Chinese EV companies enjoy enormous advantages in cost and scale, compared to automakers in Europe.

Nevertheless, some Chinese brands are scooping up closed production lines and factory capacity in Europe.

The motivation is primarily to avoid the European Union's high tariffs and regulations on cars inbound from China, and new policies on vehicles qualifying for government subsidies.

Skeptics point out that Chinese electric vehicles are taking over European markets right now, even while passing the high tariffs along to buyers. Further, that Europe's high cost structures and regulatory environment represent real challenges for Chinese carmakers hoping to keep prices low.

Report:

Good morning.

Manufacturing industries in Europe are dying. Automakers and chemical companies are closing production and laying off in Europe, to invest in new capacity and headcount here in Mainland China. One of the primary drivers of that is the cost of electricity; Western Europe has some of the most expensive power bills in the world.

Labor costs are also far higher in Europe, compared to China and other countries in Asia. This is from the Reshoring Institute. The mission of the Reshoring Institute is to help companies set up in the United States, and pull manufacturing back to the US. This table is called “China is no longer a low-cost labor country”, and we can only wonder why they published it at all.

Only Germany has higher labor costs for manufacturing workers than the United States, and China’s salaries lower by more than half. Other countries in Asia are lower still. It’s hard to see why these data would serve as motivation to relocate factory production from China to the United States. Or to Europe.

Ironically though, Chinese carmakers are considering exactly that. Chinese electric vehicles are blowing up markets everywhere, and taking over everywhere they are allowed to be sold. Chinese companies tend to be vertically integrated, and their EV industry has monopolies on the supply chains for everything that goes into making batteries for electric vehicles.

Chinese carmakers are crunching the numbers and concluding that they can probably—probably—make more money by buying up factories in Europe, that automakers there are shutting down, and cutting excess capacity.

Volkswagen previously was building12 million cars a year, worldwide. They are cutting that down to 9 million. So VW capacity that was turning out 3 million cars a year will be idled, and they are looking for their Chinese partners to move in.

Ford Motor Company has a factory in Spain. Geely is planning to take over one of those lines.

To Chinese carmakers, it’s a complex math problem. European labor costs are lot higher. European power bills are a lot higher. So these companies are trying to solve the problem of import tariffs, on cars built in China and sent to Europe.

This document is the tariff schedules and rules on Chinese cars. It runs almost 200 pages, and the summary is here. The base import duty on Chinese vehicles is 10%, and these are the “countervailing” tariffs, which are added to that 10% baseline number. So the new tariffs on Geely car imports, for example, are 18.8%, plus 10%, for an effective tariff rate of 28.8%:

Leapmotor is also expanding in Spain, and they’re at 30.7%; once again, they’re at 20.7% plus the original 10%. So that math is already part of the decision making for these companies.

Then there is this: a proposed new regulation that says electric vehicles need at least 70% of their components—excluding the batteries— to be sourced in the European Union to qualify for government subsidies. So when that becomes law, carmakers can still buy and ship the batteries from China, while meeting the 70% requirement by building locally.

By doing that, government subsidies can be applied to the purchase of Chinese electric cars.

Here is a nuts-and-bolts example of how that works now, compared to what’s coming later. Leapmotor is offering this car for sale, the T03. European buyers – lessees, sorry-- don’t need to pay a deposit, and can make a lease payment of $57 – 49 euro -- per month, for three years. This car is built in China. All of it. So when those new rules go into effect, this won’t work. Those 36 months times 49 euros means that they can drive this car for less than they would pay for a high-end bike.

This is an extreme example, to be sure. But there’s a big difference between driving off with that car for 49 euros per month, versus a down payment of 6,000 euro, then 49 euro per month. Then it’s not like buying a nice bike, and that’s the math that is driving some of these Chinese brands to buy up factory capacity from the Europeans, who already can’t make the math work in their own businesses.

There are skeptics, both here and in Europe. This auto industry analyst is dismissive of the whole idea. The costs will going up, a lot, and the Chinese are going to find out how hard it is to do business in Europe. New, higher labor costs, and the cost to build out new supply chains in Europe to meet the 70% component requirements.

In 2024, the labor costs for cars built in China was under $600, on average. That’s less than Poland, less than efficiency-obsessed Toyota. Spain was at $955. Per car labor cost in Germany is over $3300, or five times higher than China:

Foreign investment in these joint ventures is capped at 49%, so we do see a lot of these announcements at 51-49%. And that’s true here in China, too—where it’s the other way around. That’s not the problem. But the proposed new regulations for Europe will mandate half the workforce be European and include technology-sharing requirements. So the Citigroup guy is saying that nobody should be too excited, just yet.

There is also hesitancy on the Chinese side. Chinese carmakers are growing market share in Europe, right now, while just passing along the higher tariffs to end buyers. China is killing everyone else on EV’s, and that was BEFORE the war on Iran doubled gas prices for everyone in the world. So why hurry?

That may be what industry insiders here are thinking. It’s true that buying an existing factory saves time, and saves upfront costs compared to just building one from scratch. But what if European carmakers shut down capacity even faster, now that internal-combustion engine cars are even faster falling out of favor? Could Chinese companies just wait until prices fall some more? Or wait, and see if the European Union decides that it’s more important to get car buyers into electric vehicles—no matter where they come from—instead of buying fuel-burning vehicles made in the EU?

And the upfront cost savings shouldn’t be assumed either. Elvis Cheng is a top executive at Xpeng, and he’s got another problem: Xpeng wants to expand production in Europe and is talking to VW and other European companies, but the factories are so outdated that Xpeng may be better off just building a new one.

All that is happening here, in Europe, and in automotive in particular, is counterintuitive at first glance. Europe is de-industrializing, and companies there are moving to China. Yet Chinese companies and investments are also heading the other way. Chinese investment into the EU was at a seven-year high last year and was 25% of total outbound FDI. It was a 67% increase from 2024, and a big chunk of it went to the supply chain for electric vehicles.

“Greenfield Investment” is what Elvis at Xpeng is thinking about—building facilities from the ground up—that number was up 51%. Looking at some of those data, here—large greenfield investments for EV battery plants, from CATL and CALB. BYD opened an EV plant in Hungary. And going back to the tariff table, BYD enjoys the lowest tariff rate of all the Chinese car brands.

Hungary was also the first European country to join China’s Belt and Road Initiative, and so factories there can easily plug in to Mainland China supply chains, logistics, and banking systems. That’s over 12 billion euro in new greenfield FDI, just for Hungary.

There are a lot of moving parts here, and the skeptics are right to wonder just how much will result from all these discussions and negotiations. Because going back to that Leapmotor example, again. Right now the German subsidy is 6,000 euro, so drivers sign a 36-month lease for 49 euro a month. Suppose that subsidy goes away, for those cars that come in from China. Spreading out 6,000 euro over 36 months plus the 49 would mean about 220 euro a month.

It’s not apples to apples; the 6,000 euro are paid up-front, directly to LM by the German government, and no need to write to me and point it out. But charging the 6,000 euro to the lessees is still more affordable than anything coming out of a VW or Stallantis factory in Europe right now. But how much will that car cost Leapmotor to build in Europe, given all the higher costs and mandates?

Be Good.

Resources and links:

Mapping the impact of industrial decline on European regions
https://single-market-economy.ec.europa.eu/publications/mapping-impact-industrial-decline-european-regions_en

The Deindustrialization Of Europe In Five Charts

Robert Bryce

The Deindustrialization Of Europe In Five Charts

The headline on a February 9 Bloomberg article concisely sums up Europe’s unfolding disaster: “Germany’s days as an industrial superpower are coming to an end.” The article says, “Manufacturing output i…

Read more

2 years ago · 411 likes · 41 comments

The Reshoring Institute: Our Mission
https://reshoringinstitute.org/our-mission/

Electricity price statistics
https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Electricity_price_statistics

China took over another $5 trillion industry, and Europe is moving money and jobs

Global EV Sales Top 20 Million as Europe and China Lead Electric Car Boom
https://electriccarsreport.com/2026/05/global-ev-sales-top-20-million-as-europe-and-china-lead-electric-car-boom/

Cheap and sleek Chinese EVs turn European heads
https://asia.nikkei.com/business/automobiles/electric-vehicles/cheap-and-sleek-chinese-evs-turn-european-heads

China's Leapmotor woos Germans with $57 monthly EV lease
https://asia.nikkei.com/business/automobiles/electric-vehicles/china-s-leapmotor-woos-germans-with-57-monthly-ev-lease

Stellantis and Dongfeng form EV joint venture for Europe
https://asia.nikkei.com/business/automobiles/electric-vehicles/stellantis-and-dongfeng-form-ev-joint-venture-for-europe

China's investment in Europe hits 7-year high, still far from peak
https://asia.nikkei.com/economy/china-s-investment-in-europe-hits-7-year-high-still-far-from-peak

Chinese EV makers awaken Western rivals' zombie production lines
https://asia.nikkei.com/business/automobiles/chinese-ev-makers-awaken-western-rivals-zombie-production-lines

Global Labor Rates: China is no longer a low-cost country
https://www.logisticsmgmt.com/article/global_labor_rates_china_is_no_longer_a_low_cost_country

As Chinese EV makers expand in Europe, are local automotive suppliers set to benefit?
https://www.scmp.com/business/china-evs/article/3354764/chinese-ev-makers-expand-europe-are-local-automotive-suppliers-set-benefit

COMMISSION IMPLEMENTING REGULATION (EU) 2024/2754 of 29 October 2024, countervailing tariffs on China-built vehicles
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L_202402754

EU tariffs on imports of China-made EVs
https://www.reuters.com/world/china/eu-tariffs-imports-china-made-evs-2026-02-11/

China's SAIC Motor plans EV factory in Spain, Bloomberg News reports
https://www.reuters.com/world/china/chinas-saic-motor-plans-ev-factory-spain-bloomberg-news-reports-2026-04-24/

Stellantis and Dongfeng in $1.2 billion deal to make Jeeps, Peugeots in China
https://www.reuters.com/world/china/stellantis-dongfeng-sign-117-billion-deal-build-peugeot-jeep-vehicles-china-2026-05-15/

China dominates the global chemicals industry, and leads the world in chemistry and research.

A major driver is China's boom in manufacturing, which requires robust supply chains for chemical inputs, and top chemistry engineering talent.

Chinese monopolies in cutting-edge chemical research, and massive production capacities which slash manufacturing costs, mean that China's policymakers can restrict its exports and final use, for example to weapons makers.

Top European chemical companies are cutting production lines and jobs in home markets, to build production and create jobs in Mainland China.

Report:

Good morning.

This is a report from almost exactly two years ago. It’s from the Information Technology and Innovation Foundation, and is a deep dive into the Chinese chemical industry. They concluded at that time that China was already leading in the production of chemicals, and was catching up quickly with industry leaders in other countries for more complex chemicals.

By 2022, China already was 44% of global production of chemicals, and 46% of new capital formation and R&D spending. Here are some of their predictions, from 2024: Chinese policymakers are determined that the chemical industry will be self-sufficient, and it is “likely that the country will be” comparable to foreign chemical companies with respect to innovation in just a few years, at the latest. China already enjoyed strong cost advantages, which meant that Western companies’ global manufacturing share would probably fall—significantly.

This is a $5 trillion industry, and comprises four large sectors: basic chemicals, ag, and the consumer segments. Chinese companies invest much more in R&D compared to peer countries and companies outside China, while also enjoying strong industry support from government.

The conventional wisdom in the chemistry field was the same as in everything else: cars, planes, semiconductors—that China is a copier, or at the most a “fast-follower”, while North America and Western Europe are the innovators.

The United States believes that they can attract top talent from across the world, and something magic happens when they show up, and they can create and innovate faster than if they had stayed home. There are lots of problems with that idea, as we see in just about every single industry there is. China’s costs are lower, so companies in China can afford to experiment with new technologies.

And it was always a weak thesis, anyway, that Chinese researchers are waiting around for American or German or Japanese scientists to do the work, then get busy working on knockoffs. It just doesn’t survive scrutiny.

These data are already six years old, from 2020: China was already the single highest source of value-added output in chemicals. That is not basic chemicals mass-production, then—this is surplus value created, and by 2020 was over 50% higher than the chemical industry in the United States.

There is only one market where that metric is moving sharply higher, over time. China’s value-add in 1995 was less than half compared to Saudi Arabia. India, in 2005, generated more than twice the surplus value of China. By 2010, China passed India. By 2023, China’s share of global market sales was over 40%, and China saw the highest capital investment intensity, 2.8 times more than the United States.

A primary driver of all of that, is that this is where the demand is, for chemicals of all kinds. And that’s another metric that has gone vertical---as Chinese manufacturing boomed, they needed a chemicals industry to feed their factory sectors, and that need continues to grow.

By 2024, Chinese chemical companies were already snapping up market share from competitors. This is a slow-growth, low-margin industry. There is a relatively small number of commercially viable products that are developed each year. It’s a mature industry, and investors need to be patient, and that’s a big part of the problem. Chinese companies have a lower cost of capital, lower borrowing costs, and lower operational costs structures. Western firms operating in North America and Europe don’t enjoy any of those advantages, and what’s more they answer to Wall Street investors who want to book short-term profits at high hurdle rates.

This is all to say that Chinese companies can afford to expand, today, in expectation of future demand, while Western companies cannot do so in their home markets. China is where the market is, and foreign companies have no choice but to invest heavily here, just to stay competitive in the Chinese market, selling chemical products to Chinese industrial users.

By 2022, 34% of Research and Development in the chemical industry was invested here, in China. And by the way, R&D dollars go a lot farther in China, compared to the United States or in Germany. And that boom in R&D has translated into new patents by Chinese firms and research institutes.

Now it’s 2026, just two years after that report from ITIF. China is now inarguably the leading country for chemistry research. In the past 10 years, China increased its research by four and a half times. Now China’s share of top research is higher than the next 50 countries combined. The University of Science and Technology is China’s second-ranked university for chemistry, and that single institution has a higher share than Spain and Canada—entire countries.

That focus on chemistry means that China, and Asia generally, now decides which chemicals get built and how they’re used, and obviously where they’re used. We mean here that China can use their emerging monopolies in chemical manufacturing, and deny them to weapons makers, for example—just as they have already done in rare earth metals, magnets, and industrial diamonds.

Here are the global university rankings in chemistry. USTC is at #2. Tsinghua in Beijing, and is top in the world. Unis in Singapore show up at #3 and #4; Stanford is ranked #5. Then it’s a lot of Chinese flags there in the top 30.

What does that mean for students, for young people across the world, who want to study chemistry, then actually get a job after? Where are those jobs in chemistry going to be?

We already know the answer to that, and so do the biggest chemical companies across the world. That is the CEO of Clariant, which is a giant Swiss chemical company. The Chinese market is bigger than the United States and Europe put together, so Clariant was already moving their money. In 2020, 10% of Clariant’s sales came from China—402 million Swiss francs. So Clariant opened a 45 million Swiss-franc R&D center in Zhejiang. In 2023, Clariant shut down facilities and cut jobs in Europe—the company closed a plant in Romania and downsized operations in Germany. They had invested in a plant with a capacity of 50,000 tons a year but never produced that much. Their Podari facility lost 77 million Swiss Francs.

Clariant turned around and invested that same amount—80 million CHF-- in a new facility in China, at Daya Bay which, by the way, is home to some of the biggest nuclear reactors in China. So we should assume that by parking their new plant right next door, Clariant doesn’t have to worry anymore about affordable electricity. Energy costs in the EU blew up along with the Nordstream, and Russia shipping their crude and natural gas to China instead of Western Europe, and that has made European manufacturing impossibly uncompetitive and unaffordable.

BASF is the biggest chemical company in the world, and they’re doing the same—closing production in Europe to open new capacity here in China. BASF is headquartered in Germany, where the company is laying off thousands of people to invest here, along with leading automakers and equipment manufacturers. “Surging energy costs”—that’s often the first reason cited by business executives getting ready to move their production. It’s true, but also relatable to the people about to lose their jobs. Europeans generally see it in their own utility bills. They’re aware that it costs a lot more to keep the lights on at home than just a few years ago, while they are likely unaware that in the roster of top universities to study chemistry, European unis don’t hit the list until ETH Zurich, at #25, and Germany doesn’t show up at all. The costs are too high to be competitive with Asia right now, and the talent pipelines for the future have also already moved away.

