The West LOST: China’s AI & Robot Revolution is Already Unstoppable | Arnaud Bertrand

Ajouté : 2026-05-09

[00:00:00]Welcome back everybody to Neutrality Studies. This is Pascal and today I'm joined again by the wonderful Arno Bon.

[00:00:06]Arno, welcome.

[00:00:08]>> Hi Pascal. Thank you for inviting me again.

[00:00:11]>> It's good seeing you again. You haven't been on the show for quite a couple of months, which is not because I don't want you. I actually adore all of your uh writing and analysis that I read almost daily on Twitter and I don't know how you do it. So congratulations for everything you put out.

[00:00:28]>> Thank you. Thank you. That means a lot coming from you.

[00:00:31]>> Oh, it's it's quite fantastic. You're one of the most prolific uh analysts out there actually on Twitter and Substack and you recently have been working on uh AI and I thought maybe we can start with that one. Um it kind of flew a little bit on my radar. I only read that China came out with a new deepseek uh model or well the the company behind it it's it's not China itself but um the Chinese AI approach in what sense is it different from the western approach and why to you does that matter?

[00:01:03]Uh yeah, I mean it's it's it's really a topic that fascinates me. Uh also because in my main job which is actually not writing on Twitter or stack uh I'm I'm a developer. I mean I'm an entrepreneur and I code every day for for for my company. Uh so I use a lot of AI. Uh and so I get to test the different models uh both the US models and the Chinese models. Um and uh and it's fascinating to see the contrast in both approaches and I think the the Chinese approach you know the more things advanced the more it's it it's uh it actually shows a very smart strategy.

[00:01:48]Uh, so the other day you had Jensen Huang with the Nvidia CEO uh go on um you know quite uh go go on a podcast that that made a lot of noise and he described AI as uh in his words a five layer cake. Uh so you have five layer to AI uh you know starting with the lowest layer energy uh and then you know you have chips the infrastructure and so on and the last two layers uh as they described it uh was the motors uh so the models so you know on the American side you have chlo and so on the Chinese side you have uh you know deepseek kim and so on uh and then the last layer was the application layer. So what what you do actually with the AI um and his point is that AI uh is a general purpose technology. Uh so much like electricity or the internet or you know the the the phone. Uh so we've had a few of those in in the past and what generally um happens with those general purpose technology is that it's always the application layer uh that creates the value. Uh so if you think back about uh electricity for instance uh did it matter much who uh you know made um uh the actual energy infrastructure who owned the uh uh the electrical uh power lines and so on. Not that much. What what matters is who did the the the fridge uh who made uh you know light bulbs and so on and so much and so forth. But what created the value was the uh uh the application layer for that. Same thing for the internet. Uh the the company that became insanely big with the internet uh wasn't uh you know um uh telecom companies uh that provided the the infrastructure. it was you know the googers, the Alibaba, the uh Amazon and and so on and so forth who actually made use the internet made main made the applications and there is no reason to think u that AI is going to be any different. I think we're going to look, you know, 10, 20 years from now and be like this whole AI race around uh the lower layers uh positioning as whoever wins the infrastructure is going to win the AI race. Um it's going to sound extremely stupid uh because what what really matters is uh at the end of the day how you use AI.

[00:04:48]uh whoever wins to the extent that there is a race is whoever can use AI in their society in order to um uh to to gain more efficiency, productivity and and so on and so forth. Um, and that's why the American approach uh is is a bit strange because if you think about it, what that means is that uh what matters is diffusion uh in order to create the most value. So so you you want everyone out there uh to have this general purpose technology because then the application layer uh can reach the most people, right? So it's like we if you think back at electricity it would have made no sense to say okay we're going to win the electricity race by uh forbidding anyone else to have the light bulb to have electricity. So we're the only ones who can light, you know, have lights basically because then all those big companies that that did create value on electricity like G and so on would have a much smaller um uh market, right? If if only the Americans could have electricity. They made money by, you know, making sure that everyone had access to this infrastructure and then they could sell the application layer to to everyone. uh but that's the approach that the Americans are taking for uh for AI saying like u you know uh our models are really what matters and so we don't want them to we don't want the Chinese to have them we don't want uh enemy you know um non nonalign nations to have them uh so it's it's a bit of a strange take where where whereas the Chinese approach is on the contrary to offer the models free uh and open source to everyone. So ensure maximum diffusion uh because they're taking much more the general uh general purpose technology approach by saying okay uh it's a general purpose technology diffusion is what matters here is the models everyone uh you can have it for free let's focus on the application layer >> hey very brief intermission because I was recently banned from YouTube and although I'm back this can happen anytime time again. So, please consider subscribing not only here but to my mailing list on Substack. That's pascalota.substack.com.

