What China Understands About AI and Energy That the US Doesn’t

0:00 This is a story about taking your eye off the ball. Since President Trump came to office the first time, he's been focused on the economic and national security risks posed by one country in particular. Did you say China? China. China. We were losing to China. We want to beat China. We're leaving China. In his second term. President Trump has focused on AI as a key area of competition between the two countries, and specifically, the chips needed to drive all those large language models.

0:32 China and other countries are racing to catch up to America having to do with AI, and we're not going to let them do it. We have the great chips, we have the great everything, and we're going to be fighting them in a very friendly fashion. But while the U.S. is doing what it can to protect its lead in the computer race, there's another contest that it may be losing the battle. To make sure we have the power we need to drive all that I we're developing. It's fascinating because when you look at AI, There's a huge energy need for that for the data centers.

1:08 We all know Hank Paulson from his time running Goldman Sachs and then leading us through the great financial crisis as Treasury secretary. But he's also devoted much of his career to climate issues and helped lead Goldman Sachs to China over 30 years ago. We have one big advantage on China, and that's it. We have we're energy independent, right? And they aren't. But we have a shortage of electricity in this country. The demand is much greater than their supply and it's growing.

1:42 And so we have a shortage of electricity to power data centers. China on the other hand, they're investing massively in coal. And a lot of the things that I would like them to be investing in. But they are investing big time in renewables and solar and wind. They have more renewables than Europe, the U.K., the U.S. combined. They're going to have half their energy from renewables. So they've got plenty of electricity. Meanwhile, in our country. Utilities can't meet the demand.

2:16 Electricity prices are spiking up. So ratepayers are putting up their hands and say no more. At the same time, we need the electricity. And so the interesting thing is, if you look at the U.S., all of our electricity, essentially new electricity the last couple of years has come from solar and wind. At the same time, the administration is restraining it. So again, I would say that we are ahead of China when it comes to AI.

2:47 They're investing massively. But I got to tell you, the biggest potential drag we have is not having enough electricity to power our data centers. Are we disadvantaging ourselves? I think we are. Former U.S. Ambassador to China Nick Burns saw the unprecedented scale of China's energy investment First hand. I used to travel a lot by train in China because you can see a lot more of the country. You can talk to people. The degree to which China is building transmission lines all across the country.

3:20 And I visited 26 of the provinces, even out to the West. It's staggering the degree to which they're now controlling the global supply chain in electric vehicles, in lithium batteries, in solar panels and wind power. They are the world leaders in this, and I think that the United States should be making a similar effort. You know, maybe it's not as cost effective now, but we have to think out to the 2030s and 2040s. And I do think as we consider this big challenge of how do we compete with China and yet not get into a war with China. We have to start planning more long term. As they are doing the numbers bear out what Hank Paulson and Nick Burns have seen on the ground in China since 2021. In just five short years, it has added more power capacity across all energy technologies than the United States has built in its entire history, and that gap is only growing over the next five years. China plans to add more than 3.4 terawatts of energy generation capacity, nearly six times as much as the US.

4:29 They've been developing their electric grid at a rate that is extraordinary. Elizabeth Economy, a China policy expert and senior fellow at the Hoover Institution, says there will be a high cost to falling farther behind. China has made a big bet on renewables and clean energy more broadly this past year for the very first time. It has more power generation capacity in clean energy than it does in fossil fuel energy. And they're not the only ones. Europeans are following suit, but we clearly are moving in the opposite direction, sort of all in on on fossil fuels. I think it's important to understand that the bet from the Chinese side is not necessarily just about the health of the Chinese people or the Chinese environment.

5:12 This is a real economic play for them. You know, they are cognizant of the fact that by 2035, the clean energy market is estimated to be globally as big as $7 trillion, and they want to command that market. So they have spent a lot of time over the past several years investing very heavily in renewables. You know, last year, $1 trillion in renewable investments. And as a result, they've seen their exports of EVs skyrocket, 80% increase in 2025, 40% for battery exports, 20% for solar panels. This is a real moneymaker.