Europe has seen an erosion of manufacturing industry generally, along with business confidence and investment, which is a cycle that feeds on itself. China, meanwhile, is going the other way. BASF is shutting down facilities in Germany, laying off thousands of people there, and investing in cutting-edge plants in China, hiring thousands of people here.

We do appreciate these analyses, and wonder why we cannot find more of them. It isn’t particularly difficult to see charts like those, confirm that the data are right, and then ask, what does it mean if those trends continue, for just a little longer?

And then to ask, what might happen to accelerate them—and make them worse--for example an energy supply chain shock, like Russia-Ukraine in 2022, or another war in the Middle East, but this time against someone who can close the Hormuz?

The trends did continue in China, and did get worse in Europe, and today the biggest chemical companies in the world have decided that the chemical industry in Europe is gone. It has no future, because manufacturing industry in Europe has no future. So those companies are moving.

And that is all good for young people to know. If you want to study chemistry, or work in chemistry, you can’t stay in Europe either.

Be Good.

Resources and links:

Charted: China’s Rise to Manufacturing Dominance Over 30 Years
https://www.visualcapitalist.com/china-vs-americas-industrial-growth-2019-2024/

Best Global Universities for Chemistry
https://www.usnews.com/education/best-global-universities/chemistry

What China’s rise in chemistry means for the rest of the world
https://www.nature.com/articles/d41586-026-00428-9

BASF launches biggest overseas project in China with green-powered mega-site
https://www.scmp.com/business/article/3348021/basf-launches-biggest-overseas-project-china-green-powered-mega-site

Clariant CEO: China chemicals market bigger than U.S. and Europe combined
https://www.cnbc.com/video/2025/11/20/clariant-ceo-china-chemicals-market-bigger-than-u-s-and-europe-combined.html

Chemical market overcapacity and weakening demand: a perfect storm
https://www.icis.com/explore/resources/chemical-market-overcapacity/

How Innovative Is China in the Chemicals Industry?
https://itif.org/publications/2024/04/15/how-innovative-is-china-in-the-chemicals-industry/

BASF Agricultural Solutions plans to change production network of glufosinate-ammonium
https://www.basf.com/global/en/media/news-releases/2024/07/p-24-230

German 'chemical town' fears impact of industrial decline
https://www.france24.com/en/live-news/20260517-german-chemical-town-fears-impact-of-industrial-decline

BASF drives forward structural adjustments at the Ludwigshafen site and closes production plants for adipic acid, CDon and CPon
https://www.basf.com/global/en/media/news-releases/2024/08/p-24-269

BASF quietly closed 11 factories in Germany and transferred to China for plant investment
https://www.echemi.com/cms/1939901.html

BASF: 2024 at a Glance
https://report.basf.com/2024/en/overviews/2024-at-a-glance.html

Clariant to cut 170 jobs after closing Romania plant, downsize German operations
https://www.reuters.com/business/clariant-cut-170-jobs-after-closing-romania-plant-downsize-german-operations-2023-12-06/

China recently launched the world's first underwater data center powered by offshore wind.

The cost of the project, off the coast of Shanghai, is less than half that of comparably sized data centers on land.

Microsoft pioneered the underwater data center, but abandoned further efforts despite successful testing.

Report:

Good morning.

There is a race on to build data centers for Artificial Intelligence. But it is running into a lot of problems in the United States and in Europe, where contractors are hard up against the lack of electricity to feed the data centers. There just isn’t enough, and local residents and politicians are mobilizing against new construction.

That is the primary driver of the political problem: the power demands for these data centers are putting strains on electric grids where households are already seeing big spikes in their utility bills, right now.

Those constraints don’t exist here in Mainland China, where construction of new data centers is a national-level objective, and electricity costs are falling. This is China’s newest data center, which is a project off the coast of Shanghai. It’s major engineering story, but getting deeper in we see how the other constraints that are slowing AI data center builds in the United States and Europe are not issues here.

This is an underwater AI data center, and this is the first in the world that is powered with offshore wind. It was launched last summer, and cost $226 million to build. It’s a partnership with power and engineering companies, and China Telecom. There are 2,000 servers at the data center, which is right next to large wind turbines offshore:

Underwater Data Centers (UDC) are cooled with seawater, which dramatically reduces the power need, and improves their Power Usage Effectiveness. The PUE of the Shanghai project is 1.15, which is about 30% lower than data centers operating on land. Overall, the electricity consumption drops by over 22%, and reduces to almost nothing the need for water, obviously, and land.

That is the thinking here, for this Chinese design. It is connected directly to the wind power plants, and the processing outputs sent to Shanghai, which is 10km away. Network latency overall is 0.5 milliseconds.

Microsoft was the pioneer of offshore data centers. Project Natick was a data center placed at a depth of 117 feet, about 35 meters, off Scotland. Researchers used nitrogen instead of oxygen. If you’ve got human researchers operating the equipment, they need to breathe air with oxygen, but oxygen is actually less optimal for computer servers. Getting rid of people gets rid of the need for big oxygen particles floating around, and that also got rid of clumsy people, who bump into the systems and spill things.

Microsoft’s water-cooled system was found to be more efficient, and the failure rate of their offshore data center was just one-eighth compared to one on land.

Microsoft also understood that putting the data center underwater next to population centers would result in the same low latency that the Shanghai project enjoys now. But nevertheless, Microsoft abandoned the plan to build more underwater data centers, and as of two years ago had no active data centers underwater.

Their Chief of Cloud Operations and Innovation said that the Microsoft program did work. Only 6 of the 855 servers on their underwater center broke down, compared to 8 out of 135 on dry land. She didn’t explain why the company walked away, only that they learned a lot about how to apply what they learned in other places.

Shanghai is the first underwater data center powered by offshore wind. But China’s first offshore data center was launched off of Hainan Island, in 2023. This, also, is 35 meters underwater, and that project followed testing that began two years prior, in Zhuhai.

Several Chinese provinces have underwater data centers in their five-year plans, which means that this is official policy, from the top down, to deploy these units at scale, in lots of coastal areas.

We were curious why Microsoft abandoned their plans for underwater data centers, even though their own research pointed out that their Natick program was a success. The Shanghai project is the only one that has shared their cost data. It’s a $226 million project, with a capacity of 24 megawatts. It is designed for AI workloads, big data, and development of large language models.

Compared to the construction and development costs for data centers as a whole, that Shanghai project comes in less than half. These are the cost data for a typical data center, worldwide:

AI-intensive facilities are $20 million per megawatt, so a 24-megawatt data center, on land, would run over $480 million. Liquid cooling is one of the major cost drivers. Another driver is compute density, which is a function of power availability. Shanghai’s underwater data center solves the cooling problem, and they parked it right next to a giant offshore wind farm, so the issue of “robust power deliver” also goes away. Shanghai’s cost was $226 million, under half that of the $480 million cost of a comparably sized center, on land, in the US or Europe.

Locating these data centers nearby available power supply is more important than the cost of the land itself. But then there is this. The electrical systems make up a substantial part of the construction budget. Substations, switching equipment, and transformers are hard to come by; order backlogs are years-long in the United States.

US tech companies have all the money in the world, and seem to be committed to spending all of it to get their data centers built. But besides the political problems and power issues, there is a severe shortage of electrical components, and half of the data centers that are supposed to come online in 2026 are either delayed or were canceled outright:

Same problem runs into future years—lots of announcements, but just a handful of construction projects underway. The power grid needs to be continually upgraded and expanded, then comes the new demand from data centers, so delivery times for transformers and switching gear are now five years.

Data center contractors are reliant on imports to make up that difference, and China is a major source for that equipment. Builders are indifferent to the high tariffs on Chinese gear coming over, because those customs charges are negligible compared to the money coming in from the hyperscalers like Amazon and Microsoft.

It’s ironic, there, that Microsoft was the first to figure out how to build data centers underwater and showed the world the benefits of doing so. But Microsoft can’t plug their underwater data centers into offshore wind farms, because the United States is canceling them all.

And so Microsoft is waiting in line — with everyone else — for more electrical equipment to come over from China

Be Good.

Resources and links:

Interesting Engineering, China activates world’s first offshore wind-powered underwater data center
https://interestingengineering.com/innovation/china-offshore-wind-data-center

Microsoft confirms Project Natick underwater data center is no more
https://www.datacenterdynamics.com/en/news/microsoft-confirms-project-natick-underwater-data-center-is-no-more/

Microsoft waves goodbye to underwater data centers
https://www.windowscentral.com/microsoft/microsoft-waves-goodbye-to-underwater-data-centers

China puts ‘world’s first’ offshore wind-powered underwater data center into operation
https://www.offshore-energy.biz/china-puts-worlds-first-offshore-wind-powered-underwater-data-center-into-operation/

China launches 'world's first' underwater data center powered by offshore wind energy.
https://gigazine.net/gsc_news/en/20260519-undersea-data-center-china

Microsoft's underwater datacenter thrives in the depths of the Scottish sea
https://www.windowscentral.com/microsoft-undersea-datacenter

Off the coast of Shanghai's Lingang Special Area, a newly operational platform now hosts the world's first commercial underwater data center
https://www.facebook.com/watch/?v=1543813920507409

China deploys 1,400-ton commercial underwater data center
https://www.datacenterdynamics.com/en/news/china-deploys-1400-ton-commercial-underwater-data-center/

What Does It Cost to Build a Modern Data Center in 2026?
https://www.constructelements.com/post/cost-to-build-modern-data-center-2026

America’s AI Build-Out Hinges on Chinese Electrical Parts
https://www.bloomberg.com/news/features/2026-04-01/us-ai-data-center-expansion-relies-on-chinese-electrical-equipment-imports

Microsoft's AI Strategy Deconstructed - From Energy to Tokens

SemiAnalysis

Microsoft's AI Strategy Deconstructed - From Energy to Tokens

Microsoft was at the top of AI in 2023 and 2024, but then a year ago they changed course drastically. They paused their datacenter construction significantly and slowed down their commitments to OpenAI. We called this out a year ago to datacenter model clients…

Read more

6 months ago · 240 likes · 13 comments · Jeremie Eliahou Ontiveros, Dylan Patel, Myron Xie, Wei Zhou, Jordan Nanos, Clara Ee, Daniel Nishball, and AJ Kourabi

Why are communities pushing back against data centers?
https://news.harvard.edu/gazette/story/2026/04/why-are-communities-pushing-back-against-data-centers/

New data reveals at least 48 data center projects were blocked or stalled by local opposition in 2025
https://www.thecooldown.com/green-business/data-center-opposition-local-resistance-construction-challenges/

Anti-data center measures gain traction at state, local level
https://thehill.com/policy/technology/5843665-data-center-backlash-grows/
EIA: Electricity prices to rise faster than inflation through 2026
https://www.americanexperiment.org/eia-electricity-prices-to-rise-faster-than-inflation-through-2026/

Why is China's electricity so cheap?

Trump suspends all large offshore wind farms under construction, threatening thousands of jobs and cheaper energy
https://edition.cnn.com/2025/12/22/climate/trump-offshore-wind-suspension-virginia

Trump administration cancels $679 million for offshore wind projects
https://www.cnbc.com/2025/08/29/trump-administration-cancels-679-million-for-offshore-wind-projects.html

Microsoft Pulls Back on Data Centers From Chicago to Jakarta
https://www.bloomberg.com/news/articles/2025-04-03/microsoft-pulls-back-on-data-centers-from-chicago-to-jakarta

Microsoft's AI Strategy Deconstructed - From Energy to Tokens

SemiAnalysis

Microsoft's AI Strategy Deconstructed - From Energy to Tokens

Microsoft was at the top of AI in 2023 and 2024, but then a year ago they changed course drastically. They paused their datacenter construction significantly and slowed down their commitments to OpenAI. We called this out a year ago to datacenter model clients…

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6 months ago · 240 likes · 13 comments · Jeremie Eliahou Ontiveros, Dylan Patel, Myron Xie, Wei Zhou, Jordan Nanos, Clara Ee, Daniel Nishball, and AJ Kourabi

The European Union plans to "rip-and-replace" Chinese telecom gear from their systems, across the continent.

Regulators estimate the cost of the program at around 4 billion euro, and hope that member countries switch to Nokia and Ericsson to build 5G telecom systems.

But the United States has been trying to ban Huawei and ZTE for decades, and Congress also budgeted $4 billion to rip and replace Huawei gear from civilian networks.

Only a small percentage of companies have done so, and even the Pentagon requests annual waivers from laws that require them to use contractors using non-Chinese gear.

China's monopolies on gallium, and massive R&D investments allow Huawei and other Chinese equipment makers to grow, despite Western bans.

Report:

Good morning.

The European Union has plans to get Chinese-built electronics gear out of their telecommunications networks. Earlier in the month, a key legal advisor said that member states are allowed to ban Huawei equipment on national security grounds. Policymakers in the EU are “ready to crack down” on countries in the EU that still allow China to sell 5G network equipment. The new law will restrict Chinese companies from building equipment for European telecom, and also for the energy, security, and transportation industries there.

Here is the problem as they see it. For most countries in the EU, Huawei and ZTE are over 40% of the telecom hardware market. Sweden is one of the light pink countries on that map, with less than 20% of its networks reliant on Chinese vendors.

Back in 2020, Swedish regulators banned the use of telecom equipment from Huawei and ZTE in its 5G systems, and said that they would rely on Ericsson—which is headquartered in Sweden, and Nokia from next door—to provide the continent with 5G. “The new installations . . . must be carried out without Huawei or ZTE.”

Immediately following that announcement, Ericsson was basically put out of business here in China. Ericsson had won contracts to build 5G for the three biggest mobile phone carriers in China, then in the year immediately following the Swedish ban on Chinese companies, Ericsson’s revenues fell by half.

Fast-forward to now, and cutting Chinese vendors out of networks Europe wide would cost between three and four billion euro, and we will circle back to that shortly. Huawei and ZTE are deeply entrenched in the European system, and the new law there would compel European telecom companies to buy more equipment from Nokia and Ericsson. Countries who complain about replacing low-cost Chinese equipment with higher-priced European made gear will just have to pay for everything themselves, instead of asking for funds from the EU general budgets to cover it.

The problem with that idea is that when we go deeper into the numbers, it’s a fantasy that the union-wide cost will come in at €4 billion. KPMG and industry groups did their research and estimated that it would cost over 100 times that--$430 billion. Just the part of removing Chinese components and replacing them with European equipment would cost €146 billion, plus costs from downtime and employment problems. The researchers went on to include other costs that push the annual losses to be €39 billion euro for this year, and climbing to about €90 billion annually in three years.

We’ve seen this movie before. The United States did a own version of the same thing. This is a Congressional report from 2022. The United States “has raised national and economic security concerns about Huawei for two decades.” In 2017, the US government started imposing sanctions and restrictions on Huawei, restricting the use of Huawei equipment in Department of the Defense, and prohibited federal funds from being used to buy Huawei gear.

Their conclusion: The US government has taken steps to remove Huawei from American networks, and to restrict Huawei from having the tools the company needs to grow and expand across the world.

The Federal Communications Commission followed up with rules to “rip and replace” equipment from Huawei and ZTE from telecom systems in the US, and set up a $1.9 billion fund to compensate companies for cost of replacing Chinese equipment.

President Trump, then Biden later, was also pushing US allies to also ban Huawei. Mike Pompeo was Trump’s Secretary of State, and before that was director of the CIA. He says that Huawei and other Chinese tech firms are “Trojan horses for Chinese intelligence” services. Later they realized $1.9 billion wasn’t enough, so Congress kicked in $3 billion more.

But two years after that law was passed, only 12% of American companies had replaced their Chinese equipment, and it was obvious by then that the wheels were coming off the whole thing, and that the “assassination attempt on Huawei” was backfiring. Huawei sales grew.

That was civilian companies. The problem with the rip and replace idea is on the “replace” part. There’s not enough money in the United States -- or in the EU, or in the Milky Way -- to replace Chinese telecom equipment, because there are no replacements.