[00:07:27]The link's going to be in the description below. And now back to the video.

[00:07:31]I mean, the United States strategy in a lot of uh in a lot of areas has always been to gain complete market control, right? Because that then global market control that then gives you a huge lever. And we've seen the United States using this lever uh over and over and over again in the past 1015 years with sanctions and you know trying to then you know the whole swift system just uh kick pe kick countries off them with the expectation that then their economies crash. We've seen how they tried to do that or how they did that actually to Iran in January. try to just uh destroy the Iranian economy overnight by um by market man by manipulations um centries centrally done from from coordinated from Washington. And this is of course only possible if you are in firm control over um certain market segments and also technologies um and they seem to try to replicate that here. But then the Chinese approach now is a completely different one apparently. So also not not trying to control control everything but just let it go including uh open sourcing stuff.

[00:08:39]Huh.

[00:08:41]>> Yeah. Exactly. I mean, if if the American's goal is to control everything, then it's failing uh dramatically uh because you know Jensen Wong just gave um an interview in in a magazine on by his own word Nvidia uh which is the the biggest American uh chip company is down to 0% market share in China. He he said that it has 0% market share and this is directly linked to uh uh to to their approach which is of course you know you Chinese can't have our chips you can't have our models so if from China you try to access uh anthropic.com which is the uh the place where you you you get to use uh cloud AI or if you try to uh to go and ch you can't you can't access those models It's not China uh banning those models.

[00:09:42]It's the Americans uh banning those models in China. Yeah, >> I didn't know that. I thought it was the Chinese great firewall because I actually just was in Shanghai for a couple of days and I couldn't I had to route my my traffic through my Hong Kong eim in order to use entropic.

[00:10:02]>> Ah, it's the Americans who block it.

[00:10:04]>> Yeah. Oh, it absolutely it is the American side who blocks those mothers in China. Uh, and they do the same for for the chips and swim. So, you know, by definition that that gives you zero control because you're saying the the largest market in the world when it comes to semiconductors, which is a fact. Uh, China um actually buys more semiconductors than any other country in the world, including the US. Uh we voluntarily uh well voluntarily it's it's the American government actually the the Nvidia CEO is extremely pissed off about that uh but they're saying we voluntarily don't sell uh chips to them or at least the the most advanced chips.

[00:10:50]Um and and so what they're forcing China to do uh which China actually did is is to build their own uh so by that uh action they're helping they're very much encouraging China to to become a mighty competitor which they are um in mothers.

[00:11:13]Uh so you const you consistently see uh the Chinese models uh you know uh keeping track with the with the American models. Uh so including if you look at the latest Deep Seek V4 uh if you look at most of the benchmarks it's on on par with the with the American models and increasingly on on chips. Uh so the Deep Seek V4 for instance can run on the latest Huawei chips uh SN chips um and it can run very well. So right now you have uh the Chinese in control of their full stack of their five layer cake which we were uh speaking about earlier.

[00:11:57]And what they will do and what they're increasingly doing as well is uh uh going to countries other countries uh with an incredibly strong value proposition which is we have uh the whole stack the same as the Americans uh so the five layer cake uh but uh ours is open source so you guys are in full control you can even modify the order and so we don't care. Um and it's uh 30 times cheaper by the way. Uh so that is their value proposition. Uh which is insanely strong leg. It's literally at this stage uh you you are a complete idiot if you use uh if if you have a company like I do and and you're paying for code or ch or open AI uh API uh you're a complete idiot because you're you're you're paying 30 times more for uh the same thing and you give all your data to uh OpenAI or or anthropic.

[00:13:10]Whereas, if you have a Chinese open-source model on your own server, they're not communicating with China at all. You're in full control of your uh of of of your customers data.

[00:13:23]>> So, China by now providing the planet with a public good. Uh that that is, isn't it quite fascinating? I mean it it used to be the United States that that that did this had this kind of approach at least some of the companies uh to do things open source and provide and but now the US government is stepping in and making making that kind of uh that kind of model completely impossible um thereby actually increasing china's digital sovereignity and the uh the abilities they have. I mean the are isn't that just opening isn't that just increasing the gap between well the attractiveness of actually the the two the 2D development models.

[00:14:08]>> Yeah, it's it's very much increasing the the value proposition that the the Chinese are providing. That's uh that's for sure by contrast with uh with them.

