From 'US innovates, China imitates' to 'Opportunity 2.0' - lessons from Summer Davos

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Robin Pomeroy: Welcome to Radio Davos, the weekly podcast from the World Economic Forum that looks at the biggest challenges and how we might solve them. I'm Robin Pomeroy.

This is a very special episode because for the first time we're doing this podcast live in collaboration with the Forum Strategic Intelligence, which brings together expert insights and live discussions to help forum partners and digital members better understand the trends shaping the future.

I have a co-host for this episode and this session. It's someone who's hosted many of these livestream sessions before. Jessica Wanger, deputy head, event editorial at the World Economic Forum. Hi Jessica, how are you?

Jessica Wanger: Hi, Robin, it's great to be here.

Robin Pomeroy: It's great to have you here. You're going to hold my hand through this because I believe you've hosted one of these live sessions. I never have, but I've produced lots of episodes of the podcast, and this is both a live session and a podcast, so before we get into that, I'd just like to say to the people watching this live, you can put questions in the text part of the call, and we'll read them out, as many of them as we can get to. And they will be about the point of discussion today, which is our debrief from AMNC. Jessica, what is AMNC?

Jessica Wanger: So AMNC stands for our Annual Meeting of the New Champions or Summer Davos, which we hosted in Dalian in China this year.

And what basically was one of the core questions we were trying to unpack is, can innovation still be a source for shared growth in an increasingly fragmented context?

The theme was innovating at scale, but the real question for many was scale for whom? And what are the conditions for that?

So what we heard is that technology is moving really fast but deployment is much, much harder to get to. And what we equally heard is that innovation only truly matters when it leads to increases in productivity, when it needs to improve the living standards or new opportunities, especially for young generations as well. And that takes much more from what we gathered in innovation and learned.

And it takes a combination of the right institutions, investments, the right infrastructure, and also the talent system to underpin that.

I would just add that being in China, those conversations were far from being abstract.

And we're really fortunate today to have two fantastic guests to unpack that further.

Robin Pomeroy: Yes, so AMNC was in China. You and I were both there. I recorded lots of great interviews for Radio Davos and for our sister podcast, Meet the Leader. Find those at wef.ch/podcasts.

It was about innovation, but people were talking about all the big issues, weren't they? So we're going to try and unpack some of that in the time we have available.

Introduce to us our two guests who were also in Dalian with us.

Jessica Wanger: Absolutely. So we are fortunate to have both Aparna Bharadwaj from Boston Consulting Group. She is global leader of Global Advantage practise at Boston Consulting Group in Singapore and she has written extensively about geopolitics and how it is influencing global companies. She's also commented across platforms, including throughout World Economic Forum events and Radio Davos shows before, so that's one point to highlight there.

It's fantastic to have you, Aparna.

Robin Pomeroy: Hi Apana, how are you?

Aparna Bharadwaj: Hi, thank you for having me.

Robin Pomeroy: So there's an episode, I don't think you ever listened back to it, but a year ago you were on Radio Davos after last year's AMNC, so it's great to see you.

Jessica Wanger: And we're equally joined by Yanqing Yang, who is the Director of the Centre for Education, Innovation and Sustainable Development at ShanghaiTech University. It's fantastic to have you, Yangqing. And we are really excited to get deeper on the China innovation ecosystem, but also look at education, talent and sustainable development with your help on that front. So, welcome to both of you.

Yang Yanqing: Thank you for having me.

Robin Pomeroy: Right, well, it's great to meet you. All right, let's get started.

One of the real highlights was the Premier of China, Premier Li Xiang, who said, and this got quoted back to me a dozen times during the meeting, we shouldn't be talking about a China shock 2.0, but a China opportunity 2.0. I'm guessing both of you heard that. Jessica, I know you did.

Could you explain what did he mean by that? What was China's shock 1.0? What might be the shock 2.0, and is he right to say, we should be looking at the opportunity 2.0, Aparna?

Aparna Bharadwaj: It was a very interesting statement and every time I come to the AMNC, one of the highlights of that session is always Premier Li Qiang's address to business leaders.

I think, what it indicates to me is that the world's attitude to China is evolving and China's role in the world is evolving.

This is an economy that punches quite strongly as a global economy, not just as a major market, not just a major manufacturer, but also a major source of investment to the Global South, a major source of trade to most of the economies of the world, and a major upholder of multilateralism as well.

So I would interpret some of those comments in terms of China's evolving role in the global economy, not just to think of China as a factory of the world, but to actually reframe the conversation of China role to the world and the world's relationship with China.

One thing that I would call out, which I have seen in all of my global travels, when I work, especially when I talk to business leaders and CEOs around the world, most Fortune 500 CEOs will say they are either looking to sustain or deepen their investment in China.

And people are talking not just about doing business in China, but doing business with China, competing with Chinese companies all around the world, and also China's role in a multilateral world.

So this conversation is shifting, and I see that every year when I come back. But for me, that would be one interpretation of that commentary.