5:46 So I think for the Chinese, as they look out, clean energy is green, right? It's green for the environment. And you know, it's green for money. You make a really interesting point that this has been going on for several years. Uh, President XI did not just wake up yesterday and say, let's have a lot of renewables for I. It started before really. There was the big push for I how much of this is pure commerce rather than development of AI and competition.

6:10 And I, I mean, on the energy side of it, I don't think that I think I is very late to the game. I mean, the Chinese have been beginning with renewables beginning in the late 1980s early 1990s, they were already inviting Western firms in for wind turbines and solar panels and saying, sure, we'll give you access to the Chinese market. Now you just give us some of your advanced technology or set up an R&D center, or sometimes they might just illegally appropriate the technology, but, you know, one five year plan after another.

6:39 Renewables have been part of the Chinese plan. And you're right. Exactly. XI Jinping did not wake up, you know, one day and say, oh, this really matters. Though China's push into renewables may not have been intended for I. That's where it could matter most in the U.S., power demand is exploding with consumption from data centers alone expected to triple by 2035, putting even more pressure on a grid already under strain. But instead of racing to close the gap with renewable alternatives, the U.S. is pulling back from a sector China increasingly dominates, accounting for roughly 80% of global technology production in solar and battery tech and more than 70% in wind.

7:22 This enormous development of renewables in China didn't come free. They had to spend some money to do it. If the United States wanted to get back in this game and compete on the renewable part, does it have the capacity? How much money is involved? How much money has the Chinese government really put into this? I mean, at this point, it's easily over $1 trillion. It's been billions of dollars every year. And as I mentioned, $1 trillion, you know, just last year in clean energy investment. So there's not a way that we're going to compete across this spectrum of technologies, you know, solar, wind, nuclear. We're just not going to be able to do that at this point. Even any of these.

8:01 Like China's exports were worth about $76 billion last year, somewhere around 3 to $4 billion. I mean, don't forget, they're also a country of 1.4 billion people. So roughly three and a half, four times as large as we are. So that capacity is much greater as well. But could we get back in the game? I think that was the point of the Biden administration's Inflation Reduction Act. Right. It was a mix of subsidies and tax incentives.

8:27 It attracted an enormous amount of foreign investment. So it had, I think, a lot of potential to reboot the clean energy sector in the United States. But, you know, the Trump administration is not that interested in the clean energy and the renewable sector. And so, you know, we saw that they rolled back probably 95% of the Inflation Reduction Act. Can the markets make up a good part of the difference? By that I mean this. Instead of the government giving subsidies or tax breaks, incentives and renewables. Is it possible the market will take over and say it's just cheaper to get energy from some of the renewables?

9:04 Well, I think there's always a hurdle, right? When you're introducing a new technology that you have to it has to you have to get over. And that is where the government subsidies or incentives, you know, can play an important role. I mean, we see that now with rare earths. And I think the Trump administration has come around to appreciate, right then, if you're going to compete with China, you're going to have to adopt some elements of their playbook, but you're going to have to invest.

9:27 You're going to have to have a secure market, you know, for the new investment for the new, uh, technology that you're developing. Right? Because you have to get it over the hurdle from the innovation to the manufacturing to the, you know, deployment and export. And I think that's the that's the full lifecycle of new technologies that China has created its playbook. And we don't really have a playbook that can compete without a little more government intervention than we've typically been comfortable with.

9:57 The US and China may be competing hard on AI, and the US may have taken its eye off the ball on energy. That's critical in that competition, but there's at least one area where they may find common ground. Agreeing on rules to make sure that all this AI being built and powered is as safe as possible. Do we need to work with China on safety for AI? Yeah, obviously we do. It's at some time, but right now they're an adversary when it comes to military and security. So I think we're going to be forced to do it when we start seeing accidents and bad things happen.

10:41 And I just want to make sure we're in the lead when we get to that point. I really do, and I take a step further and say, when President Trump and she meet, it's going to be the first of, I hope, you know, for summit meetings. And I'm hoping right now there is you know, we got a trade deficit, but we've got a trust deficit big. And I want to close that trust deficit because we need to figure out how we can compete and work together at the same time. And if we don't, the world is going to be a much more dangerous and less prosperous place.

11:18 So again, uh, I view and I think a positive is I really do believe President Trump wants to find a way to work with China. And I hope that the Chinese feel the same way.