The fortnight ended on November 7, 2025, interesting news items to look at from the past two weeks are:
1. If you can’t take the heat, don’t poke the Dragon: The Trump Xi APEC meeting ended in a temporary ceasefire as both sides want a respite. From the pre-meeting US pressurized posturing, Trump’s body language in the presence of Xi and finally Trump’s absence from the actual APEC meeting, it was plain to see the U.S. needs a truce and an orderly retreat to fight more urgent fires at home. US and China initially set a ceasefire period of one year but in my opinion, the timing has more to do with election engineering of U.S. midterm politics than methods and tactics for the next combat. We are going into the 7th year of the US China contention and bearing in mind the US Soviet Cold War lasted 44 years, we certainly have not seen the endgame. In my previous Blog I time-lined the series of events US instigated just before the Trump Xi meeting. This has always been US’s tradition to put a loaded gun on the conference table and negotiate from a position of strength. What was unexpected was China’s quick draw of the rare earth revolver and as a result the US bluster became a whimper. If you can’t take the heat, don’t poke the Dragon (Fig. 1).
In the following paragraphs, let us see what else follows after the APEC encounter.
(i) Nexperia blow-back and Netherlands Ensnared by US - With a suspension of US Bureau of Industry and Security of an overreach of sanction against Chinese affiliates on the Entity List, Netherlands suddenly found herself in solitaire to fight China without US backing. There is added pressure by EU as the global auto industry is being furloughed on account of a supply interruption brought on by the Dutch expropriation of Chinese owned Nexperia. (Fig. 2).
Whilst a new coalition government is being formed after the October 29 Dutch election, the care-take sitting Netherlands government has taken a step to reinstate Nexperia Chinese CEO on November 7 and to unfreeze Nexperia’s assets on November 11, the Dutch far-right Wing cabinet continued to cause disruptions by withholding supply of processed silicon wafers to Nexperia China factories for final assembly and packaging. They have also not revoked order vesting the voting rights Chinese owned shares with a single Dutch national. This highlighted two points I mentioned in my previous post. The first is “no nation is to be trusted farther than it is bound by its interests” hence US only took care of its own interests and left her minions dangling. (Fig. 3 -Sep 20, 2025 Blog ).
The second is stubbornness that prevails with old European elites meant only extreme pain and “guillotines” can cause a change in the ideological jaundiced European political environment. (Fig. 4 - Aug 29 2025 Blog).
It will be interesting to look at how China can finesse a restoration all her entitlement without alienating a majority of EU countries.
(ii) State Directed Capitalism -The success of the Chinese State Directed Capitalist System in industries, resources, supply chains, technologies and the military has forced the West to replicate China’s playbook. Washington has taken stakes in 5 public companies. (Intel-10% and 15% each in MP Materials, Lithium Americas Corp, Trilogy Metals and a golden share in US Steel). (Fig. 5).
Netherlands did it on the cheap by administrative expropriation of Nexperia. Sadly, in my opinion the West only took the carcass but not the soul of the Chinese success story. Reason - none of the US investee companies were self sustaining before Washington’s stake. Remember Margaret Thatcher’s privatizations were to introduce efficiencies into state owned businesses. In all probability, the reverse should happen if the bureaucratic culture has not changed. We all can recall how technically ignoramus US Congressmen were at the Congressional Inquiry of Tik Tok. On the contrary, the Chinese system is more like a giant Venture Capital Fund. The State identifies particular sectors and technologies to be encouraged. Municipal Governments, State Enterprises and Private Businesses take the risk to invest with help from public and private venture funds with the same vigor and vigilance as any VC in developed economies. (Fig. 6)
A thousand ventures got launched with a typical yet measly 2% success rate, the process of “involution” ensures the survivors of these thousands upon thousands of Chinese ventures all pass the test of “the Law of the jungle”. To be honest, Chinese are not anymore intelligent than other ethnicity, so innovation or a lack thereof are never racial. If there is a difference in the pace of development, I ascribe that the Chinese experienced more failures simply because the Chinese face more hurdles and obstacles they were not supposed to win under the “Rule Base International Order”. As an illustration SMIC (“Semiconductor Manufacturing International Corporation” of Shanghai) would not dream of taking an ASML Eur 130 million worth NXT2000i DUV lithography machine apart for emergency repairs had not in June 2024, there was a machine breakdown in the midst of production. Against a total ban on software upgrade, maintenance service and parts and components supply been globally enforced by US since Jan 1, 2024, a breakdown means a permanent seizure. The cost of each hour of machine down time potentially cost SMIC CNY 3 million of production value and a consequential avalanche effect down of hundreds of millions the supply chain. Before that time the NXT2000i was just a black box to SMIC as the machines are monitored remotely by ASML and all service and parts supplies are proprietary to ASML under a vendor locked system. In desperation, SMIC called in the best of China’s engineers in electronics from Shanghai, optics from Changchun and materials and control from Harbin to embark on an emergency rescue operation in the next 48 hours. Without plans and circuit diagrams or even what the flashing error message meant from ASML with the armed with sophisticated laser measuring devices and 3D ceramic printers the rescue squad was able to identify the error code as an misalignment in a few hours. What followed was around the clock calibration and DIY 3D printed parts and the issue was resolved and production resumed. Having crossed the Rubicon, there was no return but a migration to full self repairs and preservation mode to overcome every error code, parts and materials in a semiconductor manufacturing life cycle. What is the take-home value of this particular episode and the mystique of the term “China Speed and Innovation”. Well, I can identify at least five: (a) It was born out of necessity. (Fig. 7)
(b) the 996 work culture in the Chinese Tech environment meant by simple arithmetic, the Chinese cut short the time requirement by 50% as compared with a standard 40 Hour work week of a western economy (Fig. 8)
and (c) A united front and kinship in “National Problem Solving” that cut across all discipline, specialization, class and profession. As Professor Martin Jacques said “China, with 5000 years of history behind it, is not a Nation State but a Civilization State” (d) Elaborate use of AI in modelling of composite materials cocktails to narrow the range of materials mix formulation in improving operating aspects of parts and components and (e ) China has complete manufacture capability under the United Nations Standard Products and Services Code (UNSPSC) and a scale larger than G7 combined.