Jessica Wanger: That is super interesting what you just outlined in terms of how Fortune 500 companies are reacting.

I really wonder in terms your sense from a participant perspective, what do international participants basically misunderstand about China's, in particular, China's innovation trajectory most often from your experience and recent conversations there?

Aparna Bharadwaj: So I have been going to Tianjin, Dalian for the last three years. And it's been interesting, just in these three years, how discussions, the first time I went was quite recently after COVID, et cetera. And I see the conversation evolved from what is a regional forum to a mouthpiece of the Global South to a truly global platform.

And I seen now the AMNC and the conversations that happen in China every year on this stage to be a truly a global conversation. So this is an evolution.

And when I work with business leaders, as well as governments around the world, this evolution is also visible in the other direction.

One of the most common refrains you used to hear 10 years ago was about, especially in international forum, was US innovates, China imitates, and Europe regulates. Today, I don't hear that anymore. I think that is a 10, 15-year-old story. China also innovates. China also competes and China drives cutting edge innovation around the world.

So I think some of those old adages that businesses had come to live by 20 years ago are no longer as prominent.

Secondly, I would think that there is also a evolved understanding of what it means to do business with China. What is the role of China in green value chains? And China's green value chain, especially in solar and wind, especially in Europe, is part of the conversation of how that can benefit the world. China's role in innovation in AI.

So these conversations have evolved a fair bit in the last few years, and it's been quite interesting to observe that.

Robin Pomeroy: Yanqing, what impact did that make on you, seen from China, this discussion of opportunity or shock 2.0?

Yang Yanqing: Yeah, I think it's a very important issue in China and elsewhere. I think that the Premier just touched three very important points on China innovation.

The first one in Chinese wording, it is a very painstaking internal efforts. I think there really is a hard-earned innovation in China. I think a lot of the efforts and a lot hard work there. I think it's really true and the premier justly talked about that very wisely.

And the second, I think it is very important that he touched it very briefly, which is the kind of adoption of the technology. But in China, we're talking about it's a flying wheel. When you have some innovation and technology innovation or a production innovation in one way or another, you need a large scale of the markets and large scale of the manufacturing to test the frontier of the innovation, if it's working or not.

I think there's a large-scale of the innovations. We call it a flying wheel of the data, of the technology, and also the market. And you can just test your technology and make it scalable. I think it's very important for China's innovation.

And the third part, the Premier also touched very, very wisely, which is the ecosystem. Because in China, actually the government, the municipal government, the central government, tried to nurture a very good ecosystem for the innovation.

And people may thinking about, may say that is the industrial policy or subsidies. Actually, if you look at the data, the subsidy or the IP, it's not that big. Actually, it's an ecosystem and also the infrastructure because China has invested a lot is on the infrastructure. It's actually it's not a IP or something. It's infrastructure and mobilising the social or the input into the innovation. I think it's for the industry and also for the broader economy. I think, it is very important.

I think that is the three very important characteristics of China's innovation. I think it's appropriate that if we can understand these very important three points, then you can understand China's opportunity instead of the China shock in this sense. I hope I elaborate nicely and wisely.

Robin Pomeroy: Are you finding, I in other interviews I've been doing, actually in the last few days, I've come across western countries that are actually going to China, sometimes to set up industrial complexes that they found it difficult to do in Europe or in North America and they found that kind of innovation infrastructure there. Obviously there's a governance difference there, we don't need to get into that. But what do you think maybe Europe and North America could learn from China when it comes to scaling up new technologies that probably require big investments, big industrial sites?

Yang Yanqing: I think that China's model and United's model is very much a complementary and we need to learn from each other.

I think if we look at the AI's innovation, United States's this model is a very clear cut. It has mobilised all the enormous resources, capital markets, the resources into the frontier of them. If you look at the IPO of the SpaceX and also the future IPO of the Anthropic and OpenAI. I think the huge resources has been mobilised from the capital markets to support the frontier innovation. Although we are not sure at this moment, the SpaceX stream or vision of the data centre in space is workable or not, but the capital market can support that and are there to support that. I think that is a very strong advantage and also the support from the United States model.

But in China's model, I think that because we do not share the advantage of the mass resources of the capital markets. So I think our focus in China innovation, especially in AI, is more about the vertical markets, because we just scatter the limited amount of the resources, especially the resources. Into the different parts of the adoption of the AI in the different industries, because we have more data and we have manufacturing spaces. So it's easier for us to have a lot of very good breakthrough in the vertical and also in the specific industry to make a lot of productivity and efficiency.

That is competitiveness of the China's industry and also the competitiveness of China's innovation.

As to the industrial park you mentioned, I think it's really a Chinese model because I touch upon the ecosystem and also the infrastructure in China, which the central government and municipal government work hard on nurturing this kind of ecosystem as well as the infrastructure. So I think the the industrial park and this kind of cluster of industry is actually is a market oriented and but also is supported by the government's nurture of infrastructure and ecosystem.

