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Sharp China: Kimi Madness; Xi's AI Vision and US Questions; Trump's Election Data Claims; The Connected Vehicle Security Act · Sharp China Podcast

• 0:04
  SPEAKER_01: Hello and welcome to Sharp China.
• 0:06
  SPEAKER_01: I'm Andrew Sharp and you are listening to a free preview of today's episode.
• 0:11
  SPEAKER_02: Hello and welcome back to another episode of Sharp China.
• 0:15
  SPEAKER_02: I'm Andrew Sharp and on the other line, Bill Bishop.
• 0:19
  SPEAKER_02: Bill, how you doing?
• 0:21
  SPEAKER_00: Well, getting a little sick.
• 0:22
  SPEAKER_00: Unfortunately, you might hear it.
• 0:23
  SPEAKER_00: I seem to be getting a little sick.
• 0:24
  SPEAKER_00: So we'll power through the podcast.
• 0:26
  SPEAKER_00: We'll see about a newsletter on Monday.
• 0:27
  SPEAKER_00: It's what?
• 0:28
  SPEAKER_00: Two o'clock on Monday.
• 0:30
  SPEAKER_02: Power through.
• 0:31
  SPEAKER_00: Coherence is not guaranteed.
• 0:33
  SPEAKER_00: It's not from screaming at the TV yesterday watching the World Cup game.
• 0:37
  SPEAKER_02: I mean, I missed most of the World Cup game,
• 0:41
  SPEAKER_02: and it sounds like I didn't actually miss much with the World Cup final.
• 0:45
  SPEAKER_02: What do you think?
• 0:46
  SPEAKER_00: I mean, it was still a good game, and Spain is just dominant.
• 0:50
  SPEAKER_00: They just ruled Argentina.
• 0:52
  SPEAKER_02: They squeezed the joy out of soccer.
• 0:55
  SPEAKER_02: So I'm not personally a fan of La Roja out there, but congrats to the Spanish national team.
• 1:01
  SPEAKER_02: We'll see what we're able to do.
• 1:16
  SPEAKER_02: The surprise release of a breakthrough article.
• 1:31
  SPEAKER_02: We'll be right back.
• 1:46
  SPEAKER_02: The trigger was China's moonshot AI, which unveiled its Kimi K3 large language model on Friday.
• 2:01
  SPEAKER_02: The Beijing-based startup claims that the model outperformed some cutting-edge U.S.
• 2:07
  SPEAKER_02: systems, stoking what some analysts called DeepSeek 2.0 concerns.
• 2:13
  SPEAKER_02: It continues from there.
• 2:16
  SPEAKER_02: Obviously, the entire internet was freaking out over Kimi over the last several days.
• 2:21
  SPEAKER_02: Alibaba also released a preview of its Quen 3.8 Max model that
• 2:27
  SPEAKER_02: the company says is second only to Fable on the Frontier.
• 2:31
  SPEAKER_02: Alibaba also announced plans to release that model with open weights.
• 2:36
  SPEAKER_02: So clearly this is becoming more and more central to policy debates in Washington,
• 2:42
  SPEAKER_02: anxiety in Silicon Valley.
• 2:45
  SPEAKER_02: What interests you as we wait to see how the U.S. responds to these developments?
• 2:50
  SPEAKER_00: Well, I thought,
• 2:51
  SPEAKER_00: you know,
• 2:51
  SPEAKER_00: the Kimi release was on the eve of the World AI Conference in Shanghai,
• 2:55
  SPEAKER_00: which had an upgrade this year because Xi Jinping gave the keynote speech.
• 2:58
  SPEAKER_00: And, you know,
• 3:00
  SPEAKER_00: he didn't really deviate,
• 3:02
  SPEAKER_00: I think,
• 3:02
  SPEAKER_00: from what we expected,
• 3:03
  SPEAKER_00: what we had talked about before, what he was going to talk about.
