Deadly Leverages

The fortnight ended on October 24, 2025, interesting news items to look at from the past two weeks are:

1. Deadly Leverages: In my previous Blog I mentioned China has now moved on the offensive and for the past two weeks, news of US and China crossing swords had really made our heads spin. As far as my understanding goes, China would not abruptly legislate new “hostile” measures without first intimating to US negotiators what China’s response to new attacks by US. The reason, China does not want to be a Hegemon like the Anglo American Empire with the associated costs and responsibilities. History and experience had taught the Chinese that empires do not last. When one sheds blood, a cycle of revenge and animosity can span multiple generations.  Hence the Chinese negotiators repeatedly use the phrase “打,奉陪到底,談,大門敞開” (Chose Fight - we will see who last, Talk - the door is always wide open). (Fig. 1).

So let’s see in chronological order recent sparks in the US-China conflict:

(i) April 17, 2025 US imposed port levies against Chinese linked vessels effective from October 14, 2025. This was part of the extreme pressure tactics arising from Chinese counter measures on Liberation Day Reciprocating Tariffs. (Fig. 2)

(ii) July 3 2023 China announced new export licensing requirement for gallium and germanium, effective from August 1 2025. (Fig. 3)

(iii) September 19 2025 Trump proposal to meet Xi in APEC in South Korea.

(iv) September 30, 2025 US Bureau of Industry  and Security published an interim final rule which explicitly impose export-control restrictions to foreign entities that are 50% or more owned by parties on the Entity List, MEU List (Military End User List) or SDN list (Specially Designated Nationals and Blocked Persons list). (Fig. 4)

(v) October 9, 2025 China announced further export control of rare earth & critical minerals effective December 1, 2025

(vi) October 10, 2025 China retaliate on US linked ships with Port levies arising from US April 17 levies on Chinese linked vessels.

(vii) October 12-14, the Dutch government takes control of Nexperia, a wholly owned subsidiary of Wingtech Technology, listed in Shanghai. The Dutch government used an antiquated national security law from the Cold War era to seize Nexperia on grounds of national security. Netherlands Court papers showed the Dutch government was following the prompting of the US Government. Nexperia is the former Standard Products business unit of NXP Semiconductors (previously Philips Semiconductors). The company's product range includes bipolar transistors, diodes, ESD protection, TVS diodes, MOSFETs, and logic devices. Nexperia is a key supplier to the car industry but does not have cutting edge technologies per se. In 2017, Chinese interests at arms length and market value acquired Nexperia in a near bankrupt state from its Nasdaq listed parent NXP Semiconductors. (Fig. 5)

(viii)  October 19 2025 US Cyber attack on China National Time Service Centre. Once the fixing of National Time is interrupted, most systems using time as a reference will fail such as navigation, military, power, banking and e-commerce. (Fig. 6)

(ix)  October 22 2025, The China-based subsidiary of embattled Dutch semiconductor maker Nexperia said it now operates as an independent company defying Dutch government sponsored management control and making the attempted takeover ineffective as substantive operations and assets of Nexperia are in China. Nexperia

To understand where all of the above will lead to, one must appreciate China is welding rare earth as the ultimate “Tai Chi” leveraged throw and knock out blow to bring the West to compromise. The total value of Chinese annual rare earth metal sales is only $2.5 to $5 billion but with it, the destiny of $7 trillion high tech industry is at stake. Rare earth is actually not rare so the ore part can easily be found. It is the Chinese refinement process and technique that makes it impossible to replace. In particular, some rare earth metals like gallium is a by-product of of aluminium refining, germanium is a byproduct of zinc and coal processing and with it, industry scale and low cost electricity comes into play. Signing a minerals deal with Australia is for show and students of geom-politics all know too well. China is using a mirror tactic of the US Foreign Direct Product Rule (FDPR) to force the Western alliances to the negotiation table. In the absence of trust and good faith, both sides can only resort to power and resiliency as bargaining chips. Where as FDPR leverages on US technology, software or equipment in upstream industrial process to put a choke hold on Chinese applications, China has now gone further upstream to apply the ultimate choke hold to render US technology, software and equipment redundant by resource control. In the days, weeks and months to follow, we will witness first hand all 7 stages of grieve that the Anglo American Empire will display before they come to terms the uni-polar world is finished. These 7 stages are shock, denial, anger, bargaining, depression, testing, and acceptance. Officially the Chinese FDPR does not come into effect until December, that means China will allow time for US to understand and work out what fortification and sacrifices is necessary for an orderly retreat. Once the rare earth sword is unsheathed, Western posturing and threats would not add weight in negotiations. China will not use rare earth to strike the civilian economy but will hang like a Sword of Damocles as a safe guard against treachery and aggression.   

