China projects global dominance in AI and economics, but internal pressures and risky strategies reveal a superpower on the edge.
Is China’s unstoppable rise actually a carefully constructed illusion?
In this WhoWhatWhy podcast, we talk with Timothy Heath, a senior international defense researcher at RAND Corporation who spent over 15 years in the US government analyzing military and political issues related to China.
Heath peels back layers of propaganda to reveal a surprisingly fragile superpower wrestling with existential challenges.
While Beijing projects an image of technological dominance and economic inevitability, behind the scenes it’s spending more on controlling its own population than on its military.
The recent AI breakthroughs? There’s an unexpected twist to that story that challenges both Western fears and Chinese propaganda.
Heath unveils China’s desperate need to maintain economic growth at all costs — not just for prosperity, but for regime survival. He explains how and why China’s traditional playbook for growth has hit a wall, forcing Beijing into increasingly risky economic strategies. China’s ambitious global plans, from technology dominance to geopolitical influence, all hinge on solving this fundamental challenge.
Heath also provides insight into how Chinese leaders view America’s political turbulence and what it means for their long-term strategy. His analysis of Beijing’s calculus regarding a Trump presidency offers a surprising perspective on how China sees opportunity in Western democratic chaos — yet may lack the diplomatic flexibility to fully exploit it.
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Full Text Transcript:
(As a service to our readers, we provide transcripts with our podcasts. We try to ensure that these transcripts do not include errors. However, due to a constraint of resources, we are not always able to proofread them as closely as we would like and hope that you will excuse any errors that slipped through.)
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Jeff Schechtman: Welcome to the WhoWhatWhy Podcast. I’m your host, Jeff Schechtman. For decades, America has been told to fear China, the unstoppable economic juggernaut, the AI superpower, the authoritarian behemoth, playing the long game while we trip over our own politics. But what if that’s only half the story? What if beneath the headlines China’s rise isn’t quite as inevitable as we’ve been led to believe? What if the reality is far more fragile, more complex, and in some ways even more dangerous? China’s AI advancements, are they truly on the cutting edge or just an illusion created by state propaganda?
The tariffs, are they a master stroke of economic strategy or a self-inflicted wound? And as Trump reemerges on the political scene, how does Beijing actually view a potential second term? Do they fear Trump, or do they see opportunity in America’s division? These are the kinds of questions that demand more than just punditry. They require deep analysis, hard data, and a willingness to challenge conventional wisdom. My guest Dr. Timothy Heath, currently a senior international defense researcher at RAND Corporation. And prior to RAND, Heath had spent over 15 years in the US government researching and analyzing military and political issues related to China.
One of our wisest minds in dissecting China’s strategy, military, and global ambitions. Heath has spent years cutting through the noise, trying to separate what China says from what it actually does. It is my pleasure to welcome Dr. Timothy Heath back to the WhoWhatWhy Podcast. Tim, thanks so much for joining us.
Timothy Heath: Thanks for having me.
Jeff: It’s great to have you here. First of all, I want to start with the story that everyone was talking about a week or so ago, which is this whole issue of where China really stands with respect to AI. There was this sense of absolute panic a week ago, and literally a week later there’s all this stuff. Maybe it wasn’t quite as dramatic as it seemed originally, and maybe it was propaganda. Maybe it wasn’t true. Maybe they did have access to certain chips. What is your sense of what the real story is here?
Timothy: I think the real story is that US technology controls worked in the sense that China was limited in its ability to acquire the most advanced chips and follow the playbook that American tech companies had outlined to boost AI capability, which is more chips equals more capability. This forced the Chinese to innovate, and they did. They came up with a much more efficient way to do generative AI at a fraction of the computing cost. And that was definitely a head-turner. So I think the story is the Chinese can innovate and sometimes our tech controls and restrictions can have unintended consequences.
Now, that said, it’s worth emphasizing that the Chinese AI program overall still tends to lag the US where the most cutting-edge work is done. And they rely heavily on open-source provided software and algorithms, which some American tech companies have put out in the public sphere. China’s AI is still not quite as good as some of the most advanced technologies that are using closed data sources and restricted algorithms.
Jeff: And talk about their decision to make their version, DeepSeek, open source.
Timothy: Yes. So the Chinese are very interested in marketizing any AI technologies and capabilities that they develop. And that’s part of the reason why they let their AI technology be open source. They are trying to get more customers and get services out on the market even if it’s not quite market-ready. This is a big difference between the US and China. The US has a lot more restrictions and safeguards and regulations on how companies are responsible for the AI technologies that roll out. China, there is none of those protections therefore, AI companies can make a lot of mistakes, and they do, and yet they still stay in business and keep selling their services.