The Pentagon is in the national security business, and nobody has more money than the people there in that building. But ever since 2019 the Pentagon has been barred from doing business with anyone who uses Huawei equipment. And every year since then the Pentagon begged for a waiver so they could continue doing so. Huawei is so deeply entrenched across the world that setting up alternative vendors is impossible:

They’re saying here that if the Pentagon followed American law, they couldn’t buy medical supplies, drugs, clothing, fuel, parts, transportation. Resupply missions in large parts of the world where the DoD operates wouldn’t get off the ground. Without those waivers, nothing moves. The Pentagon literally cannot get away from Huawei. American allies in the Middle East and South America literally cannot get away from Huawei. US troops stationed outside the US use Huawei gear themselves, and literally cannot get away from Huawei.

So here again we see a huge disconnect between the rhetoric of policymakers in the United States and Europe, compared to the real world of supply chains and manufacturing. This is a nice summary of all the laws and executive orders and rulings from US government agencies.

But despite US actions against Huawei and the other Chinese firms, Huawei is stronger than ever. Their market share is higher today than when it all started, and now they are developing new markets, and doing so without the help anymore of companies like Ericsson, or US firms.

Here is a strong example of that, and what our group sees every day: private 5G networks for mines and factories. Localized networks are driving factory automations, local logistics, and robotics. Almost all the growth in that industry comes in places outside North America and Europe:

Huawei is still the most prevalent provider of 5G infrastructure in the world, and especially in the parts of the world most of the people live. They are the places that are growing fastest, and where this technology is going to make the biggest difference.

All the orange countries on that map use Huawei. And think of the problem in this way: using Huawei means that these countries can develop faster, at lower cost. Local 5G networks can be built using Chinese equipment, and serve areas that national carriers haven’t reached yet. There are hundreds of thousands of warehouses and mines and industrial parks across the world, and they can get 5G right now, without waiting for Ericsson or Nokia to show up, someday, and bid on the job.

Chinese telecom companies’ dominance come from mastery of the supply chain, and Research and Development. 5G networks rely on gallium to make them go. Gallium nitride enables faster data transfer. It allows hardware companies to build lighter and smaller systems that are more energy efficient. It’s used in amplifiers and power supply.

Those are the advantages to using gallium, and China has all the gallium. Last year China produced 95% of the world’s total supply of gallium, and Huawei has over 2,000 patents related to gallium nitride. Nokia and Ericsson also have filed a lot of patents for gallium, but Nokia and Ericsson don’t have any gallium. Ericsson’s website admits as much—they don’t have it.

Gallium is a by-product of aluminum mining. China increased their aluminum production by ten times in 20 years and today supplies over half of all the aluminum in the world. There’s Chinese production of aluminum, compared to everyone else. And gallium, compared to everyone else:

And that Chinese monopoly on gallium means that Chinese companies can build better communications systems, and nobody else can.

Be Good.

Resources and links:

EU cyber plan barring Chinese suppliers will cost US$430 billion: report
https://www.scmp.com/economy/china-economy/article/3352610/eu-cyber-plan-barring-chinese-suppliers-will-cost-us430-billion-report

Wall Street Journal, China Leads the Way With Private 5G Networks at Industrial Facilities
https://www.wsj.com/business/telecom/china-leads-the-way-with-private-5g-networks-at-industrial-facilities-11647163802

Ericsson.com, Critical minerals supply chain
https://www.ericsson.com/en/about-us/sustainability-and-corporate-responsibility/responsible-business/responsible-sourcing/conflict-minerals

Ericsson and Nokia see their sales in China fall off a cliff
https://www.lightreading.com/5g/ericsson-and-nokia-see-their-sales-in-china-fall-off-a-cliff

Ericsson and Nokia can't gain in Europe what they lose in China
https://www.lightreading.com/5g/ericsson-and-nokia-can-t-gain-in-europe-what-they-lose-in-china

Sweden bans Chinese firms Huawei and ZTE from 5G networks
https://www.euronews.com/2020/10/20/sweden-bans-chinese-firms-huawei-and-zte-from-5g-networks

EU’s plans to reduce dependency on high-risk vendors
https://eutechloop.com/eus-plans-to-reduce/

Brussels plans to force governments to block Huawei from 5G
https://www.politico.eu/article/brussels-plans-force-governments-block-huawei-zte-5g/

Reuters, EU plan to phase out Chinese tech could cost bloc over $400 billion, Chinese study says
https://www.reuters.com/world/china/eu-plan-phase-out-chinese-tech-could-cost-bloc-over-400-billion-chinese-study-2026-05-06/

ICB, The Pentagon and FCC have a big Huawei problem: there are no substitutes, and there's no more money

Bloomberg, Pentagon Has a Huawei Dilemma Congress Doesn’t Want to Solve
https://www.bloomberg.com/news/articles/2024-07-03/pentagon-has-a-huawei-dilemma-congress-doesn-t-want-to-solve

The US is moving very, very slowly away from Huawei
https://www.lightreading.com/security/the-us-is-moving-very-very-slowly-away-from-huawei

FCC Designates Huawei and ZTE as National Security Threats
https://www.fcc.gov/document/fcc-designates-huawei-and-zte-national-security-threats

ICB, US price tag for China's gallium export ban: $602 billion and new monopolies for Huawei

Huawei has one 5G power that is hard for the US to hurt
https://www.lightreading.com/5g/huawei-has-one-5g-power-that-is-hard-for-the-us-to-hurt

Gallium: China is increasing its influence on the miracle metal as Huawei is working on promising applications beyond 5G
https://en.institut-seltene-erden.de/gallium-china-verstaerkt-seinen-einfluss-auf-das-wundermetall-da-huawei-an-vielversprechenden-anwendungen-jenseits-von-5g-arbeitet/

Fortune, Even the Pentagon can’t completely freeze Huawei out of its operations
https://fortune.com/asia/2024/07/03/pentagon-huawei-ban-national-defense-authorization-act/

Pentagon says it's impossible to ditch Huawei telecom gear — officials beg Congress for waiver from Chinese sanctions
https://www.tomshardware.com/tech-industry/pentagon-says-its-impossible-to-ditch-huawei-telecom-gear-officials-beg-congress-for-waiver-from-chinese-sanctions

Gallium Nitride Semiconductors in 5G Networks
https://www.azom.com/article.aspx?ArticleID=22494

China’s gallium monopoly a red flag for US & its allies. 5 steps to de-risk supply chains
https://theprint.in/opinion/chinas-gallium-monopoly-a-red-flag-for-us-its-allies-5-steps-to-de-risk-supply-chains/1710814/

Brussels reissues its Huawei warning, six years on, and prepares to make it stick
https://thenextweb.com/news/eu-huawei-zte-connectivity-infrastructure-recommendation

EU recommends member states to not use Huwaei, ZTE in connectivity infrastructure
https://www.reuters.com/sustainability/boards-policy-regulation/eu-recommends-member-states-not-use-huwaei-zte-connectivity-infrastructure-2026-05-04/

EU legal opinion opens door to Huawei ban in telecoms networks
https://euperspectives.eu/2026/03/eu-legal-opinion-opens-door-to-huawei-ban-in-telecoms-networks/

U.S. bans new Huawei, ZTE equipment sales, citing national security risk
https://www.reuters.com/business/media-telecom/us-fcc-bans-equipment-sales-imports-zte-huawei-over-national-security-risk-2022-11-25/

Backfire: Export Controls Helped Huawei and Hurt U.S. Firms
https://itif.org/publications/2025/10/27/backfire-export-controls-helped-huawei-and-hurt-us-firms/

U.S. Restrictions on Huawei Technologies: National Security, Foreign Policy, and Economic Interests
https://www.congress.gov/crs-product/R47012

The war on Iran has caused severe liquidity problems at the world's central banks, who were forced to sell off gold reserves to buy energy.

But in China, gold buying accelerated in March and April. Further, China's government announced aggressive expansions of domestic and foreign gold mining.

The global race to build up gold reserves is primarily driven by breaking free of Western banking systems, in which even sovereign reserves held in custody can be frozen or seized.

China's gold buying has another dimension, however. Gold is critical as a component in advanced manufacturing, and China is locking up supply chains for the raw materials that will power the rest of the century.

Report:

Good morning.

China is the world’s top gold mining country, with production in 2024 of 380 metric tons. China is also the world’s most aggressive buyer of gold. Since 2020, the gold holdings at China’s central bank increased by 357 tons. Since that time, the price of gold, in US dollars, has more than tripled, up over 3.6 times.

And China’s central bank was unique, in that they increased their buys of gold in foreign markets during the month of March. Gold prices fell in March – by 12% -- because of the war on Iran, and it was the worst month for gold in almost twenty years. But the PBOC increased their gold holdings by five tons. At that time, that was 17 months in a row of net buying of gold by the Chinese central bank.

Gold is the ultimate safe haven, and especially during a time when dollar-denominated assets can be frozen or seized or sanctioned. China and many other governments now are reducing their exposure to dollars, and so they trade the dollars -- earned by trade -- for gold, which is hauled back to vaults in friendly jurisdictions.

Then came April, and even more gold buying from China’s central bank. The PBOC bought 8 tons for the month, and that is an acceleration from periods prior. It was the highest addition in over a year:

That big spike in March – month 3 of 2026 -- may have been China taking advantage of gold’s falling price to buy more. But in April gold prices were basically unchanged, and China increased their purchases even faster. And most of that increase is from gold imports, not from increased domestic production:

This is a profound quote, there. Central banks literally print money. It’s their job to manage the supply of their own fiat currencies, and ensure that their FX reserves are sufficient to buy and sell with other countries, who are using other currencies.

And most of the world’s central banks have concluded that they do not need more dollars, or more of their own fiat, but they do need more gold. In the case of the war on Iran, countries that needed to raise cash fast to import more energy could dump some of their gold holdings. China is not in that position—they have not had to run down their oil reserves, and instead of dumping gold to buy energy, they’ve been dumping dollars to buy more gold. That’s what those big spikes in March and April mean, on the charts above.

Then there’s this. We reported recently on Tether, and its huge ‘own goal’ that made USDT useless as a tool to anyone who is trying to operate outside US banking systems.

But Tether’s gold buying is quietly putting another floor under prices during the War on Iran. In the first quarter of 2026, Tether bought 6.5 tons of gold and now holds 132 tons.

Over the past year and a half, Tether’s gold holdings grew by 73 tons, which is more than the People’s Bank of China’s buys during that time. Tether’s gold holdings more than doubled in 12 months, and last year bought more gold than any other country’s bank except Poland.

Tether now shows up at #31 on this list of the top 100. Surprisingly Tether has more gold than the central banks in Mexico, or South Korea, or Australia. Tether’s gold reserves are stored in Switzerland, and the CEO notes there that gold-backed alternatives to the US dollar are coming, and implies that if Tether is going to operate in those markets, they’ll need a lot of gold to offer their stablecoins in countries that are completely off of dollars:

Remembering what we concluded earlier: that strategy might work for small transactions, at the household or small business level in the BRICS and global south countries, but not for clearing of trades for large businesses and institutions. And forget it for state-owned enterprises anywhere that’s not in North America or Western Europe.

We’ve learned that Tether works hand-in-glove with the Treasury department, and funds in a Tether wallet can be frozen or seized, even when held at a foreign central bank itself. Tether even issued their own press release about it.

So it is true what Tether’s CEO says, that “Gold is logically safer than any national currency”, but that doesn’t mean that Tether stablecoins backed by gold are safe.

But Tether is nevertheless buying a lot of it, with that in mind—they hope to be a vehicle for this trade in the part of the world where users hate going through SWIFT banks.

Back to China, who has also announced plans to dramatically increase their own production of gold over the next five years. Again, to “bolster self-sufficiency” in a global shift away from the US dollar.”

This proposal to upgrade China’s gold mining and smelting industries comes from the China Gold Association, and it’s in the newest 5-year plan. That means it is official policy, a national objective, to “develop deep-shaft mining” below 2,000 meters, and design and build more advanced equipment.

Recall that China is already the world’s top miner, and last year—2025—domestic gold output rose again, by about one percent over 2024. But China’s production from overseas mines jumped by 25 percent year over year.

China then has made gold mining, both here in China and abroad, a national security objective, even though China’s goals to achieve self-sufficiency in gold seem to be already met.

There’s more to this, then, than simply their need to get away from the US dollar in their trading systems. China is the world’s largest manufacturing economy, and modern manufacturing uses a lot of gold.

Gold is a strong conductor of electricity, and doesn’t rust or corrode. That makes gold critical in electronics and telecommunications. Gold plating enhances signal transmission, so is used for building circuit boards, semiconductors, electrical switches, and smartphones.

Gold is also stable at high temperatures and under stress and is used across aerospace and defense industries. Satellites, radars, and avionics.

It’s also in medicine and biotechnology. Gold does not react with bodily fluids and is used in pacemakers and other devices that are implanted. Dental equipment, surgical tools—these surfaces are electroplated with gold before touching patients.

In automotive, first thought is flashy trim and expensive touches. But gold is used in cars’ electronics.

Gold is also reflective and non-reactive, which makes it ideal for scientific research applications—microscopes, lasers, spectroscopy equipment.

It is also a key component in renewable energy technologies, along with silver and platinum, which by the way are two other metals that China is scooping up from everywhere they can be found. Gold improves the efficiency of energy transmission, so they’re commonly used in solar power, and in the manufacture of wind turbines.

These are all broad industrial sectors—electronics, telecommunications, defense, aerospace, radars, satellites, medicine, new energy. And the supply chains for all this equipment run through gold mines across the world.

So this is another example of how those supply chains that make modern life even possible, and which will power the technologies of the rest of this century, run through China, and countries friendly with China in the Global Majority countries.

This is mainly a de-dollarization story, and the world’s central banks getting away from even their own fiat currencies to buy gold. But for China it’s also an industrial supply chain story.

Be Good.

Resources and links:

Tether and US stablecoins are dead. Just Bitcoin, Gold, and CBDC remain.

Ranked: Central Banks Buying and Selling Gold in 2026
https://www.visualcapitalist.com/ranked-central-banks-buying-and-selling-gold-in-2026/

US assets and gold are being sold offshore as the world scrambles to afford higher oil prices
https://www.msn.com/en-us/money/markets/us-assets-and-gold-are-being-sold-offshore-as-the-world-scrambles-to-afford-higher-oil-prices/ar-AA20kDGS

Crypto Firm Tether Buys 1-2 Tons of Gold Per Week
https://www.blanchardgold.com/market-news/crypto-firm-tether-buys-1-2-tons-of-gold-per-week/

Bloomberg, China Ramps Up Gold Buying as Middle East War Dents Prices
https://www.bloomberg.com/news/articles/2026-04-07/china-s-pboc-keeps-up-gold-buying-spree-as-iran-war-dents-prices

Gold Prices Dip, but China's Central Bank Continues 17-Month Gold Buying Streak
https://www.asiae.co.kr/en/article/world-general/2026040816155954995.

China extends gold buying streak in March despite price decline
https://www.chinadaily.com.cn/a/202604/07/WS69d4ce4ea310d6866eb420aa.html

China's gold output up 1.09% in 2025 amid shift to investment-grade assets
https://global.chinadaily.com.cn/a/202602/05/WS698410d8a310d6866eb37a79.html

China eyes gold production surge amid de-dollarisation drive, aiming to hedge global risks
https://www.scmp.com/economy/china-economy/article/3342532/china-eyes-gold-production-surge-amid-de-dollarisation-drive-aiming-hedge-global-risks

Top Gold Producing Countries (2024)
https://www.voronoiapp.com/wealth/-Top-Gold-Producing-Countries-2024-4501

Ranked: The Countries Buying (and Selling) the Most Gold Since 2020
https://www.visualcapitalist.com/ranked-the-countries-buying-and-selling-the-most-gold-since-2020/

China gold market update: A notable rise in gold reserves
https://www.gold.org/goldhub/gold-focus/2026/05/china-gold-market-update-notable-rise-gold-reserves

Tether is accumulating gold at a pace that rivals central banks:

Gold Plating in Industry: Unexpected Yet Essential Uses
https://arabartmetal.com/industrial-uses-of-gold-plating-you-probably-didnt-know/

The Role of Precious Metals in the Green Transition
https://esgold.com/the-role-of-precious-metals-in-the-green-transition/

China wants custody of the world's gold: great news for gold bulls, bad news for the US dollar

Tether Supports Freeze of More Than $344 Million in USD₮ in Coordination with OFAC and U.S. Law Enforcement
https://tether.io/news/tether-supports-freeze-of-more-than-344-million-in-usdt-in-coordination-with-ofac-and-u-s-law-enforcement/

OFAC Updates Central Bank of Iran Designation Following Record $344 Million Tether Seizure amid Strait of Hormuz Toll Controversy
https://www.chainalysis.com/blog/central-bank-of-iran-designation-ofac-update-april-2026/

Bessent says US seized nearly $500M in Iranian crypto as Operation Economic Fury sends regime into ‘crisis’
https://www.foxbusiness.com/media/bessent-says-us-seized-nearly-500m-iranian-crypto-operation-economic-fury-sends-regime-crisis

The US just seized $344 million in crypto from Iran — and it's a preview of how sanctions warfare works in 2026
https://www.binance.com/en/square/post/318759455947378

China has monopolies on supply chains and manufacturing of industrial drones.

