, overall satisfied cuz we will be left behind. If we won't do, if, if the government and us don't do anything, don't, don't do something about it and watch out for the talent flow. Watch out for the immigration policy cuz those will play major roles in shaping what the world is gonna be like 20 years down the road.

MPD: Thank you Chris. It was terrific. Of course. Pleasure Mark. And, uh, a double reminder here for everybody. Chris already said it, but he's an s e c registered r a so nothing he said should be misconstrued as investment advice. Thank you for listening.

This is 

Chris Zhang: the topic of our decade, right? 

MPD: How the new world order with two superpowers in the US and China operates. Um, how we navigate this as a country, as a people, as a world is gonna be very important. It fits into the broader, you know, multi century narrative of autocracy versus democracy. It also fits into a more shorter term dynamic of how we all recalibrate to this new reality and to the extent there needs to be any sort of violence to negotiate.

Balance of power. My great hope is that we can find a way to collaborate with these other countries, uh, even with major differences and values. It doesn't resort to war. Uh, we've had people on the podcast in the past who informed us of some pretty terrifying statistics. 20 of the last 24 times, the world's superpower has changed.

There's been a war. The transition from the British to the Americans in the sixties was one of the few where there was not, we were already allies at that point. Just coming outta World War ii, uh, my hope is this doesn't need to escalate and we can find a way, a peaceful way forward. That works for everybody.

More to come. Catch you next week. Thanks for listening.


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