Jeff: Talk about China’s AI ambitions and a sense of what they are beyond just competing with the US.
Timothy: The Chinese believe that AI can power the next generation of technological innovation. Their ambition is to dominate their frontier of technology. If they succeed, they would have the most innovative and productive economy and gain the lion’s share of profits from any next-generation products, such as self-driving cars and Internet of Things-enabled appliances, and almost anything I can think of could be enabled by AI and 5G networks. So they want to dominate all those technologies. That’s why they have invested so heavily in that. And they believe if they succeed, they could become much richer, their military could become more powerful, and that would allow the CCP to remain secure.
Jeff: Talk a little bit about how they view the change in administration here with respect to AI because it is clear it seems at this point that AI development in the US, AI growth is going to move a lot faster under Trump than it would have under Harris, or as it did under the Biden-Harris administration. How do the Chinese view that?
Timothy: They probably are fairly sure that the restrictions on their access to advanced chips will not go away. Trump seems to be pretty clear on his determination to maintain some of those controls. But the US government under Trump probably will loosen restrictions and regulation on the development of AI technologies and services to much higher degree than was the case under Biden. This could supercharge US efforts to innovate and bring its AI technologies to the next level. That would put a lot more pressure on China and force them to up their game to compete.
Jeff: And exactly how will they do that, given the limitations that will seemingly stay in place against access to advanced chips?
Timothy: Yes. So they have a couple of advantages in their favor. They have access to a huge amount of data due to the government and corporate collaboration. The government will provide data it collects from its own citizens and other countries to the extent it has that data, and they do collect data. And they will provide that to Chinese software companies so they can build better and more cutting-edge AI software algorithms and technologies.
That said, that will only get them so far if they cannot achieve or acquire the most advanced chips. I expect the Chinese will try to get the restricted chips through either third parties, black markets any way they can. And that’ll remain a major point of vulnerability for the Chinese effort.
Jeff: Above and beyond everything else for China is the state of the Chinese economy. There was so much talk at one point, a little less so nowadays, but still, some about the Chinese economy having problems, weakness in the Chinese economy, et cetera. Talk about how much of that is truth and how much of it is really what we want to believe.
Timothy: There’s a lot of truth to it. The reality is the Chinese model for growth has followed a pretty traditional playbook for developing countries. Initially, the Chinese industrialized and built a big export sector, and you recall for a while everything seemed to be made in China. Around the 2008 financial crisis, the Chinese export sector weakened considerably as Western markets economies weakened due to the global financial crisis. And that drove the Chinese to shift gears and focus on construction to drive growth. And they were on a building boom for years up to 20%, 30% of their GDP was driven by construction.
And you’ve seen the photos of the Go Cities. They overbuilt. They just kept building and building in order to maintain those high growth rates. And eventually they way oversaturated what they needed in terms of actual building and infrastructure. So that is no longer providing it much in terms of productive GDP growth. They have slowed down to scale back real estate and construction because it’s now just generating debt. Every time they build something it’s totally unproductive and they’re just making empty buildings. So they are forced back to the export sector to drive growth.
They have failed to build a domestic-driven economy where consumers are buying goods to drive growth. So they are forced back to exporting. And this is a problem for China because the world cannot absorb all the goods the Chinese are trying to crank out, and it exacerbates tensions with countries. Europe is considering all sorts of restrictions on electronic cars and other Chinese exports. US already has those controls, and those trade tensions will get worse if the Chinese keep following this export-driven strategy.
Jeff: And to the extent that the US places tariffs on China, to the extent that there’s resentment towards the US and other parts of the world, is that going to make it better for China in the long run in terms of more acceptance of China and more acceptance of Chinese goods?
Timothy: Definitely putting tariffs on our friends and allies complicates our efforts to isolate China or put pressure on them because of their unfair practices. It does build resentment in other countries, including our neighbors and our allies. And it does give an opening for the Chinese. However, it’s worth bearing in mind that export-driven growth for China is a sign of desperation. It’s going to really hurt them if they cannot export to the rest of the world because as I said, the other main strategy is to build and construct, which that’s already been exhausted.
That doesn’t provide any value anymore. And then their efforts to build a consumer-driven economy is proven extremely difficult because the Chinese government relies so heavily on a state sector, and the state sector consists of construction companies and exporters. So they really need the export strategy to work to keep growth up. If the US puts tariffs in place and other countries follow suit, this could really make the Chinese economic situation much worse.
Jeff: The fact that the US is cutting off aid to developing nations around the world, what opportunity does that provide China, both in terms of soft power, but also in terms of potential markets?