Drones are suddenly and widely in use by non-NATO countries across the world, and wreak havoc on weapons platforms and fixed targets worth hundreds of millions of dollars.

The War Department is scrambling to close the gap with China, and is looking for suppliers for thousands of suicide drones.

To clear the way for US companies, Washington has banned new imports of Chinese drones, which are popular in American small businesses, heavy industry, and in fire and police departments.

But even if the Pentagon can eventually buy and deploy drones at low cost, drones cannot be defended against at low cost.

Report:

Good morning.

China has monopolies on the manufacturing of drones, and on the supply chains for drones. That’s because China, before anyone else, was building drones for industrial and commercial markets. That’s where the demand is. There will always be a lot more people who use drones for peaceful means and ends, compared to the population of people who want them for war. The civilian market is also where cost and quality matter. The Pentagon is indifferent to cost; money is no object. That point of view is not prevalent in businesses.

And here we are taking just a handful of examples, how small businesses are using drones in industry, and even to create new industries. Here operators are using drones to feed fish in offshore farms. In South Florida alone, there are a dozen companies that use drones to power-wash roofs and buildings 40 stories high. Those drones cost $6,000 - $15,000 each to buy from Chinese factories—so they’re not cheap—but they replace a whole crew of guys dangling from cables, off the sides of buildings. Cleanings can be done more often, and obviously more safely. Empower Field is where the Denver Broncos play, and they’re not hurting for money, and they use drones there to clean the stadium.

That’s a new industry. It didn’t exist even just five years ago. Drones are heavily used now in construction, and in mining. Mining companies are using drones to do surveying work, in blast management, and in search and rescue of trapped miners.

We know that drones are already in heavy use by hobbyists and videographers, but when affordable tools become available, industry and business people are clever in asking how they can be used in their own trades, to do their jobs better, and less expensively, and safer.

Chinese companies are way ahead of everyone else on drones, because those are the markets that Chinese companies build for: civilian users. Militaries across the world have learned the hard way that drones are also ruthlessly effective in warfare, at low cost. The Pentagon and other Western militaries are trying to catch up, and to dominate with drones in the same way they did in the past, with other transformative technologies. But the Chinese are already there in drones, and getting away from China won’t happen fast, and won’t happen cheap.

China has a strong hold on everything in this industry, from end-to-end. This Ukrainian unit was taking apart a Russian FPV quadcopter. The batteries, the motors, and the brain came from China, and it “could not have been built without” Chinese parts. Here’s a money quote: “(China) has already won World War III because everything is in its hands”. That won’t change soon, and it won’t change later:

Our group has done several reports on Chinese drones, and the problems they are posing for other countries, and ironically even for China itself. The Chinese have strict export bans on these technologies, which restrict their intended use as weapons. And in the case of Russia and Ukraine, both sides are dependent on getting Chinese parts for their drones.

The Pentagon has a $1 billion plan to break China’s grip on the industry, called “Drone Dominance. “Unleashing American Drone Dominance” was an executive order from last June, and the idea is to build drones that are completely domestic, and not reliant on parts from foreign countries. A week later the Secretary of War shared this on X, which became one of the worst-ratioed videos in the history of the internet:

And this program is another example of political rhetoric, which just falls apart in the face of objective reality. There is no “American drone dominance” to unleash. It doesn’t exist. China dominates the drone industry. Chinese companies build 90% of the world’s drones, and even drone makers outside China source their parts from here, for assembly elsewhere.

For each and every component, there is no getting away from China:

Brushless motors—China controls at least 90% of the motors used in drones. Antennas—there are companies outside China who build them, but they cost a lot more, and Chinese-made antennas work smoothly with other Chinese components.

Next is the camera. There are Japanese and American companies of sensory equipment, but assembly of the whole camera is a Chinese industry. Precision lenses – those are also all China.

Batteries for drones is the same as every other battery—China owns the entire supply chain.

Flight Stacks illustrate the problem, even where non-Chinese alternatives are available. The technical barriers to entry are low, but US suppliers cannot compete on price, because there is no demand, and thus no reason to mass-produce them.

Drones are not complex; they’re simple. Technically anyone can build them. The China problem is the economies of scale on the manufacturing side, and the supply chains that feed the factories. China’s cost advantages are total, may as well say: The Chinese build quadcopters for civilian users across the world; an American company using non-Chinese components cannot build one for under $15,000, over three times as much. There is, again, a Chinese monopoly on batteries and motors. The batteries come from minerals on the critical supply lists, and Chinese companies monopolize the supply chains for most of them.

Getting new mines opened, and then the infrastructure scaled up for mass production would take at least ten years. That’s the supply chain problem. Then there’s the demand side: DJI is the largest producer in the world for commercial drones, and DJI and a handful of other Chinese companies have 80% market share in the United States. Their drones are high quality, high performance, and don’t cost much.

Nature photographers, YouTubers, and other content producers are the ones most people think of first, when we imagine who the buyers for drones are. But they’re big in real estate, civil engineering and surveying, inspection, and search and rescue operations by first responders. And there we see, again, that there is a far bigger market for people using drones to save people, instead of blowing them up.

American drone companies cannot compete against DJI and Autel on price or quality, so the Pentagon is a godsend for US companies. Now they finally have a customer who doesn’t care about cost, and is probably indifferent as to the quality too. That’s not true of municipal governments, usually anyway, and certainly not in industry. The military is the only client.

The Pentagon promised to buy 340,000 first-person- view drones over the course of several years. It hopes that order size is sufficiently large that the US supply chain will grow, competitors will come in, and the cost will fall. If that does happen, it will be the first time, in the history of the universe, that Pentagon contractors’ prices fall over time. $2,300 is the cost for a high-quality right now, from DJI. So the intended audience for that paragraph is someone who doesn’t know, for example, that the Pentagon pays $90,000 for bolts and screws and fasteners that cost a hundred bucks at Home Depot:

Then there’s a simple problem of politics. It will take years for American companies to learn how to produce the raw materials for these parts at all, let alone manufacture them at scale, and every presidential administration has an end date. There will be a new war secretary in January of 2029, at the latest, and the drone program itself is only funded through next year, 2027. The War Department is trying to build an industry that already exists—the current industry is already high quality and low cost.

So, the only way forward is to get DJI and Autel and the other Chinese drone makers completely out of the way, so US companies can compete. That was a relief to Skydio, and to a handful of others. This is Blake Resnick, age 25, whose company builds drones for police departments. BRINC knows they would have a lot more sales as soon as DJI drones are banned. He can sell a lot more drones to police departments who are happy with the DJI drones they’re using now.

And when the FCC did announce the ban, drone operators across the United States were furious. Immediately they began stocking up on DJI drones and parts. These are American small business owners who will be put out of business, because American drones cannot compete. They cost more, they don’t work as well, and now that they’re building for the Pentagon there’s no reason to make their products attractive to industrial or small-business users. Companies are buying drones, batteries and parts to push out the day they’ll be out of business. 43% of pilots – these are Americans – say the effect of the ban will be extremely negative and threatens their survival. 85% said their business would last for just two years or less.

There are simply no alternatives for these thousands of small companies across the United States. Now Chinese companies are banned from selling new models in the American market, and the Pentagon is buying up drones for military and weapons testing. Thousands of those higher-cost American drones are being bought for the US military, by the Department of Government Efficiency:

The jokes write themselves sometimes. The strategy there is to spur production of small attack drones, and scale the US industrial base to build suicide drones. Again—there is no industrial market for that. There is no business case for a one-way drone, where a good day is launching a drone that costs thousands of dollars, that doesn’t come back.

War Secretary: It’s a “new era of cheap and disposable drones.” But the only buyers in the world for “disposable” drones are militaries. And if it’s the American military, they won’t be cheap.

The Pentagon announced an event fair, where up to a dozen companies will be picked to supply 1,000 drones each, for delivery in a few months. The risk to that, of course, is that drone models from different companies will function differently, and users need to be trained to do that safely every time. They will be outfitted with explosives, after all. And another risk is that the Pentagon will buy thousands of units that are obsolete by the time they get delivered to the field.

The War Department has a lot of problems, then, when it comes to going into the drone business. The only way they can get a dozen American companies competing for contracts to build suicide drones, it to deliberately bankrupt thousands of companies across the United States who use drones in their business. And to tell hundreds of local governments and police and fire departments across the country that they cannot buy affordable drones to catch bad guys, or put out fires. That is the cost, American population-wide; that is the cost to society.

But the Pentagon has got another problem, even if they do manage to build a domestic drone industry, where they are again the only client. And that is that they will not, ever, have a monopoly on that industry outside the United States. It’s already too late for that--the idea that the United States can be the first to get this technology figured out and deployed to the battlefield. This is a mature industry, right now, and drones are in wide use, right now, by military units in the fight, right now.

That poses yet another problem: even if the Pentagon can eventually buy drones at a low cost, drones cannot be defended against at low cost.

That was a real failure of imagination, by Washington. We watched Russia and Ukraine use tens of thousands of low-cost drones to attack each other, and destroy armored vehicles and equipment that are a hundred times more costly than the drone itself. But for some reason nobody thought that Iran might be watching too.

Iran used low-cost drones to blow up American naval bases, and radars that cost hundreds of millions of dollars each. Aircraft totaling a billion or so more. And when Iran says that no ships are going through the Hormuz without their green light first, it’s with the implication that one of their drones costing a few thousand dollars could be sent toward a ship costing a few hundred million dollars, with another few hundred million dollars’ worth of crude oil in the tanks.

Nobody is even close to solving that problem yet. In the first four days of the War on Iran, the Pentagon sent up $5.7 billion worth of interceptors to shoot down very-low-cost Iranian ballistics and drones. Just in the first four days. One Patriot missile costs millions of dollars each and takes years to build, while drones are mass-produced and cost a thousand times less.

The good news, such as it is, is that some companies are hoping to build interceptor missiles that only cost tens of thousands of dollars each, instead of hundreds of thousands. The so-called Department of Government Efficiency might see that as a win these days, but we’ve just moved the decimal point over one spot. An Iranian drone costs a few thousand dollars, and these new interceptors—which haven’t been built yet—will hopefully cost just ten to twenty times that, plus remember that usually two or more interceptors are fired against a single inbound.

So we’re back to the same problem as before. Iran, in the case today, wins these engagements no matter what happens. If their drone is intercepted, it is at the cost of twenty times what Iran paid to launch their drone. If the drone is not intercepted, it may go on to blow up a headquarters building, or a radar system, or a supertanker.

That’s the real lesson, and that’s the real problem posed by drones overall. They cannot be stopped. Iran proved it. The Pentagon’s budget is a trillion dollars. Iran’s military spending for the past year was just one fiftieth of that--$23 billion. Iran doesn’t have nuclear weapons, or aircraft carriers, or stealth bombers. Those things aren’t important.

That’s the quote from the very beginning. Iran is friendly with China, Iran builds a lot of drones. And that is all that matters. In end, this could be very good news. Instead of merely transforming modern warfare, drones may just end modern warfare completely.

Be good.

Resources and links:

How are Drones Revolutionizing the Mining and Surveillance Industry
https://karkhana.io/how-are-drones-revolutionizing-the-mining-and-surveillance-industry/

Drones and laser scanning revolutionize blast monitoring with enhanced safety and precision
https://www.miningdoc.tech/2025/09/25/drones-and-laser-scanning-revolutionize-blast-monitoring-with-enhanced-safety-and-precision/

DJI still dominates the 2025 drone market — and new data proves it
https://www.thedronegirl.com/2025/11/06/2025-drone-market-dji/

Drones Can Help Mining Companies Rescue Their Workers After a Mine Collapse
https://dronearticles.com/drones-can-help-mining-companies-rescue-their-workers-after-a-mine-collapse/

The U.S. Wants to Break China’s Drone Dominance. Here’s Where It Will Struggle.
https://www.wsj.com/politics/national-security/the-u-s-wants-to-break-chinas-drone-dominance-heres-where-it-will-struggle-39e69e18

America Downs Cheap Drones With Million-Dollar Missiles. A Fix Is In the Works.
https://www.wsj.com/world/america-downs-cheap-drones-with-million-dollar-missiles-a-fix-is-in-the-works-2afff48a

At the Pentagon, DOGE Mission to Cut Costs Includes Buying Drones
https://www.wsj.com/politics/national-security/at-the-pentagon-doge-shifts-from-cutting-programs-to-buying-drones-9efc1861

Drone Makers Looking to Steer Clear of China Fear Beijing’s Wrath
https://www.wsj.com/world/asia/drone-makers-looking-to-steer-clear-of-china-fear-beijings-wrath-8fea8508

U.S. Bans New China-Made Drones, Sparking Outrage Among Pilots
https://www.wsj.com/politics/national-security/u-s-bans-new-china-made-drones-sparking-outrage-among-pilots-1624e32a

China is restricting export of drones that can be used for military purposes and some drone features
https://apnews.com/article/china-drones-export-restrictions-eb7acb88b84d97cf5fc1cbafdb650d43

China optimizes export control measures for drones, bans export intended for military purposes
https://www.globaltimes.cn/page/202407/1317107.shtml

America's farmers and first responders love Chinese drones. And that's about to be a big problem.

DJI drones used to feed fish
https://www.facebook.com/reel/1116979861490174

VIRAL MOMENT: Michael Waltz Confronts Air Force Officials With Staggeringly Expensive Components

DJI still dominates the 2025 drone market — and new data proves it
https://www.thedronegirl.com/2025/11/06/2025-drone-market-dji/

Drones Can Help Mining Companies Rescue Their Workers After a Mine Collapse
https://dronearticles.com/drones-can-help-mining-companies-rescue-their-workers-after-a-mine-collapse/

The Pentagon wants to build millions of drones without Chinese parts. It's off to a bad start.

Iranian strikes on bases used by US caused $800m in damage, new analysis shows
https://www.bbc.com/news/articles/cddq7j48p35o

Iranian Strikes Have Destroyed $2.7 Billion Worth of High Value U.S. Anti-Missile Radars
https://militarywatchmagazine.com/article/iranian-strikes-destroyed-antimissile-radars

Attack On US Navy Fifth Fleet Headquarters In Bahrain
https://www.military.com/feature/2026/02/28/attack-us-navy-fifth-fleet-headquarters-bahrain.html

Footage Confirms Iranian Drone Strike Took Out U.S. Army’s Most High Value Air Defence Radar From THAAD System
https://militarywatchmagazine.com/article/iranian-drone-destroy-radar-thaad

Attack on US radar plane at Saudi base raises concern over Iran’s capabilities
https://www.theguardian.com/world/2026/mar/31/destruction-us-radar-plane-saudi-base-raises-surveillance-concerns

UNLEASHING AMERICAN DRONE DOMINANCE
https://www.whitehouse.gov/presidential-actions/2025/06/unleashing-american-drone-dominance/

Unleashing U.S. Military Drone Dominance

This 25-Year-Old Founder Wants To Kick Chinese Drones Out Of American Skies

https://www.forbes.com/sites/zoyahasan/2025/12/03/this-25-year-old-founder-wants-to-kick-chinese-drones-out-of-american-skies

In just three decades, China's shipbuilding industry went from zero, to today building more vessels than the rest of the world combined.

