What happened in China in June

How China made a difference this month:

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“To build a floor”

This month, Blinken went to Beijing to “build a floor” under the relationship between China and US. At the G20 meeting last November, Biden and Xi had agreed to that already, but a weather balloon, new sanctions and China’s assertive response derailed the whole plan. This makes the world more unsafe when no guardrails in the US-China relationship are set to deal with military miscalculations.

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The same month of June, Chinese Premier Li Qiang went on a charm offensive to Germany and France. Since then, European leaders seem to be lowering their tone of distrust in China in order to reduce tensions with Beijing. When the two largest EU economies caution to not harm or jeopardize their business in China, one can assume that Europe now seeks “common ground” to build up constructive diplomacy again with China.

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It takes two to Tango, and it seems at least all parties are on the dance floor again. Who will first lead the dance and who will follow? So far, every party seems to keep their distance and it surely looks much more like a Victorian Dance than Tango.

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1.    China launches first Thorium nuclear reactor

2.    China built world’s largest hydro-solar plant

3.    Baidu’s Ernie outperforms ChatGPT 4 in Chinese

4.    China wants to lead in pig chips

5.    GAC reveals its ‘flying cars’ prototype

6.    Chinese Universities rank ahead of Oxbridge and Caltech

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(Click the links in titles below to read a larger news article on each topic)

1.    China launches first thorium nuclear reactor

What if we could solve the world’s energy needs for the next 20,000 years with a technology that is clean, safe, abundant and leaves little waste? Thorium could be the answer. Thorium-232 is unlike Uranium-235 not fissile, and thus cannot undergo nuclear fission or ‘splitting’ on its own. It can however easily absorb neutrons and transform into the energy-producing isotope Uranium-233. U-233 derived from Thorium is even more efficient than U-235 as it is less susceptible to meltdown issues and produces less plutonium waste.

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Using Thorium as nuclear fuel is not new. ORNL in the U.S. conducted the Molten-Salt Reactor (MSR) experiment from 1965 to 1969, successfully showing the feasibility of a Thorium MSR. In an MSR reactor, the reactor coolant and fuel itself are a mixture of hot molten salts, which allows to reach high temperatures (~1000°C), increasing the efficiency of electricity production. The other benefit is that small nuclear MSR reactors could be placed anywhere as no water is required to cool them – the salt does that job.

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So why did we wait for 50 years to reconsider this option? Despite the challenges such as fuel containment and corrosion, the real reason is that traditionally, nuclear power was linked to military nuclear R&D. You can’t make an atomic bomb with Thorium!

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This month, China’s nuclear safety regulator has issued a permit for 10 years to the Shanghai Institute of Applied Physics to operate a small Thorium MSR. The construction of the first prototype reactor is located in the middle of the desert in Gansu province and took 3 years to build. It could produce energy for about 1,000 homes. If successful, China will build a reactor to fuel 100,000 homes. By 2030, China could be rolling out Thorium MSR nationwide. China is believed to have the largest thorium reserves in the world, which could help it reach carbon neutrality by 2060. China could also become a leading exporter of clean, small, modular, safe and cost-effective Thorium MSR infrastructure to the world!

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This breaking news should have felt like China unleashed a soft-power atomic bomb – pun intended - in Washington. Yet, very little media attention is given to it.

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2.    China built world’s largest hydro-solar plant

Keeping on the subject of energy transition, China just announced that the world’s largest hydro-solar plant started producing electricity. The Kela hydro/solar plant is a multi-phased installation in Sichuan on the Tibetan Plateau. This phase provides a capacity of 1GW of solar and 3GW of hydropower at an altitude of 4,600 meters - a 1,000 meter higher than Lhasa – making it the highest-altitude project of its type in the world. It’s hard to imagine it considering the extreme cold and thin air conditions to build this megaproject!