[00:14:17]I mean it's not the first time in history that uh that this happens. uh we we saw the same thing uh between the the UK and the US actually. I I think it was uh I can't remember the technology exactly. I think it it might have been uh clothing um uh you know making garments um industrially um on and the British at the time the British Empire were were the leaders and the Americans as the sort of upand cominging uh power uh wanted to acquire this technology but the British were uh protecting it and on on so and so forth and you know ultimately the Americans gained the knowledge and uh because the British were so closed uh they actually set themselves at a competitive disadvantage versus uh uh versus the Americans. So, so it's quite uh um a common uh you know sort of dynamic uh but most of the time it's it's shooting yourself in in in in the foot to do that. I mean it's protectionism at the end of the day.

[00:15:35]It's protectionism.

[00:15:36]>> It is it is protectionism. It is actually it's actually something classic to happen once the leader starts fearing to fall behind that they go like instead of let's be innovative let's just close everything down. But what they what this does to international relations is that it leads to ideas started a couple of years ago but even now it's kind of happening in the background the idea of friend shoring right that the US wants to produce everything not not only within the US but within its its group of friends of allies when it comes to to AI and especially chips the most important two friends the United States has is Japan and the Netherlands which make the litography uh machines that then that then can produce these chips.

[00:16:16]And actually there is a uh the Japanese and the the Dutch have a um well they coordinate on that level diplomatically because they don't want to be uh left behind or played against each other. Um what is what are your observations on where this kind of French areing stuff is going and and how China is reacting to this that actually the US is trying to take Japan and and the Europeans kind of off the market from the for the Chinese.

[00:16:46]>> Yeah. I mean it's it's definitely what they're trying to do at least what they were trying to do under the previous administration which was very much about that. You could argue that the Trump administration is uh is is changing this dynamic quite a bit uh because uh well it's not very friendly.

[00:17:07]>> They they par everybody.

[00:17:09]>> Yeah. Exactly. Exactly. Uh so so if you listen to uh much of the uh rhetoric on AI uh from the Trump administration and companies that are very much aligned with them uh like Palanteer, they're very openly saying that AI is a tool of domination for the US. um uh with regards to the entire world uh allies included. Um so well allies you know in in quotation marks um and this is you know as a European uh this is very worrying rhetoric. Um, so you know I I look uh you know as as a as a Frenchman for instance I know that uh my own intelligent services uh the DJs DGSI um uses Palanteer and American AI for instance u as at at the core of their system. So it is parent uh telling the French intelligence services who is considered a threat uh to to the French uh to France as a country. Um and when Palantem says and the Americans are saying that uh you know we use AI as a tool of domination, you can you you can very much uh you know tell yourself that then Palanteer is is incredibly biased uh in favor of American interests. So it's not going to Yeah, obviously. So, so it's it's not going to surface threats uh that are objectively threats to French interests uh but that uh American interests say shouldn't be surfaced as threats. So, you know, just a recent example for instance, one of the biggest intelligence failures in France was the whole um story around OKUS. Uh so we had this deal with the Australians to build them a submarine which would have uh I can't remember the exact amount but it was tens of billions of dollar um to uh to France uh which the Australians would have paid for us to um uh to to build them submarines. Uh and then the contract was stolen by by the Americans on on the Brits. Uh which you know is obvious obviously bad for French interest. But you can bet that Palantio would not have surfaced those conversations that the British and the Americans uh were having with the Austrians because you know uh obviously uh that's good for American interest.

[00:20:06]So, so you can imagine plenty of threats to uh to French interests uh that you know a American AI is structurally set up to um to not surface and and on the converse there are some threats which are not necessarily threats to French interests like you know China uh in general is much less uh a threat to European interest than than to the US because I mean the US is number one they don't they want to stay number one China is number two they may be number one so you can understand how uh the the Americans want to prevent the Chinese from becoming number one to the Europeans it's actually more a good thing if if the world is more balanced between uh the US and the Chinese because then you can play one against the other so you don't necessarily want to prevent China so much from, you know, being a counterweight to to the US. But of course, you're going to see Parentia very much still facing uh the Chinese threats to to the the Europeans when, you know, objectively is less less of a threat to uh to European interest. So, you know, that's uh on on if on top of that uh American officials, American companies say, "Yeah, that's exactly what we are going to use AI for," then you know that's uh it's it's it's again kind of shooting yourself in the foot.