I think it's a combination of the market and also the government, I think is the essence of the of the China's model and also China can share the advantage of this model and also. United States shared the advantage of that model. I think we should learn from each other and we should have more complimentary in the fronts of the innovation for the global good.

Jessica Wanger: That sounds super interesting. And I've seen Aparna nodding. It would be fantastic to hear your views there as well.

Robin Pomeroy: I have another question for Aparna as well but if you want to come in Aparna and then I've got a specific kind of follow-on for you.

Aparna Bharadwaj: No, of course, I am in violent agreement to a lot of what Yanqing said, because I do think that this different innovation model is a key point to understand, especially for middle powers in AI that are looking to learn from the superpowers.

So in my mind, there are two AI superpowers, there's US and China, and with very different models. And then there's a series of middle powers, Japan, India, Europe, who are seeking to drive innovation in AI.

How they learn from each other is interesting. And it's quite possible to have two very different funding models. One leaning on capital markets and private sector innovation.

One leaning much more attention on venture capitals funded by the government often, and with lower access to capital market, tighter budgets, but achieving excellent results as well.

Both are very different models, but both are competing well and becoming leaders in terms of AI-driven IP, in terms of AI talent, in terms of AI innovation.

So it's quite interesting for those of us who belong to those middle powers or who are observing this from the global South to say two different models, but finding success in very different ways and competing with each other in the global market.

So that was one thing that I wanted to add from a world watching China lens.

Robin Pomeroy: Well, that was going to be my question to you, how does the rest of the world respond to this? Maybe continuing to look at the rest the world, maybe slightly away from innovation, what do you think will happen in this 2.0 of China, whether it's a shock or an opportunity or probably both, for the global South?

There was this idea that China became the workshop for the world. It's now very high-tech and pushing all these technological boundaries and producing very high quality goods for the rest of the world. A lot of that manufacturing, maybe of the low-end manufacturing, should, as some economic models suggest, migrate to other areas of emerging markets or underdeveloped markets.

There's a risk, isn't there, as so much is automated and that China has such a good track record on high tech manufacturing, that there won't be the migration of those industries or of that wealth or of those jobs. Is that a risk to countries that maybe 10 years ago in Africa or in Southeast Asia that were hoping to become the next China, maybe that option isn't there anymore?

Aparna Bharadwaj: So this, for me, is a very interesting question to say, how might the model in China evolve and how might rest of the world participate in that evolution? I guess, if I try to distil what you asked, I would put it in that way.

There are so many things that are going to be markedly different here. The first question is this question of the next China.

And for me that's a very interested question because if 20 years ago we had said is China, the next US. I would say, not really, right? China evolved its own model. It was not becoming the next U.S. It was their own model that allowed them to have the Chinese economic miracle to leapfrog the growth and to get where they are.

So my belief is that amongst the nations of those large emerging markets, particularly the BRICS, India, Brazil, nations of the ASEAN, I don't think they will see this as I'd like to be the next China. They would like to say, what is my growth model where I can work across the multipolar world, across the geopolitical fractures, work with the East, work with the West, work, with Japan, Europe, and find a path that allows my economy to grow.

So I work a lot in the Global South and governments there and businesses are saying, how do we use neutrality as an advantage? How do we us it as a way to work across the aisle with everybody? Second, how do we learn from the best around the world and find our own model for success?

Now for a nation like India or Philippines, it could be a service-driven model, and India is now making inroads in LLMs, et cetera. For a country like Vietnam or Thailand, it can be a model of connecting to Chinese value chains and having a role in manufacturing that relates to China. India too is making forays into manufacturing, but for different nations, it will have a very different answer.

So for me, I think that evolution will be quite interesting to see.

There is one other evolution to the question that you, the point you made earlier, which is a very important point. How does China's relationship as a manufacturer and a factory for the world evolve?

And one of the most common conversations we have with business leaders in China is how to globalise. So Chinese companies that used to be very focused on the domestic market are now seeking to go global. They're seeking to, I call them Chinese challengers, who are going into global overseas market to Europe and to the Global South.

And in the past, they used to think of themselves as trading trading businesses, right? I make in China, I trade with the world. I think those days are going to be over too, because many of these large global south markets will say, if you want to do business with us, if you want a trade with us please create jobs here, please bring investment here.

And so then Chinese businesses will have to think about factories overseas, will have to think about investing in talent overseas, much like the multinationals of Europe and US did a few decades before them. And that's a different mentality from a trading mentality.

I'm seeing this evolution, this operating model evolution, and I think it's a space to watch quite closely for global south businesses.

Robin Pomeroy: We're going to ask about AI and jobs and education, but I'll just remind people they're listening to this special episode of Radio Davos from the World Economic Forum. And for people who are able to, they're watching this live and you can send us questions in the chat function.

Jessica, we're very interested in AI and Jobs, aren't we?