There is a world of difference between US and China in their Methods and Tactics. Methods are the overall plans or approaches to achieve a goal, while tactics are the specific, short-term actions taken to implement those methods. For China to stand tall after the hundred year humiliation and a ruined economy, Mao Tsetung forbore a US embargo of 22 years and sacrificed over 300,000 Chinese volunteers in the Korean War to stop advances of the mighty and well equipped US Military. Subsequent Chinese leaders suffered the disgrace and threats of two mere Aircraft carriers in the Taiwan Strait  in 1996 to silence China’s protest against a Taiwan pro-independence movement. Then in 1999 the US bombing of Chinese embassy in Belgrade just to bury the wreckage of a US stealth bomber so that China may not reverse engineer the stealth technology. It is decades in the making for China to rejuvenate her industries, economy, technology and military with contingency plans for sanctions, embargoes and blockades. For US, the belief in her own power projection means she has frugal against a possible peers challenge in her industries, economy, technologies and military because she thinks taking down opponents is easy so long as the Dollar Hegemony remains intact. At the end of the day all that is left in US is a money printing machine, a narrative driven stock market, empty threats and posturing without the support of infrastructure, industry, technology and military hardware. The once proud General Electric, Boeing and Intel are a ghost of her former self. The Magnificent 7 is only magnificent  in stock prices and the virtual space without any ability to make physical products they design. China has a reserve of resources and industrial and intellectual capital, US has a reserve of digital promissory notes and electronic blue prints. When integrity and trust is gone, the result of the conflict is very predictable.

2. Anglo American Deadly Leverage in Financial Markets: On October 15 2025 the Federal Reserve published the true extent of synthetic demand for US Treasuries in a paper titled “The Cross-Border Trail of the Treasury Basis Trade. Of the $6.6 trillion new net issue between January 2022 and December 2024, over 50% were absorbed by Foreign Private buyers in derivative backed trades of which in excess of $1 trillion by Cayman Island based Hedge Funds and another $ trillion by UK and the rest of BLICS entities. (Fig. 7).

These round robin synthetic demand are funded on an overnight bases in the interbank market called Secured Overnight Funding where Treasury papers are pushed around for a spread of a few basis points hight in and night out.  As at October 23 2025, SOFR amounted to $3.002 trillion. (Fig. 8).

If that overnight trading volume signifies liquidity and depth of the US financial market, then I need to be re-educated concerning my understanding of risks and fraud.  

Across the Atlantic the London Bullion Merchant Association which purportedly is the authoritative hub of precious metals has again failed to deliver.  (Fig. 9).

Since the London Big Bang in 1986, it has been extremely profitable for London LBMA/ New York Comex Bullion Bankers to pocket customer payments for gold and silver purchases and issue pieces of paper called certificate of deposits without actually having physical precious metal in their vaults. As few customers actually bother to build their own secured vaults, most settlement is satisfied by a transfer of paper certificates of deposits. One estimate is for every ounce of physical gold in a bullion bank possession, there are outstanding claims of 100 ounces from customers. The equivalent ratio for silver is 1 to 400. As Global South Central Banks swap their US Treasuries in favor of gold and silver and take physical delivery, western financial institutions are scrambling to honor their certificate of deposits with metals that they never bought. (Fig. 10).

A fierce battle is ongoing to see if a flesh crash in prices for gold and silver will scare buyers off from viewing gold and silvers as a safe heaven asset or cause bullion bankers more pain with investors BTFD. My prognosis is the vampire bullion bankers will eventually meet their fate by a silver bullet. (Fig. 11).