The White House, the War Department, and leading lawmakers have promised billions of dollars in new investment, and enacted policies to rebuild American shipbuilding and pull business awaay from China.

But China's dominance in the industry continues to boom, and the growth is even accelerating.

The War on Iran has sharply pushed up demand for ships from the energy industry, and Chinese shipyards alone have the capacity to take new orders for VLCC's and LR ships.

Report:

Good morning.

In 1985, China’s shipbuilding industry didn’t exist. It is now the biggest in the world, and is larger than the rest of the world, combined.

These were the largest shipyards in 2024, and Chinese shipbuilding companies own seven of the top 10 spots. China’s largest shipbuilder built more vessels in 2024—in just one year—than the entire US shipbuilding industry built in the past 80 years.

Last year the White House issued new strategies to “restore America’s maritime dominance”, and to rebuild the maritime industrial base in the United States. Lots of new investment was promised for the expansion of commercial shipbuilding, and for the military, and to beef up supply chains, ship repair, and to build new ports and shipyards.

All that is going to be expensive, and so the Trump Administration announced high fees on any Chinese-owned or Chinese-built ships making port visits in the United States. This is from October, and those high fees were expected to bring in over $3 billion this year—in 2026 -- from just the top 10 ocean shipping companies. Those funds would go to helping pay to revive US shipbuilding.

Non-Chinese operators, of ships built in China, would also be charged under a different formula. Those fees add up to millions of dollars for each ship heading to the US, if it either is owned by a Chinese company, or was built by one, so shipping companies started shifting their delivery schedules and logistics around.

In this report, we detailed how the shipping companies responded. Their first idea was to shift cargo to non-Chinese ships wherever possible, but those ships filled up, fast, and so costs their went up, anyway. The delivery times to the US also went up.

Then Chinese regulators retaliated, and announced high port fees for any US ships heading to ports here. China had one problem, which is that the US shipbuilding industry doesn’t really exist at all. It’s not possible to charge port fees based on whether the ship was built in the US, because none of them were.

The United States is 0.1% of global shipbuilding, which means that American shipbuilders are one one-thousandth of the world market. Here’s how that looks on a chart, of one thousand dots. It’s 50 across by 20 high. The Japanese shipbuilding industry is over 130 times bigger than the United States’. China’s is bigger by over 500 times:

So China instead targeted ships with US owners. These are Wall Street firms, trading companies, and entities in offshore jurisdictions holding equity in ships that are flagged in other countries.

That directive, from China, was dated 10 October, and was written to hit American investment firms and shell companies with billions of dollars of fees, on any of their ships coming this way. Exactly one month later, the Trump Administration announced that the policy would be scrapped for one year, on both sides. 10 November, implementation of the Section 301 policy would be suspended for one year, and Chinese retaliatory measures would also be removed.

At year-end, we were able to look back and see what effect, if any, all those policy moves actually had on the market. And it wasn’t much. China’s shipbuilding order book is in orange, and the entire rest of the world is in gray.

In April of 2025, the new fees were proposed which would come into effect by October, but orders to Chinese shipyards went up again, anyway.

For full-year 2025, China saw a slight drop in market share, of 4.6%. China continued to have the top share in 16 out of 18 major vessel types, and 2025 was the 16^th year in a row that China led the world in vessel completions, new orders, and work in progress. Looking at that, right there, another way—in 1985, China didn’t have a shipbuilding industry. By 2009—just 25 years later, China was building more ships than anybody.

And now the first quarter of 2026 is done, and new orders for Chinese ships doubled, year over year. Now China has an 84.9% share of the global market. South Korea is at 12.8. Japan at 1.4. Looking at THAT another way, if we did this chart again after Q1, we need 849 red dots for China. The Koreans dropped by more than half, Japan gets only 14 dots, instead of 131:

Lots of those new orders in the first quarter came from the oil industry. Chinese shipyards are benefiting from the US-Israeli war on Iran. There are two blockades now at the Strait of Hormuz, and shipping companies need to buy a lot of new ships. Very large crude carriers (VLCCs) can haul 2 million barrels of oil. Out of Switzerland Advantage Tankers out of Switzerland previously contracted solely with South Korea, but placed a new order for 2 VLCC’s from China. Mercuria Energy ordered four crude carriers, and 2 long-range product tankers. A group out of Singapore ordered 8 VLCC’s. Just those three companies are buying a total of 15 tanker ships.

This is the most recent plan from the White House, and it runs 35 pages. It’s a new “Maritime Golden Age”, which will expand commercial shipbuilding and work with allied countries to pull of that business away from China. But those oil tanker orders from Mercuria was for six ships—four VLCC’s and two LR2’s. They will take delivery by 2029, for all-in contract price of $650 million. The order for the other Swiss group was for two ships; one will be delivered in Q2 of 2028, and the other in 2029. Singapore will get their ships from 2028 to 2030.

China’s shipyards are online, right now. They also have enormous capacity and can scale up to meet giant new, and sudden, demand from the oil industry. China’s so-called “overcapacity” that Washington and European politicians are always on about means, in this case, that they can build ships that nobody else can, not even the big shipyards in Korea and Japan.

Some senators wrote a letter to Trump that dropped before his big visit, urging the President to “stand strong” on shipbuilding, and to hold China accountable and reverse the losses felt over the past twenty years by the American shipbuilding industry. “To level the playing field and deliver for American workers and shipyards.”

But we don’t have a shipbuilding industry. We don’t have American workers and shipyards that make commercial ships. They’re either building for the Pentagon, or not at all. That’s what that single tiny dot means at the top left corner of that chart. Fewer merchant ships are built in the United States, than in China, or in South Korea, or in Japan.

Or in Vietnam, or the Philippines, or Taiwan, or Italy, or Germany.

Be Good.

Resources and links:

US port fees, and $3 billion in costs, loom for owners of Chinese-built ships
https://www.reuters.com/world/china/us-port-fees-3-billion-costs-loom-owners-chinese-built-ships-2025-10-07/

With U.S. port fees on Chinese-built ships coming, ocean freight carriers scramble to avoid surprise financial hit
https://www.cnbc.com/2025/10/10/ocean-freight-carriers-port-fees-china-shipbuilding-vessels.html

US senators urge Trump to 'stand strong' on shipbuilding in talks with Xi
https://www.reuters.com/world/us/us-senators-urge-trump-stand-strong-shipbuilding-talks-with-xi-2026-05-11/

China retaliates against U.S. port fees with new charges on American ships
https://www.cnbc.com/2025/10/10/china-retaliates-against-us-port-fees-with-charges-on-american-ships.html

China tightens its grip on global shipbuilding, grabbing 85% of new orders
https://www.scmp.com/economy/china-economy/article/3353147/china-tightens-its-grip-global-shipbuilding-grabbing-85-new-orders

Senators Baldwin, Kelly, Young, Scott Call on Trump to Stand Up to China and Prioritize U.s. Shipbuilding at Summit With President Xi
https://urbanmilwaukee.com/pressrelease/senators-baldwin-kelly-young-scott-call-on-trump-to-stand-up-to-china-and-prioritize-u-s-shipbuilding-at-summit-with-president-xi/

China navigates US threats to anchor global shipbuilding dominance in 2025
https://www.scmp.com/economy/global-economy/article/3342091/china-navigates-us-threats-anchor-global-shipbuilding-dominance-2025

RESTORING AMERICA’S MARITIME DOMINANCE
https://www.whitehouse.gov/presidential-actions/2025/04/restoring-americas-maritime-dominance/

Maritime Golden Age
https://www.whitehouse.gov/maritimemight/

China Dominates the Shipbuilding Industry
https://www.csis.org/analysis/china-dominates-shipbuilding-industry

U.S. policies target China's shipbuilding dominance
https://www.linkedin.com/posts/csis_new-us-policies-aimed-at-curtailing-china-activity-7385661079961628672-AqML

China’s shipyards secure wave of oil tanker orders as Iran war drives demand
https://www.scmp.com/economy/global-economy/article/3350872/chinas-shipyards-secure-wave-oil-tanker-orders-iran-war-drives-demand

Fact Sheet: President Donald J. Trump Strikes Deal on Economic and Trade Relations with China
https://www.whitehouse.gov/fact-sheets/2025/11/fact-sheet-president-donald-j-trump-strikes-deal-on-economic-and-trade-relations-with-china/

US-China Port Fee Truce: One-Year Suspension Commencing 10 November 2025
http://north-standard.com/insights-and-resources/resources/news/us-china-port-fee-truce

The Shipping Mess, Part 1: Global fleets shift routes, raise costs, slow deliveries to US markets

The Shipping Mess, Part 2: New Chinese regulations may be targeting Wall Street, US investors

The Pentagon is racing to rebuild munitions stocks, which have been drained to feed wars in Ukraine, Iran, Gaza, and Lebanon.

The War Department is seeking a record $1.5 trillion budget, and new weapons suppliers recruited from the civilian sector.

The Pentagon's strategy is to attract smaller companies to build for the defense industry, by offering longer-term contracts, with guaranteed high volumes of orders.

China's dominance of the rare earth supply chains mean that the problem is not merely a ack of manufacturing, but also of mining and refining.

Vast reserves of raw materials reserves are found outside China, but those are typically found in countries closely allied with the Chinese, instead of Washington.

Report:

Good morning.

The Pentagon is overhauling the procurement process for weapons manufacturing. And top executives from Ford Motor Company and GM are in talks to build equipment for the Department of War. The wars in Ukraine and the Middle East have burned through years of future production, and the Pentagon needs to backstop the contractors they are using now and find more suppliers who can shift from manufacturing for civilian sectors, and do defense work instead.

None of this can happen fast enough, as far as the Department of War is concerned. The production of munitions, and strategic and tactical platforms of all kinds needs to happen as soon as possible. Pentagon officials say that “bolstering weapons production” is a matter of national security.

Oshkosh is another company that is in discussions with the Pentagon, and they have a “chief growth officer” who is exploring how Oshkosh manufacturing capacity can be brought to bear “in a way that matches (their) core capability”. Most of Oshkosh’s business is in nondefense, and right away we’ve got some questions: Oshkosh is famously one of the tiny handful of companies that has a monopoly on the manufacturing of fire trucks, and their business model is to slow down production of equipment, so that order backlogs go up, so they can charge high prices.

Last April, members of Congress wrote to the CEO’s of companies in the fire truck industry, including Oshkosh Corporation. The production delays for the fire trucks seem to come from the backlogs, totaling billions of dollars. In Oshkosh’s case, the backlog of orders is $4 billion, which is up 4 times in just 4 years:

Josh Hawley is a conservative Republican and Andy Kim is a liberal Democrat, and good luck getting them to agree on anything, but both are saying here that the profit-maximizing practices of fire equipment manufacturers “reduce readiness for fire stations and put American lives at risk.”

This April, cities and towns across the United States filed lawsuits under Antitrust laws, against Oshkosh Corp and the other two companies, who collectively control 70 to 80% of the total American market.

Pete Hegseth is the Defense Secretary, or War Secretary or whatever we’re calling him now, and says that military manufacturing is back on a war footing, and the Pentagon will “leverage all available commercial solutions and technology to ensure warfighters maintain a decisive advantage.”

So we’re left to wonder just how they think Oshkosh is likely to help with any of that. It is literally their business model to let cities and towns in the United States burn to the ground, so they can make more money. That’s what the Congress said. That’s what those lawsuits say. The Executive Branch is theoretically independent and co-equal to Legislative and Judicial, but it is still okay to read about what’s going on over in those other places. Oshkosh execs are just fine with endangering the lives of first responders, at the fire department just down the street from their factories, and in the neighborhoods they live in. It’s obvious why Oshkosh would love to run that same business model at the federal level that they’re running on municipal governments in North America; it’s harder to understand what’s in it for the Pentagon.

The Department of War wants the auto industry to help with building vehicles, munitions, and hardware faster and less expensively than how they do things now. During World War II, car companies helped build the “arsenal of democracy”, and switched from cars to planes. Difference between then, and now, is that the machine tools and supply chains that went into building bombers were already in Detroit, and already set up in those factories. So what the Pentagon is suggesting isn’t going to work, at least not soon, unless the equipment the Department of War wants to buy is something similar to the products coming out of those factories now, like pickup trucks or sedans.

The objective now is to rebuild “the arsenal of freedom”. This report runs almost 50 pages and spells out the new strategy to expand the industrial base—Get more companies building weapons and gear, come up with better ideas, work faster, deliver results better:

If you’re looking for a great example of bureaucracy-speak, lots of word salads that run on forever without really saying anything at all, then I cannot recommend this document enough. But I wanted to find out just why, if the Pentagon is opening up the Military Industrial Complex to new competition, and streamlining the order process, to emphasize “quick, low-cost deals”—then why is everything about to cost a lot more.

This is from war.gov—no kidding; that’s really the URL now—and the War Department’s 2027 budget request is for $1.5 trillion dollars. It’s the biggest in history. Secretary of War says here that previous administrations “underinvested in our military”, and now that Washington is under new management, they’re changing the game.

This chart is from 2024, back when the Biden Administration was “underinvesting in the military”, and when defense budget was the same as the next 14 countries combined. For next year the Pentagon wants a 42% bump, which will supercharge the Military Industrial base, expand production, and build a Golden Dome missile defense system, along with some drones.

In order to make all that go, they need a lot of companies building weapons who aren’t doing so now. And the Pentagon needs to offer long-term contracts to get civilian companies interested in doing that. Smaller companies need incentives to invest in new supply chains and capacity.

The War Department is committing to buy far more weapons than in the past, so that smaller companies don’t have to worry anymore about big fluctuations in future orders. This goes back to the monopsony problem—the defense industry has a bunch of suppliers, but only one buyer, and a new president or a new Congress can come in and decide there may be better uses for that $1.5 trillion.

That’s why it’s crucial to sign long-term contracts that will survive the Trump Administration, is how the thinking goes. That is what “stabilize demand signals” means there: get big projects under contract now, which cannot be undone later. Sign deals for longer-term, then hope that compels companies to more invest in their own capacity, but get busy immediately. Because for the Pentagon, the crisis is immediate, and long-term. Just in the past six weeks, they launched missiles and dropped bombs that will take at least five years to replace.

Carmakers are a logical first place to look—they have economies of scale, and deep engineering and manufacturing expertise. But it’s here that China enters the conversation. The whole world now knows the Pentagon doesn’t have enough munitions, and the whole world also knows that automakers’ supply chains go through China. Ford Motor Company needs Chinese rare earth metals to build civilian cars, for families, and was one of the first companies approved to buy metals from China following the deal between Trump and Xi.

Ford was pleased that some of their suppliers were approved, under a special Chinese import license that lasts for 12 months, for magnets that are crucial in powertrain, steering systems, transmissions, and sensors. A shortage of any rare earth element, or in any of those magnets, means the vehicle doesn’t get built. At the time, Ford was approved, but German, Japanese, and South Korean automakers had not been.

Vehicles don’t work without rare earth metals and magnets, and Ford Motor needs Chinese magnets to keep their factories open. But General Motors is a little bit further along on the magnets sourcing problem. GM committed to buy more expensive magnets from new American factories, even from manufacturers who are new to the industry. So GM might be able to build vehicles for the War Department, without Chinese magnets. But the problem comes here, if you want to protect those vehicles from people who are shooting at them. Tungsten is used for that, and China and Vietnam own the supply chains for Tungsten.

This is from the US Geological Survey. Top line is tungsten mining, in the United States, which is zero, and has been for a long time. Bottom line—net important reliance is over 50%. In 2024, the price for Tungsten concentrate was $250 per ton.

Here is where tungsten comes from. In 2024, 81,000 tons of tungsten were mined, with 80% of that coming from China. China also has more than half of the world’s proven reserves. Global mining production, by country—and here again we see a lot of countries who are a lot more friendly with China, than with the Pentagon. China plus Vietnam is over 90% of global tungsten supply:

China classifies tungsten as a dual-use material, and has cut off exports to any company using tungsten to build weapons. Now there are hot wars in Ukraine, Iran, Gaza, Lebanon, and the prices paid for tungsten back in 2024 were the happy times for NATO weapons makers.