Jessica Wanger: 100%. And maybe to kick us off more broadly, looking at AI, I know, Yanqing, you've moderated a discussion around AI first enterprises. What does that mean? But also, what does it mean for a company and from a jobs perspective as well?

And I took away some some details from that discussion in the Connected World Economic Forum report, highlighting that, despite 250 plus billion invested in AI in 2025. Only 25 percent, so that's one in four of the companies report that they believe it really drastically or significantly changed the way they operate. So there is a bit of a sense that I took away from some of these comments that maybe it's more of a frosting or layering in terms of how AI is used instead of actually shifting the operating model and reframing it around intelligence at the core.

So I'm really curious to hear your views there, what you took away from the discussion and if that's what resonated or if you took some different points away from that conversation as well.

Yang Yanqing: Yeah, thank you, Jessica. A very good questions about AI utilisation, also AI adoption in the companies and also in the industry and what kind of impact and also is there any productivity gain from the adoption of AI.

I think if you look at the individual cases in the different companies and also the in the difference scenarios, the answer is very absolutely yes.

But if we look at it at the industrial level, a macro level, and also in the whole company level, I think there are some preconditions for the AI to support the productivity.

I think the first part is a structure of the company. If you have some AI native structure of a company, And also, it should be changed maybe. Now it's very hierarchical, but also a kind of manifold type of the company, which is you can move and transform very swiftly in one occasion or in another task. So the whole system of the companies should be prepared. And they also, we need some precondition for the digitization for the adoption of AI. So as long as you have all these preconditions, you can rip from the gain of AI very dramatically, but otherwise if you do not have these kind of preconditions, it is very difficult for you to have the productivity gain from the AI very quickly and in the foreseeable future.

So I think there are two very important points that we have discussed with our business leaders in my panel and also. In a broader discussion with the business leaders. I think that digitization is very important and also the structure of the company, which are more a kind of some business leader could it's like a combination of the OPCs. It's kind of the beehive. You have a lot of the OPC kind of framework menu. It's kind of a lot of the different parts, and you can combine all together.

And also, I think the culture is also very important. And there are some kind of tension between the AI and the human worker. And I think that manager and also the policymaker need to make sure that they nurture the trust between the agent and also they human worker and the as long as the human worker trust in AI and can work with AI, we can have a very kind of the flexible combination between the AI and also with the human workers. Otherwise, if people do not trust in the AI, then it is very difficult to have this kind of collaboration or this kind of complimentary work between the AIs and also with the human worker.

And I also want to touch upon recent a study from our organisation, which is very interesting and also very important, because we look at all the online hiring data in the last few years after the ChatGPT has been introduced into the industry and society. We find that the jobs requirement and also the description has been changed.

The task, we just call it a task in the labour economics, the task does not disappear, but the job requirement and the job description has been changed from one task into multiple task. And in many cases, these multiple tasks need the whole process of the one job or one scenario. You need to finish all the the process in one way or another, and the AI, it can work with the human being.

So which means that the task is still there, but you have to combine the different tasks into a new job or into a kind of a new occupation. So you have change all the process and also the organisation of the company, of the industry, and in order to catch up with the collaboration between the AI. And also with the human workers. So it is very important that the AI's impact on the labour market and AI's impacts on the industry and organisation, I think is all the things are intertwined together. And we need to make sure that all the preconditions of the AI utilisation and adoption could be take place there. That is my sense on that.

Robin Pomeroy: I wonder if companies are actually doing that. As you say, that's a big reorganisation, a big rethink, completely changing job descriptions.

We've heard a lot in the West. I'd be very interested to hear how this looks in China and also in India, for example, and other areas of the world. There's been a lot of talk about entry-level jobs, maybe graduate jobs disappearing or just not being around maybe yet for a variety of reasons. But one of the reasons is these are maybe skills that can easily be outsourced to an AI. And there's a risk there to a company and to a society that you could lose a generation to AI. Obviously, there's risk there to the young people themselves who aren't getting a foot on the career ladder.

Is it true that we're seeing that? And are we seeing that everywhere? I know that in China, youth unemployment is a big problem as well. I don't know how much of that you would put down to AI.

But what do both of you think about this risk of maybe a lost generation? Maybe in 10 years, everything will have sorted itself out. What about the next year or two or three, if you were a young graduate in one of these countries?

Apana, do you have any thoughts on that?

Aparna Bharadwaj: It's such an interesting question. And I was nodding along as you were speaking, because I work a lot with governments around the world. And in Singapore, where I'm based, and I'm a Singaporean, our prime minister said something quite interesting. He talked in this particular year's budget about preventing jobless growth. And I think that was a very interesting statement.

Because what we are seeing around the world is we're seeing a two-speed growth in the global economy. We're seeing technology economy that's moving very, very rapidly and growing and innovating very rapidly. And you're seeing what you could call a main street economy, where you have a very different valuation, very different growth trajectory and so on.