• 3:06
  SPEAKER_00: But what was interesting, too,
• 3:07
  SPEAKER_00: you know,
• 3:08
  SPEAKER_00: the freak out in the markets here in the U.S.
• 3:11
  SPEAKER_00: markets – China over the weekend rolled out efforts to rescue their stock market
• 3:17
  SPEAKER_00: because their stock market has been down significantly.
• 3:19
  SPEAKER_00: Friday was down a lot.
• 3:20
  SPEAKER_00: National team, back to work.
• 3:21
  SPEAKER_02: Here we are.
• 3:22
  SPEAKER_00: The DeepSeek founder, DeepSeek comes out of a quant fund.
• 3:26
  SPEAKER_00: One of the funds run by Deluanfong, the DeepSeek founder, was down 16% last week.
• 3:32
  SPEAKER_00: I'm not clear that it was related to Kimi, but markets are down everywhere.
• 3:36
  SPEAKER_00: And in China,
• 3:38
  SPEAKER_00: they are particularly sensitive because so much of the efforts to revive
• 3:43
  SPEAKER_00: the stock markets are about improving the mechanisms to channel capital,
• 3:47
  SPEAKER_00: private capital into these tech startups.
• 3:50
  SPEAKER_02: Into innovation, yeah.
• 3:54
  SPEAKER_00: On the US side,
• 3:55
  SPEAKER_00: I think the best thing I've written,
• 3:56
  SPEAKER_00: there are lots of hot takes over the last few days.
• 4:00
  SPEAKER_00: I was just joking before we started the podcast that I thought about a hot take over
• 4:04
  SPEAKER_00: the weekend and realized I'm out of hot takes because it's just...
• 4:09
  SPEAKER_02: Anyway.
• 4:10
  SPEAKER_02: Well, it's also...
• 4:11
  SPEAKER_02: Can I just say it's impossible to compete with Twitter in the take space in the wake
• 4:15
  SPEAKER_02: of something like this because every other tweet is talking about
• 4:20
  SPEAKER_02: the imminent decline.
• 4:22
  SPEAKER_02: Right.
• 4:22
  SPEAKER_02: It's just...
• 4:23
  SPEAKER_00: Kind of hysterical on all sides.
• 4:27
  SPEAKER_00: And lots of witchcats,
• 4:28
  SPEAKER_00: including from some big American VCs who didn't invest in OpenAI and Anthropoc and
• 4:35
  SPEAKER_00: so have a special hatred for those companies and seem to want them to all fail.
• 4:39
  SPEAKER_00: I will say the best take,
• 4:41
  SPEAKER_00: honestly,
• 4:41
  SPEAKER_00: I've read is Ben's take in Today's Stratechery,
• 4:44
  SPEAKER_00: where he looked at Kimmy and why Yeah, it's a big deal.
• 4:49
  SPEAKER_00: I mean, good for them.
• 4:49
  SPEAKER_00: They obviously have some real innovations and incredible technical talent that built this.
• 4:53
  SPEAKER_00: They also obviously distilled, likely from Claude.
• 4:57
  SPEAKER_00: And he really walks through how I think best to think about it and why it's not
• 5:02
  SPEAKER_00: the demise of the big frontier labs in the U.S.,
• 5:04
  SPEAKER_00: but it is another wake-up call for,
• 5:06
  SPEAKER_00: and we've talked about on this podcast,
• 5:08
  SPEAKER_00: why the U.S.
• 5:10
  SPEAKER_00: needs to figure out how to have a much more robust,
• 5:13
  SPEAKER_00: open-weight, open-source model ecosystem.
• 5:17
  SPEAKER_02: Yeah, well,
• 5:17
  SPEAKER_02: and it's interesting because one of the things that he suggested was the U.S.
• 5:22
  SPEAKER_02: should pass a law that one,
• 5:24
  SPEAKER_02: makes explicit that collecting data for training models is fair use and two,
• 5:29
  SPEAKER_02: bars terms of service that forbid distillation for U.S. companies at a minimum.