Now they can’t get any, and so it doesn’t matter how big those Pentagon budgets get, or how long-term those contracts are.

None of those missiles and munitions can possibly be replaced, unless and until dozens of new mines and refineries are built and come online, which will take decades. The Pentagon needs a lot of new equipment and vehicles, and fast. Ford and GM can do build a lot of equipment and vehicles, and fast, but without tungsten can’t make them useful to the Pentagon. And as soon as any American company becomes a dual-use manufacturer, China will just add it to their export-restricted lists, and cut them off of everything else they need to make anything.

Be Good.

Resources and links:

Did a Private Equity Fire Truck Roll-Up Worsen the L.A. Fires?

BIG by Matt Stoller

Did a Private Equity Fire Truck Roll-Up Worsen the L.A. Fires?

Today’s piece is written by antitrust lawyer Basel Musharbash…

Read more

a year ago · 713 likes · 27 comments · Basel Musharbash

Chinese factories build fire trucks for $400,000 in six weeks. In the US it's $2 million in 4 years

Antitrust suits against fire truck manufacturers will be centralized in Wisconsin federal court
https://www.wpr.org/news/antitrust-suits-fire-truck-manufacturers-centralized-wisconsin-federal-court

Senator Hawley letter to fire truck executives
https://www.hawley.senate.gov/wp-content/uploads/2025/04/Hawley-Letter-to-Firetruck-Executives.pdf

Wall Street Journal, Pentagon Approaches Automakers, Manufacturers to Boost Weapons Production
https://www.wsj.com/politics/national-security/pentagon-approaches-automakers-manufacturers-to-boost-weapons-production-19538557

Ranked: The 15 Largest Defense Budgets in the World
https://www.visualcapitalist.com/largest-defense-budgets-in-the-world/

war.gov, $1.5 Trillion Budget Request Prioritizes Service Members, Modernization
https://www.war.gov/News/News-Stories/Article/Article/4465551/15-trillion-budget-request-prioritizes-service-members-modernization/

New York Times, Pentagon Seeks Help From Ford and G.M.
https://www.nytimes.com/2026/04/16/business/pentagon-ford-general-motors-defense-production.html

Reuters, How U.S. Defense Industry Dodged a Rare-Earth Shortage After China’s Curbs
https://www.reuters.com/business/autos-transportation/ford-suppliers-receive-chinas-new-streamlined-rare-earth-licences-2025-12-10/

Ford Suppliers Receive China’s New Streamlined Rare Earth Licences
https://discoveryalert.com.au/global-automotive-transformation-supply-chain-2025/

Acquisition Transformation Strategy, Rebuilding the Arsenal of Freedom
https://media.defense.gov/2025/Nov/10/2003819441/-1/-1/1/ACQUISITION-TRANSFORMATION-STRATEGY.PDF

Tungsten in Military Use
https://www.samaterials.com/content/tungsten-in-military-use.html

Tungsten Supply Crunch: How China’s Export Restrictions Rattled Global Markets
https://theoregongroup.com/commodities/tungsten/tungsten-supply-crunch-how-chinas-export-restrictions-rattled-global-markets-guest-post-by-brian-hendrich/

US Geological Survey: Tungsten
https://pubs.usgs.gov/periodicals/mcs2025/mcs2025-tungsten.pdf

WSJ, GM’s Rare-Earth Gamble Pays Off as China Tightens Magnet Exports
https://www.wsj.com/business/autos/gms-rare-earth-gamble-pays-off-as-china-tightens-magnet-exports-b115ef72

Tungsten breaks records as China export curbs, military demand boost investment
https://www.reuters.com/world/asia-pacific/tungsten-breaks-records-china-export-curbs-military-demand-boost-investment-2026-04-29/

China is the world's largest importer of crude oil, with energy supply chains that run through countries under heavy sanctions by Western governments.

This year, military actions in Venezuela and in the Persian Gulf were believed to shut off China's supplies of discounted crude, and that shortages would result in China, with lower prices in North America.

But the opposite happened. China's economy continues to operate with high levels of crude surplus, while Western markets are seeing severe shortages and sharp price increases.

Over the past decade, China has invested hundreds of billions of dollars into new energy projects across the world, via the Belt and Road Initiative. Those projects, and the associated logistics and transport systems, are now mature, and today supply China with massive volumes of energy, minerals, metals, and food.

The BRI investments have also forged a powerful economic and diplomatic bloc of countries who are immune from Western sanctions and even military threats, while their intra-bloc trade grows at double-digit rates every year.

Report:

Good morning.

We now are seeing in real time the results of a decade of Chinese Belt and Road Investments across the world. As a result, China’s economy and industrial sectors are far less vulnerable to the supply shocks that are hitting the rest of the world today, and very strong economic and diplomatic ties have formed between China and the Global Majority countries.

None of this was supposed to happen, that right there, and oil industry insiders are trying to understand how China, which is the world’s largest importer of energy, is running at operational surpluses for crude oil. Countries everywhere are racing around for new supplies now that the Hormuz is closed, and energy prices are rising, fast, which is destroying demand. But Chinese policymakers have not made radical moves to slash consumption, which is in stark contrast to other economies here in Asia, Australia, and in Europe.

The Chinese oil industry is not transparent, and Western analysts are just making educated guesses, and they admit as much. They study satellite photos, talk to people here, and make some assumptions. For example, only Russia and China really know, how much oil trade they’re doing.

Analysts suspect that China’s imports of crude oil overall have fallen, perhaps by 25% since before the War on Iran. That alone would be sufficient to make a lot more oil available in markets everywhere else. But analysts also believe that Chinese inventories of oil have not changed either—stocks aren’t being drawn down, so they wonder if Chinese oil demand is significantly lower than thought, and why that might be.

It gets even more confusing, when we learn that Chinese oil majors are net sellers of crude in European and Asian markets. That means that China would be in surplus, while the rest of the world is running severe shortages. That would explain why the world is not yet at $150 or $200 on benchmark oil prices, like many of these analysts assumed we would be by now.

If Chinese imports have dropped by 3.5 million bpd, that would equal Japan’s total oil demand, and twice the supply now going through the pipelines around the blockades in the Strait of Hormuz.

So that alone would be a huge factor in rebalancing the global market, and helps to explain how the big premiums that oil trading companies were getting when the war began, have since dropped to almost zero. In other words, China’s oil industry surpluses are wiping out the arbitrage opportunities for commodities traders:

China has a lot of crude oil in storage. Last year China was buying a million barrels per day to put into storage. That buying at the time kept oil prices higher than they would have been otherwise. Now it’s the opposite—the Chinese crude surpluses could keep a lid on prices by drawing down from their reserves of over a billion barrels.

But here the analysts are confused again, because Chinese commercial inventories are not falling; they are somehow still growing. China is not drawing down its stockpiles of strategic reserves. Beijing briefly banned exports of jet fuel and other refined products, but now they are selling again, so the only conclusion is that China’s domestic markets are fully supplied.

None of that that was supposed to happen, and oil traders are trying to figure out how we got here.

Because this is the second time, in a short time, that the analysts have been proven very wrong about China’s oil supply and demand profiles. After the US’s lightning raid in Venezuela, it was just conventional wisdom that it would be a huge problem for China’s energy security:

Fortunately for Beijing, the thinking went, they could shift their buys to Iran. Venezuela was gone, and China’s refineries were then dependent on Iran. “It would be extremely difficult for China to replace the 1.3 million bpd of Iranian crude.”

Quick point here, that only Iran and China have any idea how much Iranian oil China is still getting; it may actually be higher today than before the war started.

But taking stock of things we know, just so far: Venezuelan oil would be going to be refined in the US, or at least through US trading firms, and that would raise the oil price in China, who previously was getting discounted oil from Venezuela. But it was in the United States that oil prices rose, after the raid. Crude prices rose over 20% in US markets in the two months after the capture of Maduro:

And immediately after the war on Iran started, prices went up everywhere except here. The United States up big. Europe up big. And those prices would be far higher were it not from drawdowns from stockpiles there. At least 10 million barrels per day of supply are gone from the market, and in order to keep planes in the air and trucks and cars on the road, countries are hitting their stockpiles, again everywhere except here. 500 million barrels of strategic reserves worldwide burned through already.

And even were the war to end right now, countries will prioritize building those reserves back up again. Australia is 80% reliant on energy imports and will spend over $7 billion on stockpiles after the war ends. The EU is also looking to overhaul their policies for reserves. Here is another big assumption, from Goldman Sachs: assuming oil cargoes are glowing again at normal levels in two or three weeks, the world will have lost about a quarter of its oil inventories. If it’s later, the reserve situation gets worse.

So we’re back to the question, as to why the rest of the world is running short of crude today, and why the rest of the world is draining their energy stocks today, and why China is not -- even though nobody is more dependent on imports than China, on a volume basis, and even though China’s supply chains through Venezuela and Iran are turned off.

And we’re also back to China’s Belt and Road Initiative Investments, which began in 2013, and how those are paying off today. The green part of that chart is energy, and every year China’s global investments in energy projects have been larger than in any other category. That chart is helpful in another way—transport has declined on a percentage basis, as seaports and railroad projects were completed and came online.

For energy, we’ll look just at two countries, and how China’s BRI investments in energy have quietly overhauled global oil markets. Nigeria has been a crude exporter for a long time, but now is also a major player in refined fuels, which are much higher-margin, which allows Nigeria to retain more of the energy value chain in their own economy. The biggest refinery there was a $20 billion project, primarily from Chinese engineers and contractors. There is another refinery expansion coming.

For years, Nigeria was looking for investors, and only China stepped up. China offers credit lines, and gets projects done on time and on budget:

Next up is Brazil, which is the biggest oil producer in South and Central America. The war in the Persian Gulf has been a boon to Venezuela, who in April exported 1.23 million barrels a day in April, the highest in seven years. Iran, by the way, produces around 3 million barrels a day.

But Brazil’s crude oil production is over 4 million bpd, which is about as much as Venezuela and Iran combined. Brazil’s oil exports in April hit a record high. And China gets about half of everything coming out of the ground in Brazil. China’s imports of Brazil crude are up five times in 10 years.

Brazil’s soybean farmers have already famously put the American soybean industry out of business, but meanwhile Brazil has also become a key supplier for crude. Chinese cumulative investment in Brazil is over $78 billion, and last year another $6 billion went over. Brazil is far removed from the Caribbean and the Persian Gulf, trade between Brazil and China is booming, both countries are in BRICS, and the implications for international relations are obvious.

In Nigeria, it’s the same story. Nigeria is the biggest country in Africa. The population is around 250 million, and when the Nigerians wanted to move up the value chain in petrochemicals and refined fuels, nobody would invest there except China. Cumulatively, China invested $28 billion in energy projects in Nigeria, along with other large investments in the Nigerian mining sector. Now those investments are paying off, for both sides.

Nigeria-China Bilateral Trade: Nigerian Imports v Exports

Bilateral trade is growing at double-digit rates—Nigeria exports raw materials and energy to China, and imports manufactured products in over 200 industrial categories, all growing at fast rates. Nigeria is also a BRICS country. And there is no need to even bother asking, who Nigeria is more friendly with, today—the Western bloc or the new BRICS economic bloc.

These massive investments, over time. Hundreds and hundreds of billions of dollars, into developing the economies in countries that Western investors didn’t want to touch, have yielded gigantic surpluses for China, enormous stockpiles of metals and energy and everything else China’s factory sectors need to keep that trade going.

But the investments have also yielded for China a lot of good will across the world. There’s no easy way to put a number on how much that is worth, but it is a big number.

Be good.

Resources and links:

Fueling a continent: how China’s engineering prowess built Africa’s biggest oil refinery
https://www.scmp.com/news/china/diplomacy/article/3352256/fuelling-continent-how-chinas-engineering-prowess-built-africas-biggest-oil-refinery

Chinese oil imports boom, with giant volumes going to strategic reserves. How much? Nobody knows.

New Map of the Belt and Road Initiative
https://www.clingendael.org/publication/new-map-belt-and-road-initiative

Latin America’s Largest Economy Sets Export Record on Oil Price Surge
https://www.bloomberg.com/news/articles/2026-05-07/latin-america-s-largest-economy-sets-export-record

Oil supply shock to worsen as inventories fall further even if conflict ends
https://www.reuters.com/business/energy/oil-supply-shock-worsen-inventories-fall-further-even-if-conflict-ends-2026-05-06

After Venezuela blow, Iran supply risks test China’s oil strategy
https://www.aa.com.tr/en/energy/general/after-venezuela-blow-iran-supply-risks-test-china-s-oil-strategy/55314

China's Invisible Hand Is Rebalancing the Oil Market
https://www.bloomberg.com/opinion/articles/2026-05-08/iran-war-china-s-invisible-hand-is-rebalancing-the-oil-market

US Action Threatens Venezuela-China Oil Flows, Debt Repayment, and Investments
https://www.energypolicy.columbia.edu/venezuela-china-oil-ties-severely-impacted-by-us-action/

Can China rely on domestic oil after Iran, Venezuela shocks?
https://www.dw.com/en/can-china-rely-on-domestic-oil-after-iran-venezuela-shocks/a-75516569

Brazil’s oil exports and exploration cast a shadow on its green ambitions
https://dialogue.earth/en/business/brazils-oil-exports-and-exploration-cast-a-shadow-on-its-green-ambitions/

China – Nigeria Bilateral Trade Profile
https://oec.world/en/profile/bilateral-country/chn/partner/nga

Chinese BRI Investments and Construction Contracts Smash New Records in the First Half of 2025
https://chinaglobalsouth.com/2025/07/21/china-bri-2025-investment-surge/

Iran crude oil production
https://tradingeconomics.com/iran/crude-oil-production

Venezuela Lands Billions in Oil Deals as Industry Rushes Back
https://oilprice.com/Energy/Crude-Oil/Venezuela-Lands-Billions-in-Oil-Deals-as-Industry-Rushes-Back.html

The supply chains for nuclear energy, end-to-end, now run through China and Russia.

The BRICS countries dominate the mining and enrichment of uranium into reactor fuel, and North American and European utilities rely on imports of that fuel to power their economies.

China today is building more reactors than the rest of the world, combined, and while new plant construction has stalled across North America and Europe, China can develop 50 reactors simultaneously.

Russia and China are also the world's leading exporters of reactors, which are electrifying new power grids across Asia, Africa, and South America.

Report:

Good morning.

One of our obsessions on this channel, is learning where stuff comes from, and then asking how that informs global economics, and diplomacy. And we keep learning that most of the things that make modern life possible in North America and Western Europe, come from countries that are not in North America or Western Europe. They come from countries who are far more friendly with China and Russia.

We also find it curious that our policymakers and public officials go out of their way to offend China and Russia, along with the BRICS and the Global Majority countries. But today, those are the natural resource economies, and with the most modern and efficient manufacturing centers, and with the global logistics that move everything around

They can also stop everything from moving. Two years ago, we learned last year that traffic through the Suez Canal can be turned off by militias in Yemen, and for over a year everyone had to go around. Two months ago, we learned that nothing gets through the Strait of Hormuz without being first green-lighted by Iran. This is all to say that things are much more fragile to the Western world than most common people probably assumed. But we might have expected that our prime ministers and presidents and cabinet members would have been better informed.

But no. This is where nuclear power plants in the United States get their fuel from, by country, in 2023. 27% of the reactor fuel came from domestic sources. Russia was 24%. Said another way, Russian uranium generates a quarter of all the electricity from nuclear plants in the United States.

The war in Ukraine kicked off in 2022, and two years later Congress and President Biden passed a law called the “Prohibiting Russian Uranium Imports Act.” Ninety days after Biden signed the law, imports of Russian uranium into the US would be banned.

Here’s something we’ve seen a few times—yet another industry that declined in the United States, and is now at about zero.

The United States imports over 90% of the uranium it needs—so the United States is still in the refining business, but is refining uranium that is imported from elsewhere. But Russia is way ahead on enrichment too, at 44% of the world total. The blue line on the chart shows domestic production of uranium oxide, going from a peak in 1980 to flatlining a decade ago:

Obviously then, there are some real-world problems with that import ban, if the US is almost out of the enrichment business, and Russia is almost as much as the rest of the world combined. So, Congress put a waiver into the law. That runs through 2027, and enables utilities to continue buying from Russia if “no viable alternative sources” exist or if importing the uranium is “in the national interest”.