Now AI is disrupting both of those, but one of them creates tonnes of jobs and employment and the other creates a few higher paid jobs and employment.

So one of the challenges for governments is how do I encourage innovation, encourage the embrace of the latest technology, but prevent jobless growth. And so that, I think, is becoming one of the common, probably the single big most important public policy question that governments are trying to solve for all in different ways.

But of course, that's going to lead to more economic statecraft. It's going to lead to more regulation to try to manage this. From the company side and innovation side, I also think that there was an interesting point actually made in the AMNC which talked about 1-10 innovation versus 10-100 innovation. When you do 1- 10 innovation, you really create a game-changing new thing, but the job creation is proportionately less, back to that elite few jobs. But when you do 10- 100 innovation, when you scale that, when you take it to market, you can create much more jobs and much more opportunities.

So, on the one hand, it's the balance between technology and Main Street. On the other hand, it's a balance between 1 to 10 and 10 to 100 innovation and the possibilities for job creation in each of these. How governments are going to collaborate with business to solve this? Is going to decide the answer to your question, quite frankly, and some governments are doing it better than others, but it's not something that policymakers have ignored, because this is actually one of the hot topics that policymakers talk about everywhere in OECD nations and in the Global South.

Jessica Wanger: Maybe building on that, Yanqing, I wonder, Aparna has highlighted governments where they're at in terms of discussing and examples of directions of how to think about these issues. I wonder even from a school and university perspective, what in your view, from what you took away, should they be doing in the next 12 to 24 months? What are the directions that they should certainly follow or explore?

Yang Yanqing: Yeah, Jessica, thank you for this very good question. Actually, when we look at the labour market in China impacted by the AI, but not only by AI, also in China's new economic growth environment.

Because now China's growth has been supported by the new industry and also the new technology, but because the new the industry and the new technologies are still growing. So, but the traditional industry is actually is shrinking. So because there's a shifting, a kind of evolving.

So the training and also the education in the university is trying to catch up with this kind of transition, this kind the transformation by the speed, still I think need to catch up with the speed of the AI itself and also technology and also industry.

We look at the education content in the university or almost all the university curricula, we find that if we look at the matching degree of the education content and also the requirement of the industry, of the job requirements on the online hiring, with online hiring data, we find in the current level, the content of education is matching with the requirement of the labour market nicely.

But if you look at the four times earlier, there's a four years time lag between the education when the young students enrolled in university, they have the content of the education, but four years ago, the content of the eduction does not match with the requirements of the today's job requirement.

So this is very natural because we cannot catch up with the full years of time of the innovation very quickly. So we just try to cover every major in the university and try to come up with a kind of a new content of the technology that the young students need to learn in the university and maybe also outside university. When they graduate from the university, they also need more training.

And another way of the solution is that now China's government is supporting one-person companies kind of a set-ups very dramatically. I think also one-person company helped by the AI is a new way to cope with the AI era and also to care about the young generation.

And very importantly, the last point is that for the industry and for the companies, and we need to set up a process or a protocol or the culture that the people need to remain people in the loop. And maybe the people in a loop is a veteran and very experienced workers and experienced managers.

But if we can hire more young people and also train young people into organisations and they keep the people's and humans accountability of all the process loop and and also the loop of the of the automation of the industry. So I think also the culture and also this the practical is very important for the human in the loop and also the young people in the look. Of course the training and also education and also the curriculum's reform in the Chinese university is also very important. That's my take on that.

Robin Pomeroy: It's really interesting, so that's research in China that you're saying now the universities have worked this out and they're delivering education that employers want to see, but there was this catch-up lag.

I wonder whether that's true in the rest of the world, I mean Aparna do you have a view on that? Do you think universities have caught up yet? I'm sure some have, some haven't, but what's your view?

Aparna Bharadwaj: I think it's a work in progress when it comes to schooling in the university system all over the world. But at the same time, I think, it's also a work-in-progress in organisations.

I work a lot with businesses, and even though technology moves at a great pace, and in testing environment, we have seen fantastic, amazing results from AI, and BCG is an organisation that's really applied it all on ourselves.

But the way organisations work is it takes 10, 20, 30 years to change exactly what Yanqing was talking about, the workflows, the processes, how people interact with each other. And it takes time to adopt and to get to that new reality at scale.

So I feel organisations will also take a decade or so to go through that evolution and embed AI. And as they embed AI, we have more time for the education to catch up. We have more times for the universities to get there.

Remember cloud computing, if you remember the cloud storage, we're still driving penetration for cloud storage. It's been a long while. So while AI, the technology can get there fast, organisations are organisations, and they take time for full adoption. And during that time, the young generation, the universities, the governments have a window to find the right balance.

And I think they're all working at it, but as I said earlier, the speed of it is different in different markets.

Robin Pomeroy: Take a couple of questions from the audience, Jessica.

If you're listening to this on Radio Davos, you can't pose a question, but if you're watching this live on the World Economic Forum's live stream, you can.

