China Morning Missive Once again, we have an event which takes place all with the intended purpose of containing China. And once again, we have a failed attempt. Honestly, I’m somewhat surprised at the speed of the outcome. It was just a month back when the Dutch government announced that it had taken effective control over the Chinese owned technology group Nexperia. Yesterday, that decision was fully overturned. The rationale for seizing the company was deemed “highly exceptional” and was done given “valid reasons to doubt sound management at Nexperia under the leadership of former CEO Zhang Xuezheng.” What does that even mean? Doesn’t matter. Everyone knew that the move was made in conjunction with the US government to apply pressure on China’s ambitions to build advanced chips. I’m sure that, on paper, the move would have made considerable sense. On paper. What clearly wasn’t taken into account though were the second and third order effects of making such a move. While Nexperia does have a sizable operational footprint within the EU, the actual end product (chips) is manufactured in Dongguan, China. In response, Chinese authorities placed a full export ban on all Nexperia chips. Almost immediately, the global auto industry, the largest end customer for these chips, reacted. From BMW to Honda, the industry warned that production would go offline without access to the Nexperia chips. Pressure then mounted and, in the end, the Dutch government was left with no other choice but to rescind its previous “highly exceptional” decision. This is but a single example of the unforced errors being constantly made by the Americans and Europeans. Decisions are made all with the aim of containing China, but at each and every turn there’s never any forethought into how China can respond. There just continues to be a belief that unilateral action can be taken without running the risk of repercussions. It has been years now that this way of thinking has permeated Western strategic thinking and, yet, there has been ample evidence that – when provoked – China doesn’t just retaliate, it does so in a way that is truly impactful. What this example also demonstrates is the depth and breadth of China’s institutional bandwidth. Over the past 18 months there have been a host of geopolitical flare-ups all requiring the attention of China’s leadership. At every turn, there’s not only been an immediate response, but a very well-crafted response as well. Each situation was then adroitly navigated with outcomes heavily favoring the Chinese. I’ll just once again make the following statement. It is well past time that the Americans and Europeans refrain from underestimating China’s capabilities. The leverage is now firmly in the hands of Beijing. There just isn’t anymore debate on this subject. https://www.reuters.com/business/retail-consumer/dutch-government-suspends-state-intervention-chipmaker-nexperia-statement-2025-11-19/

Everyday there is a new development in the Chinese AI space. Can’t hardly keep track. Now it’s a Chatbot from Alibaba and from just a bit of use it is impressive. Already up on the App Store.

China Morning Missive Nothing like coming into the office first thing on a Monday morning to find news of SecTres Bessent saying that the rare earth issue “should hopefully be completed by Thanksgiving.” Wasn’t the entire idea of the Trump-Xi meeting to finalize the issue? And on that note, what is going on with TikTok? There’s another item which hasn’t been fully finalized. Even though the current headlines a dominated by a growing conflict between China and Japan over comments made on Taiwan and there’s also the reporting of the Chinese economy under continued pressure, the main event remains the Battle of Two Titans, China v. America. Honestly, someone in Washington needs to hire me to teach a class in China Negotiations 101. All of what is transpiring is a known quantity if you understand how it is the Chinese operate. When they have leverage (and they very much do), they press their advantage up until the real point of conflict. I would also add that rare earths, while important, is a symptom of a far larger problem facing America. A problem known by the Beijing leadership and a problem which will continue to be leveraged. The real issue is an acute dependency throughout America on the supply of all sorts of intermediate goods. No one in the States is talking about it and it is the same dynamic at play as with rare earths but goes to just about every single corner of American industry. Intermediate goods are the critical inputs required across all industries to manufacture finished goods. So long as you are missing one or two small parts that go into a manufacturing process then you are unable to complete that process. This, again, is the primary issue with rare earths. They are a component, and intermediate good, required in a much larger manufacturing process. Without access then the process itself has zero value. Again, this very dynamic carries across just about every industry. American manufactures remain dependent on a host of inputs, intermediate goods, sourced from China. One perfect example of this would be drones. In fact, I would expect this to be one of the next major issues to arise between China and America. You’ll see all sorts of reporting on companies likes Anduril or Skydio. Both are tasked with building out America’s capacity to manufacture drones. Both, however, would have at least some degree of dependency on China for the sourcing of needed inputs. China, however, placed a global export control on critical parts for the entire drone industry. This move was made explicitly in response to the American government banning all domestic sale of DJI Technology products. I must stress; this is just one example. There are hundreds of other American companies still at critical risk to China’s supply chain. Mitigating the risk will take years and Beijing negotiators are fully aware of the issue. https://www.reuters.com/world/china/china-rare-earths-deal-will-hopefully-be-done-by-thanksgiving-bessent-says-2025-11-16/

China Morning Missive Well, there is certainly a great deal of positivity (again) from the latest round of bilateral talks between China and the United States. From what is being made public, the two sides have reached a “framework” of a deal with Trump and Xi signing off when they meet on Thursday this week. As Brad Pitt said in the move Seven though, “What’s in the box? WHAT’S IN THE BOX?” What concessions did the American side make? Up to this point what we know is the following. The TikTok deal is set to “close” on Thursday. China is preparing a “substantial” purchase of soybeans. Rare earth controls are to be postponed by a year. These are just the three larger key issues that we know of and are said to have been concluded. If China had all the leverage (which it did) and China has agreed to basically all terms, what has the American side agreed to? Thus far, Bessent is playing the game that China made concessions and with that America won’t be moving forward on the additional 100% tariffs which Trump had threatened. Nonsense. That’s Bessent providing cover to the media so that the actual details of what real concessions were made don’t need to be raised publicly. The obvious candidate would be China’s access to key technology. While I suspect that technology will be part of the American deliverable, the focus needs to remain on Taiwan. It’s always been Taiwan. I’ll also be paying close attention to the Typhoon missile systems in the Phillipines and the second installation that was placed just last month in Japan. I’m also expecting the two parties to publicly make an agreement over the future of nuclear nonproliferation. Just keep in mind that the Chinese don’t trust any verbal agreement with an American President (ironic tough that may be). All of what’s been agreed to, and I mean the real issues and not TikTok, will have had the Chinese press for a Fourth Communique. That takes time. My ongoing thesis is for Trump to travel to China in early 2026 and for Xi to travel to the States in early 2027. It will be on that US trip when the parties would sign a new communique laying out an agreement over how best to divvy up the Asia-Pac region.

US Treasury chief Bessent says ‘substantial’ trade framework with China reached — TradingView News