[00:21:44]>> Yeah. But the Europeans are really really good at that. It's interesting. I just had a talk with Larry C. Johnson were uh we came to the conclusion the United States is shooting itself in both feet right now when it comes to what they are doing or try to do with Iran um how they are approaching the the entire Ukraine war but the Europeans are kind of on a different level there aren't they like because downstream from whatever whatever the United States does then the the Europe at the moment is just integrated in that and this now includes of course the entire um AI race and maybe you can speak to that. And then a second question, um, why do you think it is that the United States and Europe still frames it as an AI race when instead, you know, China to me, especially when it comes to something that is very battlefield applicable, has been trying to play the drone race, but the United States never picked it up. I mean, the United States never went to these beautiful big drone shows the way China did in order to show what they can do in terms of coordination and so on.

[00:22:46]And that is a technology which has this obvious battlefield uh application which we now know. But the US and Europe, they never went there. The drones are in the media about how they're being used in Russia and Ukraine, but they're not on the radar of like who produces what and so on. And there's no drone race in the media. There's only the AI race.

[00:23:07]>> Yeah. I mean to be fair on the American side, you have quite a few drone companies. Uh so famous one is Ander for instance. uh the one that was started by Palmer Lucky uh who is the entrepreneur who you know created uh the VR headsets uh that was bought by uh by Meta and in fact Meta renamed itself Meta because they bought that that company and it was kind of a huge failure but that's that's on a side uh so you have some some drone companies on the US side uh but compared to China they are very very far behind and uh on and they're trying to compete on the American on the military drone side of things uh but not so much on the commercial drone side of things. So, you know, China has DJI, uh, which is, you know, by far the leader and, uh, at this stage, they're so advanced, so good technologically, so big that it's it's just impossible like the the race to the extent there was one, uh, is won. It's it's it's kind of over, I think. Um, so I I think that's that's the the status. Um, and yeah, that that's uh I think they're overplaying the AI race uh um because it's one of the only things if if you look uh where they're still somewhat where the Americans uh are still somewhat competitive with with the Chinese. There are so many industries right now, especially when it comes to actually making stuff. So not software but actual hardware um that requires you know um high-end industry at scale uh where they just can't compete uh at all and so obviously they're not going to you know overplay that in the media because uh uh you know it's not a very good look for them. So if you look at AI for instance, AI growth is uh 50% of American GDP right now. Uh so it's it's kind of >> yeah it'sif so sorry 50% of American GDP growth. So not GDP GDP growth. Okay.

[00:25:32]>> Uh so you can search it's it's actually it's a number that everyone is quoting.

[00:25:37]I think it's uh >> it's correct.

[00:25:40]>> No of growth. I I I can believe that not of total GDP but of growth. Yes. Yes.

[00:25:44]>> Yeah. Yeah. Yeah. So, when it comes to economic growth, you know, the US is kind of a one-trick pony right now. It's AI. Uh they they very much rely on that.

[00:25:57]>> Um uh uh you know, they don't have much else. uh if if if you look uh so e even when it comes to like the the fang uh for instance, China is uh is very much competing against uh against all of them. Uh so you know Tik Tok is a better social network than uh most American ones. Uh you know if if you take most industries, China is extremely competitive. So they're trying to save AI, which is kind of one of the only ones where that they might have a shot. But my argument is that the approach that they're taking is uh is is actually won't work in the in the medium to long to long run because, you know, they're focusing way too much on on the model, which is not what's going to create value in in the end. It's the application layer that matters.

[00:26:58]I this brings us to an interesting point which is that you know recently the Apple CEO uh it was announced that there's a change on the on the very top and there was quite a bit of chatter about about this one and where Apple is going and the best analysis I've seen is that Apple is actually putting its bet on on a ondevice AI and that they are that they're running with that one uh saying that that's where the future's going to be and at the same time we are now seeing in China the development of uh very very capable mach uh um machinery also by Huawei and very capable models that can run on that on on that machinery and what I've seen in in Shanghai actually which really fascinated me the robots China now has commercially available available uh robots that you can play with humanoid robots that you can that you can control with a with a with a controller and the thing walks and runs and sh and and and shakes his head and So a hand and so on.

[00:27:59]That's that's quite insane. If you combine these things, I mean, we would we would have the kind of iRoot future that Azimov and so on was was talking about. Um is what what are the the the developments of robotics and AI that you see happening and the trend?

[00:28:15]>> Yeah. So what I've uh I think I I wrote two years ago that um humanoid robots is going going to be the consumer product that will seal um China's leadership as uh you know the the top player um uh when it comes to technology it will be you know even a bigger change I think than the release of uh of of the iPhone by Steve Jobs where everyone was like wow that that's that like changes everything and then yeah everyone uh on you know the the US is very much at the top of technological leadership and so on I think that's going to happen with humanoid robots and on and China is uh at least two three years ahead of the US when it comes to humanoid robots uh so I uh I had a look it's quite funny if Take the single pro the single city of Shenzhen. Uh it has more u humanoid robot companies competing with each other uh than the entire United States.

