Millions Removed: China’s Massive Purge Is Getting Crazy | Nvidia Scandal | Japan Tensions

Happy Monday everybody. Welcome to another episode of China Update where we discuss leading political, economic and geostrategic analysis on the world's number two economy. My name is Tony. We have a lot to cover. Indeed, this first story is incredible. You can't make this stuff up, folks. Let's jump in. Nvidia's board has opened an independent investigation into whether chief executive Jensen Huang was targeted by Chinese intelligence after he admitted to having an affair. Huang disclosed his infidelity in a message to employees on Sunday, yesterday. Two days after, the Financial Times reported that U.S. officials believed he had been romantically involved with a woman suspected of working for China's Ministry of State Security. I was unfaithful to my wife, Huang wrote, apologizing to his family and staff and pledging to cooperate fully with the inquiry. His message did not identify the other person. Huang will remain chief executive while a committee of independent directors assisted by outside lawyers. Overseas, the review, NVIDIA said its board had no reason to believe U.S. national security or company secrets had been compromised and expressed confidence in Huang and his leadership team. The Financial Times, citing people familiar with a U.S. government memo, reported that American officials believed Huang had been romantically involved with Alice Huang, no relation, thank goodness, a former executive at Megaspeed, a Singapore-based NVIDIA customer. The memo said U.S. intelligence believed China's main civilian spy agency had recruited her. Officials drafted it shortly before U.S. President Donald Trump traveled to Beijing for a summit with Chinese leader General Secretary Xi Jinping. NVIDIA had previously characterized the contacts as routine dealings with a customer. U.S. authorities were already investigating whether Megaspeed had diverted NVIDIA chips to China. In violation of American export restrictions, Huang previously told US based Bloomberg that his contacts with Megaspeed employees were typical of his dealings with Chinese customers and executives, proving at the very least that the CEO has been dishonest when discussing these topics with not just folks who invest in his company, but with the American political and security apparatus more broadly. It is worth taking a step and just looking at how big a deal this is The CEO of Nvidia, one of the biggest companies in the history of the world, a player that is central to the US-China technology competition, potentially the next industrial revolution if AI is to be that, a component to the broader competition between the West and China, has been having an affair with what could well be a Chinese spy. The same person has been a prominent voice in the US debate around export restrictions, AI policy generally. And chip exports specifically. An investigation from his own company is the least of Mr. Huang's concerns. Mr. Huang has cultivated relationships with Chinese officials and technology executives while lobbying Washington to preserve NVIDIA's access to China. He argues that tighter controls could push Chinese developers towards Huawei and erode the global influence of American hardware and software. In July 2025, he met Trump and U.S. policymakers Before visiting Beijing, where he told customers NVIDIA expected Washington to license sales of its H20 chip again. The Commerce Department began issuing licenses in August. Later that year, NVIDIA scored another lobbying victory when lawmakers dropped the proposed Gain AI Act, which would have given U.S. buyers priority for advanced chips from a defense bill. The inquiry also draws attention to how closely NVIDIA's fortunes are tied to its founder. Huang co-founded the company in 1993 and transformed it into a supplier of graphics cards for video games into the leading provider of chips for artificial intelligence. He remains its chief salesman and manages dozens of direct reports. Huang credits that flat structure with helping NVIDIA make decisions quickly in a fast-moving industry. The company has no publicly announced succession plans or obvious heir. The investigation comes as investors question whether the pace of AI infrastructure spending can be sustained. NVIDIA's market value has fallen below US$5 trillion after approaching US$5.8 trillion in October. Its upcoming earnings will give investors a fresh reading on demand from the companies in building AI data centers. The board's inquiry will run alongside that financial scrutiny, examining the reported intelligence effort and whether it puts sensitive information at risk. Next up, Japan is seeking assurances that General Secretary Xi Jinping will extend the same courtesies to Prime Minister Sanae Takaichi as other leaders at this month's Asia-Pacific Economic Cooperation Summit. Their expected encounter in Shenzhen on the 18th through 19th of November would be their first since Takaichi's remarks on Taiwan sent relations between Asia's two largest economies to one of their lowest points in decades. Japanese officials expect at least a ...customary handshake and would object to any departure from standard protocol. A formal bilateral meeting looks unlikely, leaving the leaders' dinner as one of the few occasions for the two to interact. Seating arrangements and the official group photograph will also be watched for signs of how Beijing intends to treat Takaichi. The dispute began last November when Takaichi said a Chinese attack on Taiwan could pose an existential threat to Japan. Such a determination could provide a legal basis for Japanese forces... to join a collective military response with the United States. Her remarks came a week after she met Xi at the APEC summit in South Korea. Some Japanese officials believe Xi has personally pressed her to retract them. Xi has refused. Beijing has curtailed exports to Japan of rare earths critical to its semiconductor and car industries. The restrictions have also hurt