Act 3:1  Now Peter and John went up together to the temple at the hour of prayer, the ninth hour. 2  And a certain man lame from his mother's womb was carried, whom they laid daily at the gate of the temple which is called Beautiful, to ask alms from those who entered the temple; 3  who, seeing Peter and John about to go into the temple, asked for alms. 4  And fixing his eyes on him, with John, Peter said, "Look at us." 5  So he gave them his attention, expecting to receive something from them. 6  Then Peter said, "Silver and gold I do not have, but what I do have I give you: In the name of Jesus Christ of Nazareth, rise up and walk." 7  And he took him by the right hand and lifted him up, and immediately his feet and ankle bones received strength. 8  So he, leaping up, stood and walked and entered the temple with them—walking, leaping, and praising God. 9  And all the people saw him walking and praising God. 10  Then they knew that it was he who sat begging alms at the Beautiful Gate of the temple; and they were filled with wonder and amazement at what had happened to him. 

Setting the Stage for the End Game

The fortnight ended on October 10, 2025, interesting news items to look at from the past two weeks are:

1. Setting the Stage for the End Game: One of the most commonly used concept in framing the clash between Western Hegemony and the rise of the Global South is the Thucydides’s Trap. In the 16 cases cited by author Professor Graham T. Allison at the John F. Kennedy School of Government at Harvard University, 12 ended in war. (a nominal 75% chance of a kinetic war - Fig. 1).

While I give credit to Allison’s insight and work, Allison falls short in only focusing on a short 500 years of history with a Western orientation but missed 90% of the rich record of human civilization and its tragedy and hope found in the changing tides of ancient cultures and empires. Back in the days of my early Blog writing, on February 15 2019, I used the “Chu Han Contention” in BC 207 (楚漢之爭) to describe the end game between the conflict of US and China. (Fig. 2)

Why? Because what we are witnessing today is much more than a two nation contest, typical in a Thucydides narration, but a rivalry between 30-40 nations in the Western Hegemony, 130-140 nations in the Global South and 50-60 Swing States. I depict US as the mighty noble warriors of Chu and China as the grass-root friendly neighbour Han.  In building up my model and a calling out the end game, I believe US will try to encircle China but China will initially show extreme restrain and weather the jabs on a long war of attrition. This calls for China to anticipate, parry and roll along as the opponent dance around with air punches. At a certain point of exhaustion of US, China will use momentum, torque and leverage to throw off the adversary for a knockout. My thesis is simple, since Chairman Mao Tse Tung, the war philosophy of Chinese leadership can be summed up by a couplet hung outside the memorial of the famous Chinese strategist Zhuge Kongming (諸葛孔明) . (Fig. 3)

The supreme art of war is to subdue the enemy without fighting through a conquering of minds (不戰而屈人之兵). After a long 7 years of restraint and judging the times, China has now moved on the offensive.

(i) Technology - On Thursday China announced a further restriction on exports of rare earth and specialist technological equipment used to refine rare-earth metals. The announcement means that foreign companies will need to obtain special approvals from Beijing if they wish to export rare-earth magnets and certain semiconductor materials that have at least 0.1 percent heavy rare-earth metals from China. (Fig. 4).

This move will totally decimate the high end semiconductor lead of the West as the regulation applies to 14 nanometer nodes and below and not just in manufacturing but also related equipment, materials, and even research and development for these advanced semiconductors. In one fell swoop the design in US, the equipment from Europe and the foundries in Taiwan and South Korea are all caught and frozen. China has carefully cultivated this kill shot for decades because it was Deng Xiaoping in 1992 that fleshed the potency of this tool. (Fig. 5).

In retaliation Trump blasted over social media that US will slap 100% tariff on China and impose Export Controls on any and all critical software. (Fig. 6).

The US Stock market reacted with a drop of $1.2 trillion in value within minutes. (Fig. 7).

What goes around comes around, US was merciless to take down Toshiba with regards to its threat on the US semiconductors in 1986 and France’s Alstom in 2013 because of rivalry with General Electric and 2018 with Huawei, China finally pull this card and US will be totally defenseless. What can the administration do but a tweet on social media to tax her own citizens some more. No stealth, no fighter jets and bombers , no missiles, no rockets, no drones no radars, no advanced ammos and no mobile communications.