There's a couple have come in. One has come in on AI from Rahul Kerjuwal. I hope I pronounced your name slightly correctly. "The cost of computing for AI adoption is increasing by the day. And it started to offset the economic benefit of replacing people with AI."

I think his question is maybe companies have put too much emphasis on AI. They're paying a lot for it. Maybe hiring people is actually cheaper to get the jobs done.

You've gone very quiet. I'm seeing you both on the screen.

Aparna Bharadwaj: I was thinking about the question, it's a good question. I think the cost of tokens is definitely on the minds of organisations. Most of the CEOs that I speak to are saying, for now I am going to push adoption and then accept that expense because I need my employees to upscale for AI. I need people to embrace this and I therefore will look past that.

But I think at some point as it scales, because right now we're no longer talking of proof of concepts, we're talking about scaling, the cost of tokens will have a role.

So I think the human AI solution would also bring the cost of the human intelligence with the AI intelligence together to think of the right trade-off.

The other question would be the AI failure rates and what kind of human in the loop do you need to make certain key decisions.

So the answer will probably be a hybrid, but for sure the cost of tokens is a big decision. For now CEOs are saying I need to push for adoption. In a couple of years, they're going to be talking about that balance.

Yang Yanqing: Yeah, may I add a few points here? And also during our discussion in Summer Davos, some business leaders just talk a very interesting terminology, which is the "frugal AI".

And according to them, there's no need for us to try to adopt AI everywhere and at every cost. Actually, we need to make the balance of the AI and also without AI. And sometimes, maybe AI is not the best solution. And only one AI is good enough and also inexpensive enough that we can use AI.

But I also have a comment on this very interesting narrative, which is if you look at the chips and also if you look at the capability of the LLM, I think the cost is going to be lower and lower dramatically because the AI's rule is much more efficient than the Moore's rule.

So if we look at the cost of the AI in the future, in the next five to 10 years, I think the cost will dramatically reduce to a very low level. And also the cost of AI will be the cost ofthe energy and will be cost of electricity.

So the cost is going down, definitely. And also the capability of AI is going up dramatically in the next five years, so maybe the balance and also in the calculation of the company will be different, but it is very important that they to put the human in the loop and that's a human to decide and also that's human to have the accountability of all day of the process in the business environment. So I think that is my response to that question.

Robin Pomeroy: "Frugal AI". That was a phrase I didn't come across that during AMNC.

Yang Yanqing: I just learned it.

Robin Pomeroy: I wonder if that's the Chinese model of AI compared to the American model, which is, as you mentioned, had a huge amount of money. The IPO's are raising more and more money. There's not much frugality around at the moment. But when, as our question was about, someone's got to pay for this. So maybe a frugal one, maybe smart companies should be looking at being a bit more frugal with it.

It's an interesting thought. I'm glad you mentioned energy though because Jessica, we were going down that line weren't we now?

Jessica Wanger: Absolutely. One of the, I would say, strands of conversations that we've picked up from the Annual Meeting of the New Champions was certainly around energy and supply chains.

In particular, if we think about the crisis around Hormuz, it kind of pivoted our global attention to the energy question and in particular energy flows and supply chain choke points as well.

At the same time, as you were outlining, Yanqing, we were also looking at energy security, very much as being interconnected with questions around AI, data centres, but also looking at clean tech competition, batteries. So we were really looking at it in a very cross-cutting way.

So I actually wonder, looking at you, Aparna, in terms of the Hormuz crisis, do you think it has changed something in terms how companies look at resilience against this backdrop of thinking about the energy, you know, the energy question in particular?

Aparna Bharadwaj: I think it absolutely has.

So if there is going to be, there are moments in geopolitics where you can trace the legacy of a policy to that moment. If you remember Fukushima, that was when the world kind of got put off from nuclear. I feel like Hormuz is going be one of those moments that's going to shape energy policy for a very long time.

A few things that we have noticed is the first is this interest in renewables again. And an interest in reducing dependence on Gulf oil, but not as a climate and sustainability question, but as an energy policy question.

It's a question all over ASEAN for sure, it's all over Asia because many Asian economies were in that bracket of 10-30% of their trade got impacted by the cost of energy from the Gulf.

And here the question is let's revisit our focus on renewables, on wind, on solar from a lens of energy policy, not from the lens of ESG. And I think that transition is a crucial one.

I do think that the nuclear question will be debated yet again. I don't know what the outcome might be, but I think it will be seriously debated again in light of this.

Shipping lanes is another area. I serve quite a few shipping clients around the world where choke points, and we're about to write a publication about this, global choke points are back in focus.

I don't know if many of you follow this news, but there were discussions in Indonesia about the Strait of Malacca to say, should there be a toll in the Streat of Malaca, just like Iran would like to toll the Strait of Hormuz.