Timothy: So aid, the big scheme of things, it can buy some goodwill, but often the amount of aid given by the US, although it may seem large to us in aggregate on a country basis, it’s not often a game changer and by some goodwill. But the Chinese one, they don’t seem interested in following that kind of approach. They don’t actually give out much foreign aid. What they do try to do is secure deals for their companies to build infrastructure and exploit resources and then they call it a win-win, where the host country gets some revenue for it, but the Chinese benefit much more.
Jeff: This is what they’ve done in Africa to a large extent.
Timothy: This is what they’ve done in Africa, is what they’ve done in Latin America, Central Asia, South Asia. Yes, it’s a big part of their development model, is go to countries where nobody is willing to go because it’s too unstable and cut a deal to extract resources. Markets, they definitely are looking to build. As I said, they have an export strategy. They need markets. So they will look for opportunities where the US has maybe burned some goodwill with tariffs and withdrawing foreign aid.
And the Chinese have their own approach, which is usually to cater to and essentially bribe the leaders to doing what the Chinese government wants. And yes, they may have some opportunity there. But the problem for the Chinese is that the developing world in general just isn’t rich enough to buy a lot of Chinese goods. The main markets for China are the US and Europe and Japan. And if those countries tighten access through tariffs or other measures, that is very hard for the Chinese to overcome.
Jeff: How will the Chinese act with respect to Mexico and Canada?
Timothy: So yes, the US has raised tariffs against Mexico and Canada, in part to remove a backdoor which Chinese companies have been exploiting to get around US tariffs and restrictions on Chinese companies operating out of China. By relocating to Mexico, some Chinese companies were able to basically outmaneuver US restrictions and continue to exporting to US. But it will also drive Mexico and Canada to seek their own export markets where they may feel shut out of the US market due to these tariffs.
So China may have an opportunity to expand trade relations with Canada and Mexico. But again, the value that comes out of those countries, it’s just not enough to make up for a loss of access to the US market.
Jeff: And what will be the consequences of that with respect to the Chinese economy, obviously, but what are the internal political consequences of that inside China?
Timothy: Economic growth is the single most important basis for legitimacy for the CCP. They have to keep growth going and they have to make the Chinese people feel that their lives are getting better under CCP rule or they face instability. When people start to lose faith in the CCP, they may start to protest. This is already actually happening. There has been unrest growing since around 2010– Actually starting the mid-2000s. And already by 2011, the Chinese internal security budget had surpassed the entire military budget. They are forced to rely more and more on repression to maintain order. This will intensify if the economy slows down dramatically due to a loss of access to Western markets.
Jeff: And how will this impact the Chinese attitude towards Taiwan? How does that play into those aspects of internal politics?
Timothy: I think the Chinese stance regarding Taiwan is one of perpetual frustration, but this, I don’t think drives them to want to risk armed clash with Taiwan. The problem with starting an armed clash with Taiwan is the US military might get involved. And if the US military gets involved, then China has opened a massive can of worms that could face a straight-out war with the US, which there’s no way to predict where that could go, and in fact, could end up in nuclear exchanges.
The risks are just so high that most likely what we will see the Chinese do is act in a very tough and belligerent manner. These intimidating exercises and demonstrations, I would expect more and more of that maybe in the South China Sea, more of this nationalist posturing and intimidation tactics. But the Chinese government’s very wary of provoking an actual fight, war that they know they cannot control. The risks are way too high.
Jeff: And when you say that they could not control, unpack that a little bit.
Timothy: The problem with war, as Vladimir Putin has learned, is the other side gets a vote. So if we even assume that Chinese just out of pure luck– And we have to remember they haven’t fought a war in 40 years. They have massive problems with corruption. Their military still isn’t sure how to operate as a joint force. It’s all kind of vulnerabilities, weaknesses, and deficiencies in the PLA, which in my view, makes it really questionable if they could pull off a large-scale attack and conquer Taiwan in one fell swoop.
But assuming they do, and they inflict a devastating blow and wipe out the entire US military and the Indo-Pacific before we even were aware, caught our pants down, epic Pearl Harbor-type attack, they may be done and then approach Washington and demand the US surrender. But just like the US did after Pearl Harbor, the US can vote not to surrender, and in fact continue the war and remobilize its economy and build up its military, and continue the fight, which could shatter the global economy, shatter the Chinese economy, and lead to renewed warfare.
And again, they may demand and plead and ask the US to stop fighting, but the US may be determined to win. This is the problem with wars, is once they start, they’re incredibly difficult to end, and the other side always gets a vote. The US has huge military capabilities, including a massive nuclear arsenal, and there’s no guarantee that the US will not be tempted to use any of that.