• 5:35
  SPEAKER_02: And the response from Anthropic,
• 5:38
  SPEAKER_02: the response from OpenAI over the last several years has been to raise alarm
• 5:41
  SPEAKER_02: about distillation.
• 5:43
  SPEAKER_02: Pointing to Chinese model makers like Moonshot,
• 5:47
  SPEAKER_02: like Kimmy K3, saying that this is going to inevitably undermine US interests.
• 5:54
  SPEAKER_02: And so Ben is sort of going the other direction and saying, look, American model makers...
• 6:00
  SPEAKER_02: American open source model makers are at a disadvantage to Chinese competition
• 6:04
  SPEAKER_02: because they have to abide by the terms of service from these AI labs.
• 6:10
  SPEAKER_02: Chinese model makers aren't abiding by those terms of service requirements.
• 6:14
  SPEAKER_02: And so the growth of the US open source ecosystem has been pretty stunted over
• 6:20
  SPEAKER_02: the last several years,
• 6:21
  SPEAKER_02: given the state of play, at least as we sit here right now in July 2026.
• 6:28
  SPEAKER_02: We'll pay attention to that argument because we do need open source and the lack
• 6:32
  SPEAKER_02: of US open source options.
• 6:35
  SPEAKER_02: I think one of the problems that we're seeing is that like new
• 6:39
  SPEAKER_02: and innovative companies on the US side are building on top of Chinese models,
• 6:43
  SPEAKER_02: which you've I mean,
• 6:43
  SPEAKER_02: what have you been hearing in terms of what direction the administration may go?
• 7:05
  SPEAKER_00: Axios said something today.
• 7:08
  SPEAKER_00: We've talked about a bit,
• 7:10
  SPEAKER_00: which is just that the administration is looking at ways to discourage U.S.
• 7:15
  SPEAKER_00: companies from using these Chinese models.
• 7:17
  SPEAKER_00: And I think getting legislation passed.
• 7:20
  SPEAKER_00: Right.
• 7:37
  SPEAKER_00: But that doesn't solve the problem.
• 7:39
  SPEAKER_00: The Chinese model makers are still going to keep making these good open source models.
• 7:44
  SPEAKER_00: The US ecosystem is still going to be relatively underdeveloped or building,
• 7:48
  SPEAKER_00: as you said, on distilling Chinese models, right?
• 7:51
  SPEAKER_00: Which are, in some ways, distilling US models.
• 7:54
  SPEAKER_00: As Ben pointed out, right?
• 7:55
  SPEAKER_00: It's this completely ass backwards approach.
• 7:58
  SPEAKER_00: And so I think what you're seeing,
• 8:00
  SPEAKER_00: there's just been a lot of incoherence from the Trump administration around this.
• 8:04
  SPEAKER_00: Obviously, it's fast moving.
• 8:06
  SPEAKER_00: It's new.
• 8:06
  SPEAKER_00: It's complicated.
• 8:07
  SPEAKER_00: There's been a fair amount of turnover, I think.
• 8:09
  SPEAKER_00: And it's, of course, like anything heavily politicized.
• 8:13
  SPEAKER_00: But again, we've talked about this on the podcast multiple times.
• 8:17
  SPEAKER_00: People should not be surprised to see more robust actions out of
• 8:23
  SPEAKER_00: the Trump administration to try and discourage U.S.
• 8:25
  SPEAKER_00: companies or companies that are dealing with either have U.S.
• 8:28
  SPEAKER_00: government contracts or dealing with sensitive data from using these Chinese models.
• 8:31
  SPEAKER_02: Yeah.
• 8:32
  SPEAKER_02: Yeah.
• 8:32
  SPEAKER_02: And I mean,
• 8:33
  SPEAKER_02: the Axios report,
• 8:34
  SPEAKER_02: they threw out the possibility of procurement rules that would secure U.S.