Having the lights go out across the United States would be contrary to the national interest, so American utilities are granted waivers to keep buying Russian uranium until new capacity can be built at scale. That won’t happen fast—the first new enrichment capacity since 1954 came online and only recently started some deliveries.

1954 was a long time ago. Global power demand since went straight up, and it didn’t occur to anyone in the United States to build a bit more uranium enrichment capacity at home, let alone build out an end-to-end supply chain. Nobody else thought to do so in Europe either—and today the fuel for nuclear power plants come from the BRICS countries, plus Kazakhstan, who by the way is a neighbor—a friendly neighbor—to both Russia and China.

That’s the reality. The uranium is the raw material, which is enriched to become reactor fuel. And without that enriched uranium, much of global supply of which comes from Russia, nuclear plants cannot run. Nothing about that is complicated, and we might suppose it might give our political leadership some pause, if not outright humility.

But this is a press release from the UK, from the government of the United Kingdom. Bullet point one: “UK to build the first high-tech nuclear fuel facility in Europe to shut Putin’s Russia out of the global market.” The UK aims to be “the first country in Europe to produced advanced nuclear fuel, a market currently dominated by Russia.” We’ll pause right there to point out that Russia also is a European nation. The objective is to “help isolate Russia from global energy markets” and boost British energy security.

New fuel will come online five years from now, they hope, and if they can export the fuel, they will reduce other countries’ dependency on Russian exports.

The UK Secretary of State for Energy Security: We stood up to Putin on oil and gas and refuse to be held ransom on nuclear fuel. We’ll pause again to point out that didn’t happen. The Brits are still buying uranium, and the Russians are still selling. Nobody is being held ransom, even though there is a war on.

Here’s the Prime Minister who doesn’t care for Putin much, and says that Russia has been the only provider for too long, and this marks the latest step in getting them out of the energy market entirely:

There is a large disconnect here between political rhetoric and objective reality.

Here’s where the world’s uranium is. The UK just announced plans to start enriching some of their own, by 2031. But their power needs are immediate, and now. Fifteen percent of the UK’s electricity comes from nuclear, and most of that capacity will close down in coming years. 7800 megawatts of power come from 36 reactors that will be decommissioned, and only two plants are under construction now, which will generate just 3,260 megawatts. They’ll be at least 4,500 megawatts short:

The UK’s nuclear power capacity today is below where it was in 1977. That was a long time ago too. So, the nuclear power industry in the UK is in decline, and will soon be in very steep decline:

Meanwhile, here is nuclear power plant construction across the world, along with the date they will come online. Most of the new reactors will be in Asia, and just a small handful of new builds in the next six years will be in countries that are unambiguously more friendly to the US and Europe. Of the plants coming online in 2026, with just two, Slovakia and South Korea as Western. Online in 2027: just one. For 2028 all of the new reactors will be in China, India, Iran, Russia, Turkey—so zero. 2029: there’s one from the the UK, and in 2030, just one again, and just the UK again. For 2031 and 2032, one plant in South Korea will come online. All of the others will be in the BRICS and Global Majority nations.

So the UK will have those two nuclear plants, and will need fuel for around 3400 megawatts, while decommissioning other plants that total even more. Enriched uranium demand will fall sharply, in the UK. But there will be lots of new demand from other countries, mostly in Asia, and so Russia could simply close the books on their business in the UK and walk away, right now.

That process is already well underway in other energy markets. Russia built new natural gas pipelines to carry energy that previously went West to Europe, and now they’re coming East, to China and Asia. Same for Russian crude. Asia is where the most of the world’s factories are, Asia is where most of the world’s population is, and Russia is making more money than ever by selling to their new customers here. All of which make that UK press release sohard to figure out. Were those officials behind closed doors, saying some of these things, then making policy changes and investments to bullet-proof their energy supply chains, I get it. But until 2031, at the earliest, they will still need lots of Russian uranium. So why say those other things, until 2031, at the earliest?

When scrolling that list of the new nuclear plants coming online, we see China a lot. China is building more than the rest of the world, combined. Over the past decade, China increased nuclear power plant construction, while the utilities in the Western world of the world slowed down new builds, and are shutting down more plants than are being replaced.

And this is an important point—countries that build plants are always learning new things. China is the only country that never stopped building, and China has learned to build new plants less expensively, than plants build decades ago. China has a deep pool of people, with deep experience, whereas other countries do not. The Chinese can build 50 reactors simultaneously, and will be the world’s largest producer of nuclear power by 2030, and will double their power capacity by 2040.

This analyst makes the same point, in a different way. A country that builds one plant every 20 years operates in fits and starts, the system atrophies, and people forget how to build them. It takes a long time to go through permitting and construction in Europe and North America—the national-level agencies, then state and local governments get involved. Then come financing and the inevitable lawsuits. But in China everything happens much faster. China has never canceled a project after national regulators approved it, so developers and projects managers can start right away in lining up the engineers and materials to build. In the US, then, there are huge delays and cost overruns; the last two plants were Vogtle One and Two, in Georgia. The delay was seven years and was $21 billion over budget.

The cost of capital is far lower in China; equity plus loans run about 4% in China, and are at least twice that in the United States and Europe. That is typically the largest single driver of the final cost to build, over time.

China is building a lot of reactors at home and is exporting their reactors to other countries. The analysis here explores why the Chinese are not MORE successful in their nuclear plant exports, and points out that Russian reactors are more widely deployed, at least so far. China is building reactors for Pakistan, but other deals in the UK and in Argentina fell apart. In the case of Argentina, the Chinese company walked away when asked to finance 85% of the total costs.

In the UK, Boris Johnson shut down the project because of China’s involvement in the project, and as of now the UK has not moved forward on new construction at that location at all. Meaning, that when the Chinese were pushed out, there was nobody in line to replace them.

The points we are emphasizing are that Russia, China, and Kazakhstan and a small handful of other countries friendly to them dominate the supply chains for the mining and enrichment of uranium. China dominates the industry for new nuclear power plant construction, and are competing against Russia for new export markets for nuclear reactors.

The raw materials chains, and the uranium enrichment industry, and the hundreds of thousands of nuclear plant engineers and operators who are the only ones today who can bring new projects in on time and on budget: Now this entire industry, end-to-end, is Russia and China.

Be Good.

Resources and links:
Nuclear Power in the United Kingdom
https://world-nuclear.org/information-library/country-profiles/countries-t-z/united-kingdom

UK first in Europe to invest in next generation of nuclear fuel
https://www.gov.uk/government/news/uk-first-in-europe-to-invest-in-next-generation-of-nuclear-fuel

How Houthi attacks on one of the world’s main maritime trade routes have impacted international trade
https://interactive.aljazeera.com/aje/2024/mapping-red-sea-shipping-attacks/

Russia’s $55bn pipeline gamble on China’s demand for gas
https://ig.ft.com/gazprom-pipeline-power-of-siberia/

Plans For New Reactors Worldwide
https://world-nuclear.org/information-library/current-and-future-generation/plans-for-new-reactors-worldwide

Why China Came Up Short in Nuclear Exports
https://neutronbytes.com/2026/02/26/why-chima-came-up-short-in-nuclear-exports/

China to nearly double nuclear power capacity by 2040 in rapid build-up
https://www.scmp.com/economy/china-economy/article/3314794/china-nearly-double-nuclear-power-capacity-2040-rapid-build

As the Hormuz crisis exposes ‘fragile’ global supply chains, how will China respond?
https://www.scmp.com/economy/china-economy/article/3350753/hormuz-crisis-exposes-fragile-global-supply-chains-how-will-china-respond

China Says It Can Now Build 50 Nuclear Reactors at Once. What About the United States?
https://www.zmescience.com/science/news-science/china-says-it-can-now-build-50-nuclear-reactors-at-once-what-about-the-united-states/

China Is Rapidly Building Nuclear Power Plants as the Rest of the World Stalls
https://financialpost.com/pmn/business-pmn/china-is-rapidly-building-nuclear-power-plants-as-the-rest-of-the-world-stalls

中国核电：本公司平均债务成本3%-4%，长期借款普遍采用浮动利率计息
https://news.qq.com/rain/a/20240423A08FU100

China’s vast nuclear power sector now able to build 50 reactors at a time
https://www.scmp.com/economy/china-economy/article/3350847/chinas-vast-nuclear-power-sector-now-able-build-50-reactors-time

Enriched Uranium Fuels Russia’s War Machine. But the US Still Imports It
https://bellona.org/news/nuclear-issues/2025-03-enriched-uranium-fuels-russias-war-machine-but-the-u-s-still-imports-it

How Much Does the U.S. Depend on Russian Uranium?
https://elements.visualcapitalist.com/how-much-does-the-u-s-depend-on-russian-uranium/

China’s vast nuclear power sector now able to build 50 reactors at a time
https://www.scmp.com/economy/china-economy/article/3350847/chinas-vast-nuclear-power-sector-now-able-build-50-reactors-time

Ban on Russian uranium aims to revive American supply
https://www.reuters.com/business/energy/ban-russian-uranium-aims-revive-american-supply-2024-06-04/

Savvy trading companies are making billions in risk-free profits, as dislocations in oil markets ripple across the world.

Real-world buyers of oil are paying high premiums bring in new supply, while futures traders have wagered--wrongly so far--that prices would soon fall as supply resumes.

The shortages were first felt in East Asia, in major refining hubs in Singapore, Japan, Korea, and India. Spot prices rocketed immediately following the closure of the Strait of Hormuz.

But prices were suppressed in North America, and particularly on NYMEX futures markets for WTI.

We explain the mechanics of an arbitrage trade, and how commodities traders earn billions in profits.

Report:

Good morning.

Previously we pointed out that there was a very large disconnect across different energy markets. First there was a big difference between what oil futures traders were doing, compared to what oil consumers were paying for oil in the real world, where ships need to move and planes need to fly.

For the first couple of weeks of the war on Iran, oil traded in US markets in particular seemed far out of line with the real-world price of oil was at the time. There was also a dislocation—the oil was in the wrong place. At the time, oil was in surplus in the United States and Canada, and ironically in China, but in severe shortage almost everywhere else.

That entire situation is ripe with opportunity, for companies and institutions who can operate on these trading exchanges, and who can physically move oil from well-supplied markets to the ones desperate for supply; to buyers who will pay big premiums to get it. This is a top analyst who writes for Bloomberg, who explains that the oil market is global, and how much a barrel of oil is worth depends very much on who is answering the question, and from where.

Immediately the price for Brent crude went vertical; Brent is the reference index for Europe. Meanwhile the WTI index, West Texas Intermediate, did not move nearly as fast or as high, until later:

There are two markets. The physical is the real-world market, and the paper market is speculators buying and selling oil contracts to be settled later. Physical reflects supply and demand today, and how easily barrels and ships can be moved around, and how fast.

The paper market is theoretically infinite in size when the contracts are created, then as the contracts get closer to expiration, they either expire because they’re out-of-the-money, or the paper prices converge to real-world physical supply and demand. For example, the physical market lost over 10 million barrels of real-world oil because of the closure of the Strait of Hormuz, but the paper market traded an extra million barrels. That surplus million barrels don’t exist in the real world, and so the contracts will expire with one side or the other losing their premiums.

The physical world is different. Airlines, for example, either pay up for energy, or keep planes on the ground, or a combination of both. So the premiums paid for physical oil, today, blew out to record highs. Saudi Arabia is using a pipeline to move oil and ship from different ports, bypassing the Strait of Hormuz. But the volumes through the pipeline are far below what ships can carry.

Saudi took advantage, and was charging premiums of about $28 per barrel, compared to the paper contract. Just before the war Saudi Arabia was selling their oil at a discount, of 65 cents. Physical barrels just aren’t there.

Then comes the transportation problem. Logistics used to be taken for granted. Now the shipping costs for a barrel of oil are shooting higher. Transport costs pre-war were $1 a barrel. Now they’re $25:

Insurance is expensive, assuming buyers can get it at all. Those extra costs do not show up on paper oil trading screens because nobody has to buy it yet, but as soon as paper becomes physical, those costs become real. He points out here that these are two markets, generally functioning as they should: physical market is still telling us the price for the next 30 days, the paper market is trying to figure out the price after 60 days.

The dislocation, we can say, is getting fixed, and this is how. Oil shortages appeared right away in East Asian markets—like in Japan, Korea, Singapore. And right away refineries here in East Asia were paying whatever they had to, higher than $175 a barrel. Then those demand and price pressures moved to Europe.

After that it was just a matter of time before supertankers were headed to the United States. In the opening few weeks of the war, prices in the US did NOT move as much as -- almost anywhere --else; now the ships are filling up and hauling the oil away, and shortages are hitting even in North American markets. For example, no Asian airlines yet have needed to shut down because of fuel prices, but Spirit Airlines is gone, and the clock is ticking on a handful of others there too.

This all represents a massive arbitrage opportunity. The prices on trading screens are completely divorced from the prices paid by real-world buyers and sellers to move energy around. Then we saw North American oil markets still in surplus—temporarily; briefly—while rich countries in Asia and elsewhere were in shortage.

It’s a bonanza for commodities traders, who operate in both the physical and paper markets, and have the logistics to move oil from one place to another. Vitol is a commodities trader, and lost a lot of money in the first days of the war when prices moved violently against them. They also have ships are stuck behind two blockades now, and cannot get through the Strait of Hormuz. Since then, Vitol has recovered all those losses, and have made profits of $2 billion.

Mercuria reports their return on equity is at the high end of its normal range, implying that their profits just so far are $2.3 billion. These companies are taking physical oil, moving them, and pocketing record-high premiums.

This is a beautiful example of how, in a nuts-and-bolts way, this kind of trade works. Again, this was widely understood, weeks ago, that the paper barrels in the United States were way out-of-line with what was happening in the real world, everywhere else. The question is, what can anyone do about it?

If you saw this chart oil of oil futures from 13 April, you would think that the market was pricing in a lot more supply coming online. The price dropped at the open, even though that was when the US Navy’s blockade of the Iranian Navy began. It made no sense.

That is what the commodities traders also saw, and what they did. North Sea crude price—that’s physical—was $148.87 per barrel, and the training companies placed these bids on the US exchange, for West Texas Intermediate for delivery in May. The May WTI contract was trading at $96 per barrel. The June contract was trading at $90 a barrel. That is called “backwardation”, when lower prices are expected in the future. That $6 per barrel backwardation is also highly unusual, far higher than normal. And if prices continue to move higher—and they have been—a lot of traders for the June contract are in trouble. But for that day, the physical crude markets were $50 a barrel over the prices for May. That situation then is a “reverse cash-and-carry” arbitrage. The futures price is deeply discounted compared to physical, today.

Here is the trade—buy the May 2026 futures contract, on the WTI:

In May, take physical delivery. Then transport the barrels from Cushing, Oklahoma to ports, and load them onto tankers heading to Europe. Then sell those barrels into the physical market. The net spread would be about $40, before logistics and financing of around $8-15 per barrel.

The other advantage for these companies, is that while the crude is on the ocean, heading to markets, they can still shop for and hit other bids, then send the ship in a different direction. These profits are locked in almost everywhere.

Everyone in the energy markets knew at the time, that even were the war to end today, it will take a long time for new oil barrels to get delivered to markets. Everyone in the Persian Gulf needs to turn their wells back on and everyone else needs to get ships turned around.

And so when politicians tell us that oil prices will “drop like a rock” as soon as the war is over—it’s true, in a way. On trading screens, and on oil contracts three months out, that is probably true. But in the physical world, it will take a lot longer.

Be Good.