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When the whole project over the length of the 1,500 km long river is complete it could add up to 100 GW of generation capacity and annual capacity of 300 billion KWh. The first phase now covers an area of 16 km2, comprising of 2 million solar panels. On top days they installed 33,000 solar panels to meet the deadlines. Only in China! The whole project would be about 250 km2, the size of a large city in Europe. It would generate clean energy for 100 million Chinese households - as much as the whole population of United States.

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The hydro-solar design leverages consistent energy production of hydro-power to offset the variability of the solar power. Simply said, if there is drought it lowers the hydropower water capacity, but then there is usually lots of sun which is great for solar power. And vice versa, when there is lots of rain, there is not much sun, which is great for the hydropower station. Water is more stable as it flows downhill, while solar is much more irregular but can help to provide energy to pump water up when there is a lot of sun. The solar panels as such function like a battery ‘water’ storage.

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I imagine the Daoist philosopher Lao Tzu would be proud to see how China has incorporated Fire and Water in a perfect Yin and Yang source of Energy (Qi or Chi).

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3.    Baidu’s Ernie outperforms ChatGPT 4 in Chinese

Today, every global CEO is trying to figure out how to apply Generative AI in business. Is it a tech hype or game-changing opportunity? A McKinsey article helps to make sense of it all.

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End of June, Baidu (China’s Google) said that its latest AI-powered large language model (LLM) called Ernie 3.5 outperformed OpenAI’s ChatGPT in comprehensive ability tests and outperformed ChatGPT 4 in Chinese-language capabilities. In this newsletter (Feb 2023), I wrote how Generative AI is becoming the next geopolitical tech war between China and U.S. Ernie 3.0 has since been upgraded to Ernie 3.5. A 50% cumulative improvement is already evident in creative writing, questions and answers and code generation. The latest Ernie bot also allows for new features through plug-ins from Baidu and third parties - similar to Google Chrome’s latest ChatGPT extensions. According to Baidu’s CEO Robin Li, Ernie is about 2 months behind OpenAI’s ChatGPT.  

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Baidu seems to be leading in China in Generative AI, but other Chinese giants are closing in fast. Alibaba announced a new open-source audio-visual language model called Video-LLaMA, which helps the system to understand visual and auditory content in videos. Alibaba also added generative AI to its meeting assistant app to help summarize recordings. Tencent’s cloud business launched in June its industry oriented LLM as a Model-as-a-Service [MaaS] to cater to sectors ranging from finance, media, travel to education.

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The refreshed Baidu-Alibaba-Tencent (BAT) rivalry epitomizes the current AI frenzy in China against AI powerhouses like SenseTime or iFlyTek. On top, Bytedance (Tik Tok) just bought enough AI processors from NVIDIA for all China to secure its AI future. China’s e-commerce giant JD.com will announce its new LLM model on July 13th. Ant Financial is also working on a large model named ‘Zheng Yi’.

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Besides fighting each other, Chinese have a new obsession: competing with US titans like Google and Microsoft in the Generative AI race. China’s AI investment deals are still smaller than United States, but in terms of deal flows, the gap is closing quickly. The Generative AI race is on, one can expect China to go all in.

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4.    China wants to lead in pig chips

China has started a new “chip” war with United States. This time it is not about Silicon, but about the future of “pork chops”, or what China refers to as technology-driven pig breeding. China breeds about 60% of all the pigs in the world and consumes about half of the world’s pig meat. Pork prices are closely watched as a measure for inflation. Beijing maintains a strategic pork reserve.

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More than 90% of China’s pigs are derived from imported breeds – often from the United States. Due to decades of specialized breeding, American pigs are leaner and require less feed, making them 30% more efficient. American farmers have depended on the supremacy of US agriculture technology to win in global trade, but they’ve rested on their laurels too long.