• 8:38
  SPEAKER_02: supply chains,
• 8:40
  SPEAKER_02: adding Chinese labs to the entity list,
• 8:42
  SPEAKER_02: which would mean that U.S. companies cannot access their models without a license.
• 8:47
  SPEAKER_02: And then, quote unquote, public pressure campaigns aimed at American companies.
• 8:52
  SPEAKER_02: Highlighting potential backdoors and the lack of security.
• 8:56
  SPEAKER_02: I mean, you could also police Chinese models by saying we're going
• 9:01
  SPEAKER_02: to aggressively police infrastructure, including crackdowns on smuggling chips.
• 9:07
  SPEAKER_02: Well, that's right.
• 9:08
  SPEAKER_02: I mean, you think about the whole loophole for accessing cloud
• 9:23
  SPEAKER_00: I mean,
• 9:30
  SPEAKER_00: that changes the conversation too about is the U.S. losing, is the U.S. behind?
• 9:37
  SPEAKER_00: In some ways,
• 9:38
  SPEAKER_00: we're still lacking some information,
• 9:39
  SPEAKER_00: but when you look at a response, again,
• 9:42
  SPEAKER_00: the U.S.
• 9:43
  SPEAKER_00: government response, I think, has been, I think it's fair to say, fairly incoherent.
• 9:47
  SPEAKER_00: And one of the,
• 9:48
  SPEAKER_00: in addition to the That potentially moves around discouraging U.S.
• 9:54
  SPEAKER_00: companies or some U.S.
• 9:55
  SPEAKER_00: companies from working with these models is also,
• 9:58
  SPEAKER_00: and we're seeing some of it flow or move through Capitol Hill,
• 10:03
  SPEAKER_00: is adding more restrictions.
• 10:05
  SPEAKER_00: Not just on, say,
• 10:07
  SPEAKER_00: trying to close the loopholes around access to top-end ships
• 10:10
  SPEAKER_00: through overseas clouds,
• 10:11
  SPEAKER_00: but also more restrictions on semiconductor equipment exports to China and servicing
• 10:17
  SPEAKER_00: of those equipment that's already there,
• 10:19
  SPEAKER_00: not just by U.S. firms,
• 10:20
  SPEAKER_00: but by foreign companies,
• 10:21
  SPEAKER_00: say Dutch and Japanese,
• 10:22
  SPEAKER_00: say ASML,
• 10:23
  SPEAKER_00: who still have a pretty significant U.S.
• 10:25
  SPEAKER_00: technology component or composition of their technology.
• 10:29
  SPEAKER_00: So the U.S. has legal, has jurisdiction.
• 10:31
  SPEAKER_00: Sure.
• 10:32
  SPEAKER_02: And that may come through
• 10:34
  SPEAKER_00: Congress.
• 10:36
  SPEAKER_00: You don't see that coming out of the Trump administration.
• 10:38
  SPEAKER_00: You don't see that coming out of BIS and the Department of Commerce,
• 10:40
  SPEAKER_00: which is clearly completely dysfunctional.
• 10:43
  SPEAKER_00: But you may see that legislated by Congress.
• 10:46
  SPEAKER_02: And as far as the Trump administration,
• 10:49
  SPEAKER_02: what's your read on why they are reluctant to go that direction?
• 10:54
  SPEAKER_02: Is it because of just broader concerns with the state of the relationship
• 10:59
  SPEAKER_02: and how fragile that relationship is right now?
• 11:02
  SPEAKER_00: I think it's rare earths.
• 11:03
  SPEAKER_00: I think you go back to, again,
• 11:06
  SPEAKER_00: after one of those meetings when the BIS issued that guidance about
• 11:10
  SPEAKER_00: the Huawei Ascend chips that had been fabbed that they'd used to cut out the fathom
• 11:16
  SPEAKER_00: at TSMC in Taiwan even though they weren't supposed to.