(ii) Military - China’s 93 Military Parade was a show stopper. Not only was the latest weapon systems on displayed, the embedded message was clear. China would not first employ nuclear weapons but no nation on earth could have a second chance of a nuclear strike against China either. This completely shattered a US delusion that the larger number of US nuclear warheads would deter China from a counter strike against a US preemptive nuclear strike. Pentagon has since revise its pacific doctrine to pivot towards homeland security against the Administration’s namesake change from Department of Defense to Department of War. Behind the recent all Generals and Admirals meeting, is a military retrenchment program to free up resources for weapons upgrade and catch-ups to China. Open source intelligence indicates that out of the 39 active Four Stars Generals, 11 will be retrenched. However the big bucks will be in the withdrawal of military bases. Out of 11 unified combatant commands based on geography and functions,  Africom will likely to the the first on the chopping block. Funding for Eucom will be stuffed down the throat of Europeans among NATO members and as things go in the Middle East, the future of Centcom is anybody’s guess. This is the exhaustion signal that China is waiting for. To rub salt to the wound, China this week show cased yet another black dual use drone tech.  In a single container with 12 automated racks, the system can simultaneously launch all 12 racks each equipped with 54 quadcopters making a total of 648 drones under a single command controller capable of directing a maximum swam of 11,198 drones. Can Ukraine, NATO, Pentagon, IDF, Mossad, MI6 and CIA match that without chips and Chinese drone components. (Fig. 9).

Below is the video on the subject. (Video).

(iii) Alternate International Trade Settlement System: The Shanghai Gold Exchange (SGE) is establishing strategic offshore gold vaults in key global financial centers, including Hong Kong, Singapore, Zurich, and Dubai. This system supports China’s trading settlement system using local currencies and period end net balance settlement using gold as a country’s reserve asset. The Hong Kong facility will be opened in 2025 and its design capacity is 2,000 tons of gold with today’s market value of US$233 billion, quite capable to handle many country’s trade balance with China. (Fig. 10).

(iv) Large Scale Commodity Trade Settlement in CNY: BHP agreed to settle 30% of iron ore shipment to China to be priced and settled in CNY after China suspended all US$ denominated shipment from BHP. (Fig. 11).

The consolidation of purchasing power of Chinese Steel Mills took a decade to accomplish and finally Xi has overcome factional interests and gain an upper hand against the divide and conquer tactic so perfected by the Brits. This is an important move against the derivatives driven pricing power of commodities of the Anglo American Empire. Gold has fallen, then oil, grains and now base metal. We are going to see an accelerated de-dollarization as a result. (Fig. 11)

China has accomplished most of its objectives in the Made in China 2025 plan. This called for China to be near self-sufficiency in medium to high tech manufacturing. The next 10 Years objective will be China Standards 2035 and envisions China to take a leading role in establishing standards for scientific and technological research. We have entered a multi-polar world with or without acquiesce from the existing Western Hegemon. My prayers is that this fourth turning would be smooth and without bloodshed. Only God can determine the fate of mankind in this crossroad. Will you join me in this prayer.

2. First 10 days in October financial market performance as follows (Fig. 12)

Silver (+7.48%), Gold (+4.18%), Ruble (+1.56%), DXY (+1.05%), Bitcoin (+0.03%), Rmb (-0.21%), Copper (-0.46%), GBP (-0.57%), Euro (-0.97%), Shenzhen Composite Index (-1.89%), JPY (-2.15%) S&P 500 (-2.47%) and  Oil (-6.30%).

All signs of a global economic slow down have appeared with major problems in France, UK and Japan as all 3 markets entered a debt death spiral. Gold broke $4000 per ounce and Silver broke $50 in a rapid ascend. This canary in the coal mine is a clear omen of market panic. SOFR Volume broke $3 trillion at the end of September and the first few days in October as the US Federal Government continued to suck liquidity from the private sector through fiscal deficits. The latest Fed minutes released indicates Fed is very troubled by sticky inflation and maintain a more restrictive outlook. All the tariff tantrum and arbitrary supply interruptions would mean no one is optimistic concerning the economy. I maintain my outlook for hyperinflation towards the end of 2026. Trump talked about peace, peace when there was no peace. Venezuelan opposition leader María Corina Machado is the laureate of the Nobel Peace Prize for 2025 in Oslo, Norway. A graduate of Yale University and possibly a stooge for another color revolution in Venezuela.