Jeff: What do the Chinese understand about the vagaries of US politics right now?
Timothy: In some ways, they view developments in the US politics as confirmation of their theory that America is suffering a serious political crisis if not outright decline. On the one hand, they view Trump, I think with some apprehension as a very unpredictable character who’s willing to inflict harm on the Chinese economy with these tariffs. But on the other hand, they seem as an agent of chaos who will rip up or severely damage America’s relations with some of its allies and partners, which traditionally our network of friends has been one of our greatest strategic strengths. So I think they view them with mixed feelings as threatening, but also as an agent of chaos who will inflict harm on US interests.
Jeff: Do they see opportunity in that?
Timothy: Yes. So perhaps their most worrisome possibilities if a grand international coalition aimed at China to the extent Trump undercuts that with his policies, the Chinese will find pressure eased on them and will pursue a divide and conquer strategy where they try to cut deals with individual countries and persuade them to avoid cooperating with US trade restrictions, tech restrictions, et cetera. And if they succeed in doing that, then they can severely mitigate any of the economic damage the US is trying to impose with the tariffs and related restrictions.
Jeff: What is the ultimate goal of Chinese foreign policy at this point?
Timothy: I think what they are hoping to achieve is to build a network of friendly or neutral countries around Asia who will not challenge China’s leadership and rise. They are hoping to persuade countries to weaken their attachment to the US and their alliance with the US. And then from there, the Chinese are hoping to become a leader of the Global South. And if they’re able to do that, they can perhaps gradually build up their markets which they need again to drive their economic growth and economic partnerships, maybe even new technology partnerships to aid their ambitions for technological leadership.
And they are hoping to keep the US and Europe boxed in and mired in their own troubles. So this gives an incentive for the Chinese to secretly support Russia, for example, as a country that can help box in Europe, keep Europe and the US at odds with each other, and keep Europe divided. The more Europe is divided, the more the US and Europe are at odds with each other, the happier China is.
Jeff: And is China’s ultimate goal then in that framework, is it economic or geopolitical?
Timothy: Both. So they want to become the world tech leader. They would like to become the most prosperous and successful economy so that people reap the lion’s share of global trade and global economic activity. And then geopolitically, they have long resented US and European dominance of the global order and would like to see that limited and deluded and allow Chinese preferred values that are consistent with the CCP to become more entrenched in all global institutions and discourse and international relations.
Jeff: And finally, talk about how the Chinese instinct to play the long game and not to be reactive to anything helps them in the current political and geopolitical landscape.
Timothy: I do think they have a more patient approach to what they’re trying to achieve unlike perhaps Russia’s Putin who is in some ways maybe tactically brilliant but strategically a failure. The Chinese, I think clearly see the risks for example of starting a fight, a war with neighbors. They know that’s a massive distraction. It could be a huge drain on resources and it could be catastrophic. So they avoid those kind of entanglements. They’re very wary about pledging any kind of alliance to any other country because they don’t want to get drawn into those other countries’ problems.
So they maintain an aloof posture and are patient in trying to just build up their national strength and manage– They have huge problems and they’re very sensitive to that and manage all their problems, domestic problems. This I think helps them avoid catastrophic mistakes, but it also keeps them in a perpetually limited geopolitical position because they simply don’t offer much to any country around the world because of their refusal to become an ally, refusal to help other countries, refusal to get involved in other countries issues.
It makes them always a less attractive partner than the US who is willing to or at least used to up until recently. We’ll see what happens under Trump. US has been much more willing to try and help countries and provide a lending hand.
Jeff: It’s interesting because to the extent that under the Trump administration, the US doesn’t do that. In fact, if it keeps offending allies, it seems that it gives the perfect opportunity to China. Are they capable of taking advantage of it, I guess?
Timothy: It’s far from clear. So think of Europe, for example, the Chinese have offended them equally with their export practices where they’re trying to wipe out the entire European auto industry with cheap Chinese cars. And that is a critical, critical part of the European economy. Very threatening to their future. And as much as they may resent and criticize the US and President Trump, there’s just no question as to which of the two countries Europeans would rather remain close to. It’s the US by far.
Jeff: Dr. Timothy Heath, I thank you so much for spending time with us here on the WhoWhatWhy Podcast.
Timothy: Thank you. I really enjoyed it. Take care.
Jeff: Thank you. And thank you for listening and joining us here on the WhoWhatWhy Podcast. I hope you join us next week for another WhoWhatWhy Podcast. I’m Jeff Schechtman. If you like this podcast, please feel free to share and help others find it by rating and reviewing it on iTunes. You can also support this podcast and all the work we do by going to whowhatwhy.org/donate.