[00:29:30]uh and and as a matter of fact uh than the entire west uh because if if you combine with uh with Europe, Europe I I I think unless I missed any has zero humanoid robots uh companies. Um so you know the US has uh has as has as has as a copper. Uh I think the most uh advanced one is the one from Elon Musk.

[00:29:56]Uh but uh it's not even released yet. Uh so you can't buy um I forgot the name.

[00:30:03]Uh h I have it on the on the tip of my tongue. Anyway, you you can't buy Elon Musk's humanoid robots. I think he said that it might be commercially available next year. Whereas if you look at the unit tree robots uh human robots, it's been commercially available for I think two years already. Uh and you can buy it today on Amazon. I think the price is $13,000.

[00:30:30]Uh so you know ju just by that that very fact it's uh it's years ahead of of the Americans and and you have dozens of human rights robots companies in China.

[00:30:43]they're, you know, organizing so many events. Uh, like, uh, there was the Beijing marathon, I think, two weeks ago, where you had humanoid robots, uh, doing it was a half marathon against each other. For the first time in in ever, you had the humanoid robots running a semiarathon faster than humans. um uh which is quite an impressive achievement uh technologically uh so yeah they they're very much advanced I mean they're not yet at the stage where uh you know you can speak with them uh like you speak with a human being they can't do most tasks so they can't you know make beds or uh cook or whatever uh but that is directionally where we're going um uh you know when I'm saying that humanoid robots uh a humanoid robots won the semi marathon this year last year they were twice as slow. So that is the pace at which they they're improving. Uh so last year I think they they took I can't remember the timing but they were like way slower than than humans. Uh so they're improving very fast and I think you know we're looking within less than a decades we might we might be somewhere somewhere like that. Yeah.

[00:32:11]>> Where do you think that puts uh you know the everybody else let's say I mean especially Southeast Asia and you're you are in Southeast Asia is in this very interesting spot where they can basically access both markets. They can they can play with with both sides. Uh Malaysia is now rising as a as um a hub where things are being made um and that companies pivot to. Uh what do you think that does to the to the inbetweens in between places?

[00:32:46]>> Uh I mean I think those in between places still don't want to have to choose.

[00:32:56]At least that's that's the case of Malaysia. they want to they want to remain in between. That's that's the point. Uh so you know Malaysia for instance a big it's it's doing very well these days by building data centers um in in Penang and in in the first of Malaysia in Johor at the border with uh with Singapore. I I I I know uh quite a few people work in that u in in that industry.

[00:33:27]uh and you know that they're uh they're agnostic when it comes to uh who uh whose chips are are in those data centers and so on that is in their interest they uh if everyone on on on both sides the Chinese and the uh and the American side is coming on the investing in in Malaysia to build those data center with their chips on some you know the more the better uh so that is their interest. Uh the issue is that the the American side is pushing very much for uh exclusivity. So, you know, last year you had Trump visiting Malaysia and they made the Malaysian side sign a deal where they were trying to, you know, um extract some sort of exclusivity uh which the Malaysians signed. But uh since then the deal is kind of off the table because there was something related to tariffs I think and uh on the US Supreme Court uh you know at this ruling on tariff which means it voided the deal. Uh so you're seeing many attempts by the Americans to uh contractually ensure that uh it locks uh countries like Malaysia or in Southeast Asia away from from the Chinese market uh well away from uh from uh partnerships with China. But um you know quite systematically you see it fail and being based in Malaysia um I'm seeing more and more uh you um development of of Chinese companies here. So, so uh so for instance, you know, more and more my shopping and Malaysian shopping is directly on Chinese uh e-commerce sites uh for instance uh because there is this new deal where you can buy directly on uh Taba and Sun and it's it's delivered directly to Malaysia with improved infrastructure and so you know uh that's an amazing deal. Uh so yeah.

[00:35:47]>> Yeah, it is. But and and you know this on the one hand we've we've now got this pressure especially from the United States to do French shoring and like lock everybody else out right and put pressure on the allies to do so. On the other hand we have this uh this natural urge of these third parties to not do so and and play with everyone. Yeah, also when it comes to the the payment infrastructure, you know, I'm one of the things going to China that surprised me is that at the moment these payment infrastructures are quite linked. I'm I'm able to to use my Japanese issued um uh Visa credit card with Alibaba uh Alip Pay >> and that worked like a charm. And on the other hand, in Japan, you can use Alipe u because it's now integrated into into most systems. I mean it's most places including taxes and so on accept that.