Amongst the shipping companies, that is a key question to say how will countries that are around those key choke points continue to think about the UN Charter around free waterways? How will they think about the cost of servicing those waterways? And should we minimise our focus on those choke points? Pipelines in the Middle East, finding ways to work around these choke points, new ports that bypass some of these chokepoints. All of these are going to be discussions that will evolve off of this moment that we are in right now.

One more point that I wanted to say is. I know that, you know, this morning we found that the ceasefire is very fragile. Two days ago we thought the deal was imminent. This will go up and down and sideways for a while, but even if the perfect outcome happens and we get a ceasefire that holds and Hormuz is fully open, it will take anywhere from one to two years for oil and LNG up to two years to get back to normal supply. Because repairs have to be done, because supplies have to be restored. And companies that I work with are planning for that, not just for the closure, they're planning for the recovery time. And that's quite a bit of time to think through a higher cost of energy. So this is a pretty seminal question.

Robin Pomeroy: I'm just checking what the oil price is today, as we record this, on the 8th of July. Yeah, it's just gone up 6% because hostilities have restarted.

Yeah, being in China, AMNC, I'm wondering what, if anything, you learned about this notion of it's very interesting what you're saying, Aparna, about this being a historical moment. People talk about the post-Hormuz. The last one was maybe COVID, right? Which really showed up supply chain difficulties. Should we be reliant on supply chains on the other side of the world? We've still not really answered that question. Should we be reliant on energy supplies coming through a very narrow waterway?

So what did we hear? What did we learn from, did you have any conversations with people in Dalian? Did you see any sessions there? I will do a quick advert now for Radio Davos. Tomorrow, on Thursday the 9th of July, will be our – you'll already have heard this if you're a listener to Radio Davos regularly, I'm talking to an energy expert about what he learned from AMNC on energy.

But I mean, for example, and Yanqing, I'd be interested on your view on this, a lot of people are saying, well, China's been vindicated in its real push for electrification and because most of the cars in China now are electric, that's a whole lot of part of the economy that it doesn't require fossil fuels anymore.

What did you learn from the conversations in China on energy, Yanqing?

Yang Yanqing: Thank you for this question.

I think that's the China's vision for the green energy and also the climate change, we call it a '30 and '60 strategy. I think China's the vision is very clear and also China's a vision helps China to to develop the whole brilliant industry of the EV and also the sloar panel. All this new industry, which helps China support China's economic growth and also support the transition of the whole world to net zero future of the carbon emission.

I think this helps China a lot for the sufficiency of the energy and also the security of energy.

Because China, just as Robin mentioned that, we do not rely on the oil and gas that much because they are actually, the enrollment of the solar panel and also the new energy has accounted for the 40% of the energy supply in China. But only 20% of new energy have been adopted on the electricity line.

So China has a large room of new energy and also a buffer for this kind of external shock. And also, I think China just reaped the benefit from our vision of the '30 and '60 strategy of the new energy and also the carbon neutrality strategy.

And also I want to add a little bit here with regard to the industrial policy. And if we look at the EV, without the industrial policies, we cannot have this huge market. Because at the beginning of the development of the EV, the scale is not enough and the market is now there. The ecosystem is not mature.

Only as we have some industrial policy, just to pop up and support the innovation and also manufacturing and also investment into this very unknown future of the EV, then we can have a very a mature and huge market of the EV and supports the China's economic growth. And also the new energy sector supports the neutrality of the carbon for the whole world.

So I think this, at this part of the world, at this part of this scenario, the industrial policy for the innovation and also for the transition of the energy, it is very important.

So maybe we need some new economics of the industrial policy here. And also in the innovation area.

Robin Pomeroy: I want to go back to a couple of the questions, there are lots of questions coming in, thank you for that. But a couple have come in about the environment, which we're touching on here. One of them said, this is from Declan McAdams: "Given the amazing progress that China has made in terms of electric vehicle adoption and the very positive impact it's had on pollution levels and the quality of life for those living in cities, where does China stand on the issue of plastics and micro-plastics pollution?"

Someone else wrote, this is Helle Bank-Jurgensen: "Will clean air and clean water be in full supply or in high demand in the years to come? What needs to happen?"

So we've not really touched directly on plastics, plastics pollution and on clean water and clean air. I wonder, did you hear in AMNC many people talking about these big environmental challenges and what did we learn about that?

Obviously, energy is directly linked to this, but which one of you can leap in on these big environment questions?

Aparna Bharadwaj: I was reflecting a bit on what I see in the ASEAN forums that I was in as a part of in the AMNC and the question of environment and the green economy has come back in full force in the AMNC, in ASEAN in particular, the 10 nations had set up a Neutrality Roadmap about two or three years ago, but that was not a binding agreement, it was a directional roadmap. This year and during the Singapore presidency, they are seeking to actually set that up into a green economy framework agreement and get started with thinking around the green economy.

So I think this dialogue on the green economies coming back in full force in ASEAN and in many nations of the Global South.