U.S. manufacturers that rely on Japanese magnets, prompting President Donald Trump to ask Xi in September to ease the measures. China has separately discouraged its citizens from visiting Japan, restricting seafood imports and tightening controls on some Japanese companies' access to goods with military uses. Tokyo has a precedent for a handshake under strained circumstances. When China last hosted APEC in 2014, she greeted then-Prime Minister Shinzo Abe after senior officials laid the groundwork for a thaw in relations strained by a territorial dispute. Comparable talks have yet to take place with members of Takaichi's cabinet. Takaichi could speak with Trump at the Asian summit in Manila before heading to Shenzhen, giving her a chance to raise Japan's concerns ahead of his talks with Xi. Trump and Russian President Vladimir Putin are also expected to meet Xi at APEC. With a bilateral meeting looking unlikely, Tokyo's immediate aim is to ensure Takaichi receives the same welcome as her peers. Whether two governments can begin to ease the trade restrictions and reopen high-level talks is likely to depend on what follows. The summit. Next up, we have one more development to cover, but just quickly, if you're getting some value from today's episode of China Update, as always, it's a big help if you just hit that like button. Consider subscribing if you'd like to continue to be on top of updates like today's, and if you'd like to go the extra mile and help me keep China Update financially sustainable, Patreon and BuyMeACoffee links are in the description below. I cannot stress enough. How much I rely on this support from the audience to keep going. This channel is primarily subscriber supported and this does give me that runway to continue making these every day. For those who do help keep the channel going, thank you so much. I could not do it without you. And finally for today, a seat and nameplate. We're waiting for Feng Xinghai at a Peking University seminar in July. The Stanford trained former market regulator, a familiar figure to foreign investors in Beijing. Never arrived. Messages went unanswered. China's state news agency later announced that Feng was under investigation for suspected serious breaches of party discipline and the law. His case, UK-based The Financial Times argues, offers a glimpse of the sweeping purge underway as Xi Jinping prepares for an expected fourth term as Communist Party leader next year. About a quarter of Central Committee members were absent from the recent Fifth Plenum, which we noted at the time, largely because of purges. Leaving the party's top leadership body at its most depleted since the Cultural Revolution. The meeting confirmed the expulsions of 33 full or alternative members, including 16 military officials, and called for the continued pressure on cadres. The campaign began after Xi took power in 2012, when rampant corruption threatened the party's credibility. Party officials now claim an overwhelming victory. He Minxin, a professor at Claremont McKenna College, Estimates that 7.2 million party members have faced some form of punishment, including at least 632 senior officials. Nearly 983,000 cadres were disciplined last year alone. Over the same period, China's score on Transparency International's Corruption Perceptions Index rose just four points, from 39 in 2012 to 43 in 2025. The military has lost some of its most experienced commanders. Zhang Youxia, formerly Xi's top uniformed official and one of the few remaining senior officials with combat experience, was expelled from the party and the military. The plenum elevated Zhang Shenmin, a political commissioner who helped lead the military purge, to the Politburo. Philip Saunders of the U.S. National Defense University argues that the upheaval could complicate large operations such as an invasion of Taiwan in the near term. while opening a path for younger, better-educated officers to improve the military's capability over time. The economic risks are more visible in local government. The property slump, or collapse as it perhaps should better be called, has eroded land sales or land-use sales revenues, just as Beijing has broadened the performance targets used to assess cadres. Officials face pressure to show progress on everything from sustainable development to party building with less money to spend. One county in Shandong province invested more than 700 million RMB in an agricultural training centre. State media reporters found a hotel, a gym and rooms for chess and cards, but no facilities for teaching crop cultivation or livestock breeding. Greater scrutiny may also make officials reluctant to approve projects that require large contracts or to experiment Thank you. Shi, a political economist at the University of California, San Diego, warns that officials competing for promotion could use allegations of wrongdoing to sideline rivals. Oxford Economics Jana Yue says growing risk aversion could delay projects and weaken the effect of fiscal stimulus at a time of weak domestic demand. Xi Jinping himself argues that tackling corruption protects fair competition and encourages enterprise. Yet his own warnings about officials who voice support for central directives while quietly resisting them suggest that enforcing loyalty has done little to settle his concerns about implementation. A tougher disciplinary regime could widen that gap if cadres conclude their safest course is to report what their superiors want to hear. China's leaders have few independent channels for assessing conditions on the ground. As she heads toward another term, the test is whether officials can still deliver unwelcome news about failing policies and worsening economic conditions. Those are precisely the reports Beijing needs if it hopes to revive domestic demand and make better use of the resources local governments have left. Okay, that is today's episode of China Update. Thank you so much everybody for watching. Have a good Monday, Have a productive week and I hope to see you for a new episode.