• 11:18
  SPEAKER_00: And the U.S.
• 11:19
  SPEAKER_00: BIS issued that guidance,
• 11:20
  SPEAKER_00: which basically said using these chips, I mean,
• 11:22
  SPEAKER_00: I'm paraphrasing here,
• 11:23
  SPEAKER_00: but could effectively mean you're in violation of U.S. export control laws.
• 11:27
  SPEAKER_00: The Chinese freaked out, right?
• 11:29
  SPEAKER_00: Yeah.
• 11:30
  SPEAKER_00: It was sort of quietly revised.
• 11:32
  SPEAKER_00: And then obviously it's not being enforced.
• 11:35
  SPEAKER_00: And so one of the things when you talk about or people talk about this freak out,
• 11:38
  SPEAKER_00: like, oh, the Chinese are winning in open source.
• 11:41
  SPEAKER_02: Well, one of the hysterical reactions in the course of all that is,
• 11:45
  SPEAKER_02: and there's nothing that can be done because this is just how the technology works
• 11:49
  SPEAKER_02: and they can distill models and there's nothing America can do.
• 11:53
  SPEAKER_00: And yes, it's complete bullshit.
• 11:55
  SPEAKER_00: Excuse me.
• 11:56
  SPEAKER_00: But I think when you go back to Xi's speech on Friday, and we can post a translation to it.
• 12:02
  SPEAKER_00: I'm going to read from it, yeah.
• 12:03
  SPEAKER_00: A couple of good analyses.
• 12:05
  SPEAKER_00: I think the best summation was from this—he's in Singapore now,
• 12:07
  SPEAKER_00: this lawyer named Henry Gao,
• 12:09
  SPEAKER_00: who went through—he actually had a long retweet of Dean Ball's tweet,
• 12:14
  SPEAKER_00: which I'm sure everyone has read here.
• 12:15
  SPEAKER_00: We don't need to— Rehast that, but we can put a link to it.
• 12:19
  SPEAKER_00: But he summed it up,
• 12:20
  SPEAKER_00: I thought,
• 12:21
  SPEAKER_00: extremely well,
• 12:21
  SPEAKER_00: which is reading the Xi speech is,
• 12:26
  SPEAKER_00: and I'm just going to read from the end of his tweet.
• 12:28
  SPEAKER_00: He said, taken together, Xi speech is not useless rhetoric.
• 12:31
  SPEAKER_00: It is a surprisingly frank account of the global AI order China wants.
• 12:36
  SPEAKER_00: China wants openness while it's catching up,
• 12:39
  SPEAKER_00: limits on newest national security controls while it still needs access
• 12:42
  SPEAKER_00: to frontier technology,
• 12:43
  SPEAKER_00: and Civilizational pluralism internationally
• 12:46
  SPEAKER_00: while maintaining ideological uniformity at home and AI capacity building for
• 12:52
  SPEAKER_00: the global South in ways that expand China's technological governance influence.
• 12:55
  SPEAKER_00: And to that fourth point,
• 12:57
  SPEAKER_00: part of that capacity building includes the ability to effectively outsource
• 13:02
  SPEAKER_00: the entire AI stack to the rest of the Right.
• 13:05
  SPEAKER_00: Absolutely.
• 13:05
  SPEAKER_00: And it's still a huge vulnerability for them.
• 13:08
  SPEAKER_00: And the Trump administration, again, is not interested in cracking down on that.
• 13:11
  SPEAKER_00: Congress may change that, but we'll see.
• 13:32
  SPEAKER_01: All right.
• 13:32
  SPEAKER_01: And that is the end of the free preview.
• 13:34
  SPEAKER_01: If you'd like to hear the rest of today's conversation and get access
• 13:38
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• 13:41
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• 13:44
  SPEAKER_01: Cynicism, So check out your show notes, subscribe, and we will talk to you soon.