I think the reason for that is that climate change in these economies is existential. ASEAN, in particular, for example, with island economies that generally and directly get impacted through coastal exposure, through coastal economies, through rising sea levels. For them, this is existential and not an academic question. And therefore, I think in the Global South and in ASEAN, I've seen a renewal of this discussion versus where we were in Tianjin last year.

I don't know if that's the trend everywhere, but certainly in ASEAN this topic is an important one.

Jessica Wanger: I'm really—I would say I'm very glad that you highlighted the Global South perspective, which in many ways is often a little bit of an overlooked story from the economic perspective as well.

And I do recall a striking analogy that you made in one of the previous Radio Davos conversation on the geopolitical front, which was kind of providing an analogy, looking at Global South countries, really a swing state of the world, so not choosing sides, if I interpret that correctly, but working along any of these divides when it comes to a whole range of critical questions.

So I wonder if conversations in Dalian, did they reinforce your view there or what did you hear from that lens as well and how we should be thinking about countries in the Global South and how they're positioning themselves on this and other issues?

Aparna Bharadwaj: So I think multipolarity has been an interesting movement for the Global South because it's made them incredibly important because of that swing state point I mentioned, right?

It's a fragmented, multipolar world. Global South are the swing states wanting to do business across the aisle and they become important.

But for emerging markets, the key question I believe, and as someone who really works and feels for emerging markets is, how do you convert that importance to agency?

Because being important is not the same as having agency in the global economy. If you want to have true agency, then you have to think about your relevance. How am I relevant as a nation to the global supply chains? How can I be an answer to near-shoring, friend-shoring, de-risking supply chains for the larger countries in the world, for businesses in the word? How can think about business-friendly policy as opposed to going down the road of economic statecraft that makes the country less attractive for investment and FDI.

Take an example of FDI, we discussed in the AMNC how even though the headline is that FDI has been declining for a couple of years now, behind the headline, greenfield FDI in semiconductors multiplied 7x. In pharma multiplied 25x. Those nations that have access to that talent, that ecosystem, that opportunity are attracting FDI. FDI into India has tripled in the last five years, all because of India's role in global supply chains.

So I think Global South nations are in a moment of importance. Whether or not they successfully convert it to a moment of agency will depend on the cards we play over the next few years.

Robin Pomeroy: We're getting towards the end of our time. Yanqing, do you want to leap in there?

I did notice in, I came to Dalian seven years ago. I just joined the World Economic Forum. I have to say the air quality wasn't great. It's a coastal city, but despite that, I was there a couple of weeks ago. The air quality was now. Maybe the weather was different there, but one big difference was that there's very few internal combustion engine vehicles on the road. And that makes a big difference to local air pollution, also to noise pollution. That was interesting.

Where do you see the environment? How important is that an issue for China, do you think? If you could be quite brief, because we're going to try and wrap this up in the next couple of minutes.

Yang Yanqing: Yeah, I think that air quality in China is very much better these days compared to several years ago.

I think China has a very strong strategy for the energy, green energy, and also the net zero carbon strategy and vision. It helps a lot. And I think that the air quality environment issue is a priority of the highest leadership in China. And also, we achieve a lot of the improvements there.

And I also want to touch a little bit on the Global South about the AI, the frontier model from China, which a little different strategy of China's model with that of the United States.

China's model is open source, and the United States' model is closed source. So I think open source model helps and supports economic growth and adoption and productivity gains of the global sales a lot.

And also, I think maybe the infrastructure and energy and electricity of all these things are combined together to support the growth and also the adoption in the global sales down the road. That is my final take.

Robin Pomeroy: Thank you. Jessica, should we bring things to a close?

Jessica Wanger: I think we missed one of our key questions on what shapes the rest of 2026 for you. So I wonder if you had to say two, three words. What do you expect to change or to be at the forefront for the next year? And then we're ready to wrap up this discussion.

Robin Pomeroy: Aparna, what's your couple of words that we should be looking out for?

Jessica Wanger: Hormuz open or closed.

Robin Pomeroy: Open or closed, which goes back to what we were just hearing.

Robin Pomeroy: Yanqing?

Yang Yanqing: I think I would like to see a more alignment of the AI and with the human being.

Robin Pomeroy: Well that touches on a lot of what we've been speaking about.

Radio Davos, as I say, will be dropping tomorrow about energy, but for now, thanks to our guests, Aparna Bharadwaj of Boston Consulting Group and Yang Yanqing of ShanghaiTech University.

If you're watching live and you're not already following, please follow Radio Davos wherever you get podcasts. It's a weekly show that looks at the world's biggest challenges and how we might rise to them.

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If you're listening or watching this on Radio Davos and want to know how you can join an audience for this, for similar live stream discussions, become a digital member of the World Economic Forum. There's a link to that in the show notes.

For now, thanks to my co-host, Jessica Wanger.

Jessica Wanger: Thank you and thanks to our guests as well and to everyone who joined us live and shared some questions with us.

Robin Pomeroy: Thanks very much. For now, goodbye.