Jeremiah 6:13  "Because from the least of them even to the greatest of them, Everyone is given to covetousness; And from the prophet even to the priest, Everyone deals falsely. 14  They have also healed the hurt of My people slightly, Saying, 'Peace, peace!' When there is no peace. 15  Were they ashamed when they had committed abomination? No! They were not at all ashamed; Nor did they know how to blush. Therefore they shall fall among those who fall; At the time I punish them, They shall be cast down," says the LORD. 

 

Choke Points, Stranglehold, and Self-Asphyxiation

The week ended on September 26, 2025, interesting news items to look at this week are:

1. Choke Points, Stranglehold, and Self-Asphyxiation: Since WWII, control of energy production and energy transit choke points has been the most important US Foreign Policy. Hence, the US Energy Information Agency (EIA) has meticulously tracked where and how oil and gas are produced and moved. (Fig. 1).

With the default of the Bretton Woods Agreement and the creation of the Petrol Dollar to maintain the Dollar Hegemony, US has doubled down to ensure she stays as the apex predator. Non-submissive regimes are changed (Iraq, Libya, Venezuela and Iran), war is waged (NATO proxy war with Russia) without cost considerations so that America could feel safe that she remains as numero uno. Eighty years has come and gone since WWII and finally the punch bowl party for America has come to and end and even the White House realized her days are numbered. The following are some of the more recent event markers.

(i) Saudi Arabia/Pakistan Strategic Mutual Defence Agreement: From the Brookings Institute - Even those accustomed to dramatic developments in the Middle East and South Asia were caught off guard by the announcement last week by Saudi Arabia and Pakistan of a new “Strategic Mutual Defense Agreement.” The pact, formalized with considerable pageantry in Riyadh on September 17 during Prime Minister Shehbaz Sharif’s visit, went far beyond the platitudes that typically characterize cooperative security announcements. It included a sweeping commitment to mutual defense, and although the text was not released, some officials on both sides—including Pakistan’s own minister of defense—intimated that the deal involved the provision of extended nuclear deterrence. (Fig. 2).

The link to the Brookings’ analysis is given here https://www.brookings.edu/articles/the-signal-and-substance-of-the-new-saudi-pakistan-defense-pact/ . I just want to highlight, as China has given her full backing to Pakistan and recently agreed to arm Iran with Air Defense Systems, the Saudi Arabia/Pakistan Pact will have a domino effect on power play in the region because by association China in effect is backstopping Pakistan in the deal and is seen as the stabilizing force.

(ii)  Poland reopens its border ports with Belarus: At the behest of UK, Poland applied a stranglehold on the China-Europe railway through her border checkpoint with Belarus. On September 12, the Polish government suddenly announced that it would " indefinitely close" all border crossings with Belarus thus poses a serious threat to the China Europe Rail Link. (Fig. 3)

The China Europe railway links 128 Chinese cities with 26 European Countries and 229 European cities is the most important overland trade route between China and Europe. Since its inception the rail link carried $450 billion worth of merchandise between the two regions. The rail cut short 40% of time it takes for container ships (from 40 days through Cape of Good Hope to 25 days) and cost is 5 times lower than air freight. Poland and her UK backers thought this stranglehold would force China to withdraw her trade with Russia. The choke hold only lasted for 12 days because China had plans B,C & D already lined up to guard against such possibilities. On the afternoon of September 22, a giant container ship called "Istanbul Bridge" completed the loading operation at the port of Zhoushan in Ningbo, and its destination was Europe. But it is not a traditional route, but a new, game-changing channel - Central Europe "Arctic Express". (Fig. 4).