[00:36:36]So we do have kind of linking of payment methods, payment systems and uh where do you see that one developing because the prediction for a long time was that this one would be completely decoupled especially because what the United States did with the Russia sanctions and Iran sanctions and so on but it seems that Asia develops a little bit differently doesn't it?

[00:36:54]>> Absolutely.

[00:36:56]In fact, I posted about that uh quite recently because I traveled recently to both Thailand and Cambodia.

[00:37:03]>> Um and what I found interesting is that everywhere on on in Malaysia also, of course, everywhere you can pay by QR code. Uh so this is something you don't see much in in Europe or the US but everywhere in Asia little shops have a QR code uh which is normally local so national every country has their national QR code which you can scan uh on um on and you pay that way. But interestingly in in in both Cambodia and Thailand uh often times those QR codes were working if I scanned it with uh Alip Pay uh or the Malaysian app which is called Touch and Go uh which is part of the Alipe Plus uh network. Uh so so so you're seeing uh so if I was Chinese for instance say traveling in uh in in Cambodia or Thailand I can pay everywhere with uh with my Chinese uh with my Chinese alipe. Um so you're seeing uh uh and by the way it's free.

[00:38:16]So there is no uh there is no charge. Uh it's it's like um how do you call that?

[00:38:23]Uh it's it's it's a ledger. Uh >> meaning it's just uh it's not like you have a master card or or visa taking a cut in the middle. Uh it's a blockchain.

[00:38:36]That that's the word I was looking for.

[00:38:38]Uh so so it's it's it's more beneficial to everyone. Uh basically >> very it's very interesting that we are seeing that at the moment. basically metab banking companies that try to sit on top of of of lower lower level banking uh uh infrastructure. We have one in the west called wise that is doing also a good job of of of this kind of linking and then and then do do money clearance basically. Um but we see even more of that in in Asia, don't we? And a lot of it actually coming out of China.

[00:39:13]>> Yeah, absolutely. Absolutely. I I mean why is this tiny compared to uh to to you don't see wise QR codes uh everywhere like Alipe or or WeChat in China um like every single shop uh or person in the whole of China is is connected as a QR code like it is it is the def facto uh you know payment system in the whole of China and increasingly u linked to local payment system in in in the rest of uh of Asia whereas Wise you know I mean it's a great company I use Wise uh but it's nowhere near that sort of uh of scale uh um yeah no it's it's also the they do a little bit different not exactly the same thing it's more interesting that you have at the moment the the rise of a lot of companies that try to sit on top of the of the banking infrastructure and I wonder if that can continue and if that's something that we might see um you know if that will solve the problem of how to access Russia for instance right if Russia would be integrated in that and Alipe would work in Russia so that you know the stupid swift decoupling uh uh would would lose its lose its power and that people like you and I can like simply travel again everywhere and have and have access to to to methods >> yeah I mean that's fascinating observation because because those things I'm not a specialist of uh of of banking infrastructure. But what I gather is that those things are uh are blockchain often private blockchains. So in in the case of Alipe or or WeChat it is absolutely a private blockchain um that get linked with uh it depends on the countries either government blockchain uh or other private blockchains uh which means those are you know standards uh that are completely out of the uh typical uh you know banking infrastructure. So I would guess that when I'm a Chinese person who pays through Alip pay uh after scanning the um you know Cambodian QR code or TA QR code uh that transaction never transits through uh through Swift uh for instance and so through consumer adoption uh you're right that we we might set up a a system where you know swift on the whole sort of legacy banking infrastructure uh becomes exactly that becomes legacy because it's h it's been you know uh rendered uh useless it is useful because you know it's uh it's it's it's what payments relied on but if if payments are you know through consumer adoption just done uh through those blockchains on SW then you know we don't need it anymore and uh and all those sanctions based on it by by the US um becomes also completely ineffective because people just don't use it anymore.

[00:42:36]>> Yeah. H how this brings me to a next point because we've seen this very interesting move just two or three days ago of China for the first time activating a 2021 law that pro prohibits its companies from following US sanctions when it comes to Iran. So China saying like uh dear Chinese companies if you go ahead and and actually uh you know adhere to US sanctions then well uh you have a problem with us here at home. How did you interpret that one?