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To wean itself from imported food from America, China has now itself become the largest investor in agricultural technology. China’s urgency now is to make great technological advances in livestock breeding by tapping digital and bio-technologies and scaling up the agricultural value chain. China is now working hard on chipping every pig in the country. With the help of intelligent ear tags and 5G-enabled patrol robots, it can record real-time temperature and the steps the pigs take daily. Soon, vaccination robots will also be put to use.

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Companies like Ping’An and Alibaba have been using face recognition for a few years now to scan every pig face to monitor their health to help the farmer improve breeding in real-time and prevent pigs from getting sick and reduce death rates. This has helped reduce labor with 80% and aids pig breeders to even use healthy pigs as security to get loans from banks.

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5.    GAC reveals its ‘flying cars’ prototype

I remember one of the first movies I saw on the big screen was the science fiction cult movie Blade Runner from 1982. The ‘spinner’ flying cars could be driven as ground-vehicle and take of vertically, hover, and cruise like an aircraft. I loved this dystopian science fiction that was set in the far-away time of 2019. As a young boy I was convinced flying cars would become a reality as I grew up. Actually, as far back as 1917 the first serious attempts to build a flying car – the Autoplane - were made by Glenn Curtis. The next hundred years, it felt only to be possible when pigs could fly!

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Chinese science fiction movies did not feature flying cars. The Chinese started dreaming of flying cars only a decade ago and made a successful manned test in 2018 with the eHang216. In June, an announcement was made by Chinese automaker GAC showcasing an electrical, flying car prototype. Although the first test flight was performed unmanned still, it matters because GAC has separated flight and automobile components to allow passengers to drive away once landed. They now started recruiting aircraft R&D engineers to develop flying taxis with expected flying range of at least 200 kilometers.

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Several Chinese automakers have been working on vertical take-off and landing (eVTOL) such as Aerofugia (part of Geely-Volvo) and Xpeng, but none have received approval for commercial use from regulators yet. But Chinese would not be Chinese if they stopped there. In June the first man-made electrical flying saucer manufactured by the UFO Science and Technology Company took flight in Shenzhen and stunned onlookers. It has 12 propellers and one person can fly up to 200 meters high for 15 minutes. This makes me think of another fantastic science movie of the same year of 1982 I saw: E.T.

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6.    Chinese universities ranked ahead of Oxford, Cambridge and Caltech in Research

When one thinks of the best Universities in the world, we think of age-old establishments like Harvard, MIT, Oxford and the likes. Never do Chinese educational institutions come to mind first. But a recent ranking from the academic journal Nature is now challenging that idea. According to Nature, 7 out of top 10 university contributors to research articles published in the world’s most influential science journals came from China.

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A look at the Nature Index between 2015 and 2023 shows how rapidly China has been closing the gap with the US in terms of high-quality research output. China’s share of quality published research was 37 per cent of the US output in 2015. By 2020, it had risen to 69 per cent. In this year’s list, China’s share has overtaken the United States’ contribution by 20 per cent. Among the four disciplines tracked by the index – chemistry, Earth and environment, life sciences, and physical sciences – Chinese universities have a clear lead in chemistry.

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Rankings by QS and US News – which often place Chinese universities lower – also consider factors like a school’s wealth, international students and accolades, as indicators of its “soft power”. These elements are not taken into account in the Nature Index. The question is which university ranking system reflects best the true capabilities of innovation?

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Recommended reading of the month

A book I loved reading was “Dragon Tactics” from two ex-Adidas executives in China Aldo Spaanjaars and Sandrine Zerbib.  

If you enjoyed reading my own first book China’s New Normal (2019), you will 100% appreciate Dragon Tactics. It is a must read for every manager who has an open mind to learn new business management skills.

The book explores 5 topics on how Chinese Entrepreneurs thrive in uncertainty.

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1. Wolf Culture.

2. Adapt to change or die

3. The emperor decides. But agility rules

4. People come and go.

5. It all starts with data

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This newsletter was first appeared on Pascal's LinkedIn newsletter.

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