The Arctic Sea Corridor has been in planning for quite sometimes and all the details worked out at the September 2025 Shanghai Cooperation Summit between Russia and China in Tianjin. The Arctic Sea Route further shorten the time for a container to reach Europe than by rail by almost one third. This re-routing together with other rail diversions would put 50,000 Polish jobs at risk and loss of economic value annually of $50 billion to Poland. (Poland 2024 GDP is $914.7 billion). Face with a possible permanent redundancy by the Chinese move, Poland immediately backed down and reopens her border.  Just how many attempts by incompetent politicians to sanction and embargo the Global South before they realized weaponizing trade is a double edged sword and very dangerous to weld. Whilst on the subject of the Arctic Route and the Arctic Region, the attached map shows why the obsession of Trump to make Canada its 51^st State and a takeover of Greenland. (Fig. 5).

With an anticipated growth in merchant fleet through the Arctic, so lies an increased risk of undetected submarine penetration to the Atlantic nations.

(iii) US Confrontation with Venezuela: The Trump administration has declared the start of a military campaign against Venezuelan drug cartels, claiming cocaine smuggling by the “narco-terrorists” poses an imminent threat to the United States. On September 2, Trump announced that U.S. forces struck what he claimed was a Tren de Aragua boat trafficking cocaine to the United States, killing eleven people. To every political and military analyst, the US attack was under a false pretext because (a) a 12 meters long boat with a 200 -horsepower outboard motors cannot travel 3,000 Km from Venezuela to US. (b) Venezuela was never classified as a major narcotics producing country. (c) The boat and passengers posed no threat to the US Naval Vessel. This is political provocation and murder under broad daylight and another example of American Exceptionalism with impunity.  (Fig. 6)

Venezuela has the world’s largest proven oil reserve (303 billion barrels) and has suffered relentless attacks from US spanning decades.

(iv) US War Secretary summons military leaders to Virginia mystery meeting: We conclude this week with news of US summoning all top military generals world wide to a sudden meeting in Virginia without an agenda to the invitees. (Fig. 7).

Whilst US Media downplay the unusual meeting as an opportunity to rally the troops (Fig. 8).

 Independent military analysts argued that such a meeting would most likely be a prelude to military budget cuts, closure of outlying military stations and summary dismissals of generals. Last week we reported on a strategic change of direction of Pentagon to pivot to Homeland security and downplay the “China Threats” as there is no money for Washington to build the Golden Dome Defense, renew its aging Naval Fleet and to meet the aerospace military techno challenge of China. Trump’s reluctance and inability to continue as the Global Police is already plain for all to see. With DOGE a failure, a recalcitrant Federal Reserve and a Western duration Bond rout, the axe has finally come to Pentagon. We will know by next week if the knives will be out.

2. Gold is for War and Bitcoin is for Flight: Gold and “Digital Gold (Bitcoin) has begun to diverge. Understand the different user of these two instruments and one may even prosper at times of adversity. The week financial market performance as follows (Fig. 9):

Silver (+7.19%), Oil (+3.49%) , Copper (+2.84%), Gold (+2.09%), Shenzhen Composite Index (+0.87%), DXY (+0.55%), Ruble (+0.15%), S&P 500 (-0.24%), Rmb (-0.25%), Euro (-0.42%), GBP (-0.51%), JPY (-1.05%) and Bitcoin (-5.08%). 

This week saw a weakening of the US Credit market as the subprime auto loan originator Tricolor dressed up as AAA failed in eerie similarity to the fiasco in 2008. JPMorgan Chase and Barclays were also potentially exposed. (Fig. 10).

The entire US Treasury Curve shifted upwards despite the Administration’s desire to have another 150 basis point rate cut before year end. (Fig. 11)

After this week, the frequency of this Blog will be reduced from weekly to fortnightly because I felt I am getting too old to keep pace with everything happening so fast and so unexpectedly. My friends, you should take at easy as well.

Psalms 128:1  Blessed is every one who fears the LORD, Who walks in His ways. 2  When you eat the labor of your hands, You shall be happy, and it shall be well with you. 3  Your wife shall be like a fruitful vine In the very heart of your house, Your children like olive plants All around your table. 4  Behold, thus shall the man be blessed Who fears the LORD. 5  The LORD bless you out of Zion, And may you see the good of Jerusalem All the days of your life. 6  Yes, may you see your children's children. Peace be upon Israel!