[00:43:08]Uh so just to be clear, it's not uh China forbidding all its companies to adhere to US action. It's it's very specifically for a bunch of oil refineries. Um because uh recently as part of uh I forgot how they named the operation, operation freedom, you know, uh something uh the Americans uh sort of ramped up the application of their Iran sanctions specifically for some Chinese companies, oil refineries um in uh that that were allegedly according to the Americans processing Iranian oil and specifically they went after a very big Chinese company uh which is a Fortune 500 um 500 company uh and and basically they said we're going to apply if if if that company continues to uh process Iran oil we're going to apply uh the full strength of the uh uh of of US sanctions on them which means they can't use the dollar and so which is a massive move for such a large company.

[00:44:26]Um, and it's also saying that any uh banks that does business Chinese banks that does business with that uh massive Chinese Fortune 500 company uh if they continue to do business with it, they will be cut uh from the dollar. So, it's a it's a huge sanction.

[00:44:49]>> Yeah, exactly. So, so it's a huge move on China said uh it's actually China what most people don't know is that they've been a very good actor when it comes to strangely uh when it comes to applying US uh US sanctions. So you know just an anecdote for instance I know a very very famous person that's uh you know globally famous uh I won't say his name publicly but uh two three weeks ago he went to to China is sanctioned by the US he went to China just went to the counter of a local bank I don't know agricultural agricultural bank or something like that he just wanted to change money he had dollars he wanted to get Chinese yan Um, China has absolutely no issue with that guy. In fact, I think he's seen quite positively by by the Chinese. But still that local agricultural bank in China told him, "No, you can't change here because you're sanctioned uh you're sanctioned by the US." So, you know that that's they're showing a lot of goodwill uh actually for for US sanctions. uh so it is quite and it is the first time that China is uh applying its that 2001 2021 law uh because it's kind of the stro that broke the camel's back uh it's it's a huge escalation by the US saying that they will go after that one company and all the banks that that do business with it which is probably all the banks in China that's that's a crazy move uh and that's why China is like Okay, that's that's enough. Uh we're not doing this anymore. We're not, you know, applying your sanctions. Um and uh my point was, you know, it's it's actually a much bigger deal, much more detrimental to uh to US interests uh to have China lose their goodwill when it comes to um to applying US sanctions than whatever small amount of oil those companies might have uh Iranian oil that those companies might have uh might have processed.

[00:47:01]>> Yeah. I mean we are back at the shooting yourself in the foot because the I mean the good goodwilling in air quotes because of course what it is is over compliance by Chinese uh private uh institutions, banks and so on that you know they all have these legal departments and these internal uh the lawyers in these in these legal departments they do the due diligence and they're overly careful. These lawyers are so careful because the last thing they want is to forget about something and then get fired because of that. So they always over careful and then they study the US sanctions and sanctions laws like no no we need to apply this because we don't want to get cut off or whatn not.

[00:47:39]>> Um and that's that's how it works. And this is the first time that China as a state right stepped in and said guys by the way we're not doing that anymore. Um >> a I forbid you from doing it. B if something happens to you I'm going to help. So actually this is now going to to reduce the overcompliance issue within China.

[00:47:58]>> Yeah. Exactly. Exactly. uh at least specifically for this case. Uh so anyone that does business uh with with those companies oil refinery and it's the interesting thing to watch um actually it will be fascinating to watch is what the US does now because if if they apply right so because if they apply their sanctions uh which say okay if as a banking institution you keep doing business with a with a company that we said is on on on our list, then you as >> yeah, you as a banking institution, you can't use the dollar anymore. So, and we're speaking in this specific case probably most large banks in China. So if they apply their sanctions, it will mean right now cutting most large banks in China from the dollar system, which would be a huge move, which I guess the Americans won't do, which means that effectively the Chinese would have shown, okay, your sanctions are a lot of bark, but not a lot of bite. Like you're a paper tiger, basically. You said you were going to do that. We said, no, you won't. uh we we're we're cutting your bluff basically and they won't I think because especially right before Trump's visit that will be like the most host it it will be like basically saying okay we're cutting off all most links between the US financial system and the Chinese financial system like it will cause a global economic crisis of uh you know major one uh so yeah I I think that's what's going to happen and it's it's Very interesting.

[00:49:49]>> Fascinating because you know this is actually that that threat of cutting off the banks from the US dollar system is what broke in 2009 the Swiss bank secrecy act. We had an act on our books that actually protected each and everyone who had a Swiss bank account from not only from the Swiss government but from every government in the world.