(iii) AI Competition: In a FT piece titled “China is going to win the AI race” published two days ago, Jensen Huang CEO of Nvidia lamented US is loosing on account the China has an electric power and cost advantage and there were too many burdensome regulation in the West which hampered AI deployment. (Fig. 9).
Last month in a “real money, real market showdown” DeepSeek out distanced all other western LLM models including ChatGPT, Gemini and Claude Sonnet. DeepSeek led the race all throughout the competition with western LLM all lost money. The other LLM competitor that turned a profit was Alibaba’s QWEN3 MAX. (Fig. 10).
My take is DeepSeek with an open source code strategy proved its learning curve is steep and broad as compared with just brute computing power of US models.
2. Red Financial Market Alert: Red lights are flashing in G7 financial markets as a liquidity crisis has finally arrived.
(i) Liquidity Crisis is Here: US Secured Overnight Financing (“SOF”) edged up to $3,237T on Thursday night (Fig. 11)
and Emergency lending by the Federal Reserve through the Discount Window triggered and up to $30 billion. (Fig. 12).
This had not happened since the Repo Crisis in late 2019 when US Depository Institutions ran out of cash and the Fed immediately flipped and restarted QE. Two Fed Governors, Lorie Logan of the Dellas Fed and NY Fed President John Williams in the span of a week opined that the Fed may should expand the Balance Sheet (Fig. 13).
Although it was only one week ago that Lorie Logan said there were ample liquidity for a safe and efficient banking system. (Fig. 13).
(ii) Fathom Buyers of US Treasuries: In my previous Blog I already reported Synthetic Demand through derivatives and swaps accounted for the majority of buying of new issues of US Treasuries between 2022 and 2024. Allow me to plainly predict QE will begin before end of the December 2025 and the Fed will be forced to raise interest rate by February 2027. (Fig. 14).
Reason: The US Debt Binge will exhaust money supply M1 in December 2025 and M2 by February 2027. In all probability the money printing machine will run hot non-stop and hyper-inflation will become the new normal.
(iii) China De-dollarization is a success: With agricultural, energy, metals and other commodities largely settled in CNY, the final loop would be CNY settlement in semiconductors. This is the ongoing tug of war which arose from the Nexperia saga. BMW the first to concede and VW likely to follow. In March 2010 settlement statistics of China was CNY-0.3%, USD-84.3% and Other Currencies-15.4%. By March 2024 they were CNY- 52.9%, USD - 42.8% and Other - 4.3%. (Fig. 15)
3. Precious Metal Volatility: Since September 2025, precious metals had shown a fair bit of volatility with a 15% swing in the price of silver and an 11% swing in gold. (Fig. 16).
The culprit of the machination is the extreme leveraged and high frequency derivative algorithm driven CTA Funds (“Commodity Advisory Trading”). If readers recalled I reported in my previous Blog that these funds are disguised fronts of the US Exchange Stabilization Fund as a distraction to the weakness of the USD. The sad truth is LBMA and Comex do not have the physical metals to backup the Bullion Banks naked short selling., in particular, every 378.1 ounce of paper silver claim is backed only by one ounce of the physical metal. Market intelligence suggests the Industrial and Commercial Bank of China has to lease out 150 tons of silver at a lease rate of 30% to temporarily bailed out the LBMA bullion banks from a default (failure to deliver). This together with significant borrowed silver from the silver ETF- SLV would all need to be repaid by early 2026. Well at least while the US Government is in shut down mode, the mouse can play. This game however won’t last long as the Chinese Government will tighten control of Tungsten, Antimony and Silver from 2026 (Fig. 17).
Contemporaneously USGG has added Silver and Copper to its critical minerals list. The critical minerals list serves as a basis for which commodities the Trump administration will invoke a Section 232 probe for potential tariffs and trade restrictions, as it had done with copper earlier this year. (Fig. 18).
In my last Blog Post in December 2024 (27/12/2024), I wrote: The Year 2025 will be a watershed year. A global recession is all but guaranteed and truth and integrity is very much in short supply. All asset class representing a promise to pay will suffer. Supply disruption is a certainty and credit based commerce will shrink. The best investment advice I can give is an investment in oneself through skills upgrade, education and health rejuvenation. Be thankful for what you have and show love to people who cross your path. Last but not least get to know your Maker and pray to be carried to His vantage point.
I will be taking a short break to China and Hong Kong from November 23 to the second week of December. The next update in December will likely be the final one for 2025.
Matthew 17:14 And when they had come to the multitude, a man came to Him, kneeling down to Him and saying, 15 "Lord, have mercy on my son, for he is an epileptic and suffers severely; for he often falls into the fire and often into the water. 16 So I brought him to Your disciples, but they could not cure him." 17 Then Jesus answered and said, "O faithless and perverse generation, how long shall I be with you? How long shall I bear with you? Bring him here to Me." 18 And Jesus rebuked the demon, and it came out of him; and the child was cured from that very hour.19 Then the disciples came to Jesus privately and said, "Why could we not cast it out?" 20 So Jesus said to them, "Because of your unbelief; for assuredly, I say to you, if you have faith as a mustard seed, you will say to this mountain, 'Move from here to there,' and it will move; and nothing will be impossible for you. 21 However, this kind does not go out except by prayer and fasting."