[00:50:11]And it was the United States that said either you give us all of the information of all the US citizens that you have right now or that's what's going to happen and the Swiss enacted emergency law to comply and that's that was the end of it. So here science really matters doesn't it?

[00:50:29]>> I mean it is quite sad for Switz I was living in Switzerland at the time so I I remember and I think Switzerland actually has a lot of leverage right because it has uh in it's small as a country obviously uh but financially it's uh it's huge uh so in in in in in Basil you have um uh ah what's the name of this uh uh the bank of banks uh >> bank of international settlement >> exactly you have the bank of international settlements which is like the central bank of central banks >> yeah but that one doesn't belong to Switzerland that one is its own little country actually because it's extrajudicial it belong belongs to the central bank. So Switzerland had no leverage over it.

[00:51:14]>> Yeah, I I know actually my roommate in university, his dad was the uh the head lawyer of the bank of international settlement. Uh so but still it's physically located in Switzerland.

[00:51:27]Switzerland has quite a lot of leverage on it. So they have quite a few cars to play. Uh and I think that's on on that particular one they could also have uh you know called the US breath. Um but anyway, what's done is done.

[00:51:42]>> Yeah. No, it's it's also the difference that that there's two uh UBS and credit Swiss at the time. By now, Credit Swiss was folded into UBS, so there's only one. But it's this too big to fail kind of issue. If that bank is attacked and it goes down, it drags with it.

[00:51:55]Basically, the entire Swiss economy, everything. It's like everything gone like up in fire and flames. Um there's too large a risk. Whereas China actually can say like look, we're sufficiently large to try to take it, right? Um >> yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah no yeah yeah >> and they do um where else we started this conversation with uh with AI um what else are you looking at at the moment that fascinates you maybe the most just to to round up the the the conversation when it comes to you know technological development but also uh geopolitics uh I mean the the Iran war Iran war continues to be uh to be a very interesting ing case to to watch um >> because it's it's another great revealer of uh of >> many people say you know those those types of things accelerate multiparity uh I don't like the term accelerate it's more you have events that you know temporarily open the curtain and reveal what is the uh current you know state of play um what we are factory seeing with Iran is that >> they're much more powerful than we thought than anyone assumed or uh or slash and uh the US much much weaker um because um you know they have you know yesterday you had or the day before you had Rubio saying that right now the objective of the war is to uh go back to the way things where uh so go back to the status quo ante which like he he he officially said that uh on on stage uh which you know is is a complete is is 100% an admission of strategic failure when you're saying the war I started now it's objective is is to un unfuck what we've done >> and isn't it the same presentation where he actually asked the United Nations can you please help to talk to the Iran ians to open the straight again because this is not fair. I mean, and he didn't say it in a in a sense of you must do this, we demand it's more like could you please help.

[00:54:16]It's kind of it's it's changing tone, isn't it?

[00:54:19]>> Yeah. Um, not only the UN, but another funny thing is he asked China because the Iranian foreign minister is is in China or was in China at least yesterday. Um, he asked China, "Please tell the Iranians that they're they're globally isolated when you know the Iranian >> we hear about that.

[00:54:45]>> Yeah, that was really hilarious. when the Iranian foreign minister was in China uh which you know by definition shows he's not globally isolated uh and you know welcomed very warmly by the Chinese and so it shows that the United States still thinks of itself plus Europe plus Japan as the world >> yeah no yeah no yeah so yeah they they're pretty deluded uh so so this is something quite interesting to Europe I watch a lot as well. Um as a European it's uh interesting is not the right objective. It's very depressing to watch. Uh unfortunately I mean you're European as well. So >> it's very >> Yeah, I think we completely agree on on that one. I mean it's like everything they do uh is just uh stupid. like they just for instance uh put further u sanctions or rather roadblock on Chinese green energy for instance which will make European energy even more expensive when it's already three times the cost of uh the US or the rest of the world uh which will further make European industry unc uncompetitive I mean it just makes no sense you know, at some point the Europeans are just going to be all all dressed and covered up in in in shaggy old blankets.

[00:56:23]And that's the moment when they will put an import ban and sanctions on on blankets from China, Russia to show them who's who's ruling the world. It's um yeah, it's a very sad spectacle. But I know people who want to follow you. They should first and foremost go I think to your Twitter and your substack.

[00:56:44]>> That's actually those two.

[00:56:46]>> That's it. That's it. And my name it's all under my name Arnbert Substack on Twitter. So it's easy.

[00:56:56]>> Okay. I will also put links uh in the description box below and then we will uh talk again in the next couple of months for sure. Thank you very much for your time today, Arno. Thank you, Pascal.