Resources and links:

So What Is the Real Oil Price Right Now?
https://www.bloomberg.com/opinion/articles/2026-04-18/iran-war-what-is-the-real-oil-price-right-now

WHY WHO’S F/AROUND IN THE OIL FUTURES MARKET MIGHT FIND OUT IN 7 DAYS
https://justdario.com/2026/04/why-whos-f-around-in-the-oil-futures-market-might-find-out-in-7-days/

Commodity Traders Reap Billions in Profit as War Upends Markets
https://www.bloomberg.com/news/articles/2026-04-21/commodity-traders-reap-billions-in-profit-as-war-upends-markets

Vitol Made About $2 Billion in First Quarter Despite War Losses
https://www.bloomberg.com/news/articles/2026-04-19/vitol-made-about-2-billion-in-first-quarter-despite-war-losses

$140, and going higher: That's the real price of oil, right now. Oil traders will be wiped out.

More Airline Bankruptcies May Be Coming — JetBlue And Frontier Face The Highest Risk
https://viewfromthewing.com/more-airline-bankruptcies-may-be-coming-jetblue-and-frontier-face-the-highest-risk/

Bloomberg, Fuel Tankers U-Turn to Asia as War Worsens Supply Crunch
https://www.bloomberg.com/news/articles/2026-03-09/fuel-cargoes-redirecting-to-asia-with-supply-crunch-worsening

Reuters, Trump says gas prices will drop as soon as Iran war is over
https://www.reuters.com/business/energy/trump-says-gas-prices-will-drop-soon-iran-war-is-over-2026-04-30/

The US Treasury Department recently froze $344 million held by Iran's central bank, in two digital wallets that contained Tether (USDT) Stablecoins.

Tether cooperated with Treasury in these actions, intended to shut off Iranian sales of oil.

Stablecoins were promoted as alternatives to traditional banks, and are in wide use outside the United States.

Tether is the largest stablecoin, with transaction volumes higher than Visa and MasterCard, and assets of hundreds of billions of dollars in US Treasury bonds, gold, and other investments.

Stablecoins were also perceived as decentralized, and outside the reach of regulators and governments, except in cases of egregious criminal violations.

Crypto market players reacted violently to the news of the freeze, and (truly decentralized) Bitcoin has traded sharply higher since.

Report:

Good morning.

Stablecoins are a kind of cryptocurrency that are usually pegged 1-to-1 to a fiat currency, like the US dollar. Tether, or USDT, is the most widely used stablecoin. There are good reasons why crypto is popular as a trading instrument, as well as a store of value. And there are good reasons why stablecoins were preferred to other types of cryptocurrency like Bitcoin, or BTC.

Since January of 2020, BTC is up over 10 times, to over $78,000. But we can see from the other charts why it would give companies headaches, to use it as a trading instrument, or a medium of exchange.

This is the past five-day chart of Bitcoin, going from 76,000 to 75,000 the next day, then up to over 78,000 two days after that. If you’re buying manufactured products, for example, and put up a 50% deposit today and remainder upon delivery to the outbound port 30 days later, we can see the problem. And we can see the opening there for stablecoins, which are believed to be completely secure, and outside the oversight of regulators, while being pegged to the US dollar, in the case of Tether.

Another major advantage to using Stablecoins is that they can be traded as dollars, during a time of global dollar shortages. That is driven by the monstrous US fiscal deficits now being run. The US government is borrowing a trillion dollars every hundred days, and total debt is now over $39 trillion. That equals $113,000 per American.

New buyers of Treasury debt are insisting on higher yields, to compensate for the higher inflation and repayment risk. In just five years, new borrowing costs for the US government have skyrocketed.

This is 10-year paper, which is also the reference rate for home mortgages. In 2020, the US government issued new debt at under 1% interest per year. Now it’s back to over 4%, and that dynamic is sucking hundreds of billions of dollars out of banks across the world, back to the United States to lend back to the US government at the highest rates in years.

That results in shortages of US dollars, even in countries we wouldn’t expect. November 2025 was just six months ago, and Argentina got a $20 billion bailout after they ran short of dollars to pay back dollar-denominated debt. Argentina’s central bank is drawing down those lines, but the money is leaving faster than it’s coming in. Argentina’s dollar position is worse now than when they signed the deal:

Since World War 2, no country has gotten more US foreign aid than Israel — over $337 billion through 2024. Add another $4 billion for 2025 and again for 2026, then another $3.3 billion in military aid, hundreds of millions more for missile defense and other defense tech in just sixteen months. But as fast as the dollars are going in, they’re going out even faster. The moneychangers in Tel Aviv are running shortages of US dollars.

So Stablecoins are backed by US dollars, or other instruments that are denominated in US dollars. Trade done using Stablecoin went from just $3 billion in 2018, to over $18 trillion. The Visa network across the whole world was $15.7 trillion, by comparison.

And that steep rise in stablecoin adoption, starting in 2020, coincided with the spike in US government bond yields. As US dollars were emptied from banks across the world to feed government borrowing, stablecoins were an alternative, a way to continue doing business in US dollars even though there weren’t as many of them around.

Briefly: Tether buys assets that they hope can maintain the US dollar peg, where $1 USD equals $1 USDT. That means they’re primarily buying a lot of Treasury bills and notes. As of 2025, Tether held more US Treasury bonds than most countries, ranking 17^th, and ahead of South Korea and Germany.

Tether is still buying, and is now Top 10. This is the CEO of Tether, who points out that Tether has stepped up to buy nearly half of the bonds that China’s central bank is selling off. Tether is also a major buyer of gold, and today holds 132 tons. Tether is the largest gold holder outside of financial institutions, central banks, and governments.

But Tether is not a bank, which lends long term and is repaid over years. Tether earns interest income from Treasury bond holdings, but lends very short term, often overnight, at very low rates. But they can flip their asset book over many times, even in a single month. USDT is how millions of people in Africa, South America, and Asia prefer to hold dollars.

American citizens are not allowed to use Tether. So this adoption of Tether, USDT, a US-dollar-denominated stablecoin, is taking place completely outside the United States. And that feature is also appealing for the users of Tether. They don’t need to worry about whether their central bank is doing a good job managing foreign exchange reserves, or whether moneychangers are recycling US dollars to buy villas in Cyprus instead of keeping dollars in circulation in Israel. Tether allows them to keep and use dollars, without concern of what is going on in-country, while also being outside the US banking system and out of the reach of regulators in Washington or in Europe.

And it’s that part that is especially attractive to users in Global Majority countries. Back to that graph of Stablecoin adoption, and we see that the biggest jump came after 2022. From 2021 through 2022, use of Stablecoins plateaued, at around $8 trillion in volume per year. Then it more than doubled; over $18 trillion. And that was because of the sanctions on Russia. Hundreds of billions of dollars held in European banks were frozen, seized. That action, alone, destroyed the credibility of the Western banking system in the BRICS countries, when policymakers everywhere learned that their US dollar holdings can vanish in an instant. The global majority countries now had no choice but to de-dollarize, and build up their foreign exchange reserves with gold, instead of fiat currencies issued by governments elsewhere, and held in banks elsewhere.

“Dollar assets held abroad can be frozen”. That explains so much of the appeal for Stablecoins, because they are held in digital wallets, instead of in banks.

But now those days are gone, too. I see the term “shadow banking sector” a lot and I’m not sure what it really is, but apparently Iran has one, and they use it to sell their oil abroad without going through banks in New York or London. Some of those buyers are Chinese refineries, and the Treasury Department is cracking down on those oil sales.

This is called “Operation Economic Fury”, and the Treasury Department says they seized $500 million in Iranian cryptocurrency assets, and they say they’re doing it as a favor, to the Iranian people. The campaign has been going on for over a year—which predates the shooting war, by the way. The Secretary of the Treasury is “freezing bank accounts everywhere”, like “the retirement funds that they thought they had outside of Iran”.

The agency is sending warnings to buyers of Iranian oil, threatening secondary sanctions on their industries, and on banks that are used to buy oil from Iran. “We will follow the money that Tehran is desperately attempting to move outside the country.” They’re going after the villas in the French Riviera. Everywhere Iranian oil money went out to buy things, Treasury is going after them.

OFAC is the Office of Foreign Assets Control, and one of those sanctioned companies is a Chinese refinery in Dalian, and OFAC worked with Tether to seize $344 million in accounts. What is strange though, is that this was NOT money that was going to buy luxury houses in Europe. It was sitting on deposit at the Iranian Central Bank. It was held as “sovereign reserve”. Since 2021, the wallets took in $370 million USD over 1,000 transactions. Less than $16 million went out. Total outbound activity in both wallets was $25 million over their lifetimes, which is just 7% of what came in. What’s more, most of the activity in those wallets stopped about three years ago, and the reserves were just sitting there:

But now, with Tether, wallets can be frozen even if they’re sitting on reserve in central banks, anywhere. Not only can Washington or Europe seize assets held in custody, in trust, in their own banks—they crossed that line in 2022. Now they can get to USD stablecoins held anywhere in the world. This is Tether’s media release. US authorities gave Tether information about companies using USDT to buy Iranian oil, identified the wallets used, and Tether froze $344 million USDT on those two addresses. Tether points out there that their blockchains are a visible trail for investigators and regulators, and assets can be frozen before they can be moved if there are credible links to sanctioned entities.

It took about ten seconds for the whole world to realize the significance of what had just happened. Tether stablecoins are not a neutral currency. They’re compliance tools, and there is no point in holding them, because nobody can possibly know which way the political winds are going to blow.

Tether cooperated directly with the Treasury department to seize the funds, which were on the Tron network. The “level of coordination between Treasury and Tether is much more powerful” than anyone thought. Decentralization doesn’t protect you. Bitcoin had been selling off. But that stopped and is turning around, fast. Bitcoin cannot be censored or seized, but the world now knows that Tether can.

All the governments in the world just discovered that Tether is little more than buying Treasury bonds that can be frozen at any time. Here’s a nice, compact summary of the last five years: the SWIFT system was sold as a messenger service that helped banks move money. Now it’s a weapon. US dollar reserves in the European banks were safe, that’s over. Gold sitting in London vaults were the same as in your vault at home. Those days are gone. Then came Stablecoins, a way for people to trade with dollars, and now that’s over too. Tether could have been one of the most important companies in world history, but nobody can trust them anymore, either. All that’s left is gold, and central bank digital currencies.

Here’s what we mean. Going back to those Iranian wallets that were seized. Iran took in $370 million across a thousand transactions. That’s $370,000 each, on average. These are big purchases, but not supertanker-sized deals, which would be hundreds of millions of dollars. So just small percentage-sized proceeds of those oil trades went to those two wallets, and they were frozen.

Those transactions though are also much, much bigger than any household user in Brazil, or in Nigeria, can possibly ring up even over a lifetime of use. So what did Tether just do? They just told every government in the world that they cannot be trusted either. The Treasury Secretary and Tether’s CEO were taking victory laps on the freezing of $344 million or whatever it was, but that was a cheap lesson as far as the rest of the world is concerned. The growth of Tether and US stablecoins, the vertical line that blew through MasterCard and Visa—that just stopped, forever.

Be Good.

Resources and links:

Tether Acquires Over 6 Tons of Gold in Q1 2026, Expanding Holdings to 132 Tons
https://phemex.com/news/article/tether-acquires-over-6-tons-of-gold-in-q1-2026-expanding-holdings-to-132-tons-78288

https://www.binance.com/en/square/post/318603926546673

Tether Supports Freeze of More Than $344 Million in USD₮ in Coordination with OFAC and U.S. Law Enforcement
https://tether.io/news/tether-supports-freeze-of-more-than-344-million-in-usdt-in-coordination-with-ofac-and-u-s-law-enforcement/

OFAC Updates Central Bank of Iran Designation Following Record $344 Million Tether Seizure amid Strait of Hormuz Toll Controversy
https://www.chainalysis.com/blog/central-bank-of-iran-designation-ofac-update-april-2026/

Bessent says US seized nearly $500M in Iranian crypto as Operation Economic Fury sends regime into ‘crisis’
https://www.foxbusiness.com/media/bessent-says-us-seized-nearly-500m-iranian-crypto-operation-economic-fury-sends-regime-crisis

The US just seized $344 million in crypto from Iran — and it's a preview of how sanctions warfare works in 2026
https://www.binance.com/en/square/post/318759455947378

JUST IN: Tether is a top 10 buyer of US Treasuries
https://www.kucoin.com/news/insight/USDT/69f4e1782f8d6c000731a218

The CBDC we already have

Gold and Geopolitics

The CBDC we already have

The product was sold as the alternative…

Read more

a month ago · 146 likes · 66 comments · No1

Dollar Shortage Still Looms After Argentina Buys Time at IMF
https://www.bloomberg.com/news/articles/2026-04-17/dollar-shortage-still-looms-after-argentina-buys-time-at-imf

Scott Bessent's $20 billion dollar gamble on Argentina
https://www.npr.org/2025/11/14/nx-s1-5609382/argentina-loan-bessent-treasury-bailout

Treasury Dept. Issues More Sanctions on Iranian Oil Exports
https://www.nytimes.com/2026/04/28/us/politics/treasury-iran-oil-sanctions.html

Treasury Yields Snapshot: May 1, 2026
https://www.advisorperspectives.com/dshort/updates/2026/05/01/treasury-yields-snapshot-may-1-2026

Stablecoins: Definition, How They Work, and Types
https://www.investopedia.com/terms/s/stablecoin.asp

How does US foreign aid work and where does it go?
https://usafacts.org/articles/which-countries-receive-the-most-aid-from-the-us/

Tether minted around $15 billion in profit last year—and its CEO makes a strong case for finance leaders to finally embrace stablecoins
https://fortune.com/2026/01/27/tether-15-billion-profit-lceo-strong-case-finance-leaders-embrace-stablecoins/

Why are BRICS countries buying so much gold?
https://www.idnfinancials.com/news/63107/why-are-brics-countries-buying-so-much-gold

Bitcoin on May 4: BTC Price Hits $80K for First Time Since January
https://bitcoinfoundation.org/news/bitcoin/btc-price-hits-80k-for-first-time-since-january/

Why Nigeria ranks number one globally in USDT, USDC ownership
https://tribuneonlineng.com/why-nigeria-ranks-number-one-globally-in-usdt-usdc-ownership-experts

The economic model for the AI industry brought to us by Wall Street and Silicon Valley is falling apart, with subscription fees paid by users which are far below the companies' cost of compute.

The companies are also facing severe blowback for new data center construction almost everywhere, and constraints on power grids and capital budgets have delayed dozens of projects.

Top managers of Silicon Valley AI companies are also, finally, facing harsh public scrutiny, particularly after the disastrous opening days of the War on Iran.

The Artificial Intelligence industry is comprised of five layers: energy, chips, infrastructure, models, and applications.

Now that Chinese Large Language Models are optimized to run on Chinese-built chips, are are soaring in popularity across the world by enterprise users, even top US industry insiders admit that Chinese tech will dominate going forward.

Report:

Good morning.

My team is a heavy user of translation software in China, and it is powered by AI systems which are very good. Several years ago a friend of mine was working with the Beta version of one of the newest models, and we sat down together and tested the software.

I was very impressed that it was able to handle, easily, native American English idioms, such as from baseball or football. I used the terms “Hail Mary”, and “out of left field” in conversation, and it was no problem. Then we got a chemistry journal, and I read a long paragraph into the translation software, which he then read back to me, so it would translate his Chinese into my English. We selected that passage because neither of us were chemists, and probably were mispronouncing the words. The word order was changed, slightly, but otherwise it was perfect.

I then took an article from ZeroHedge, about the market internals from a recent Treasury bond auction. It was very high-level finance, and the translator again, back-and-forth, was perfect.

A few months later, my group was in Guangdong, meeting with engineers at a factory that builds manufactured housing. This factory group builds small homes and buildings for dozens of countries across the world, and I was asking if they could design for the US market. I asked them about Southwest house designs. They ran it through their system, and in a few minutes had generated plans and rough price estimates. Then I did the same for ranch-style, contemporary, and cabana houses that are popular in resort areas. Each time, the AI software generated comprehensive designs and prices.

We were getting excited, because we can open vast new markets in North America and Europe, using these factories. Then I moved to the northern part of the country, and asked about Craftsman homes, and Cape Cods, which are very popular in the Northeast.

Their software generated designs and plans, along with costs, but their engineers refused to build those. They didn’t like the different roof pitches and dormers, and especially disliked the chimneys and fireplaces. They had no experience building anything like them, and refused to do so even though their software was telling them how.

Later I began to notice some issues with the translators, which are used by everybody now. For example, when I said, “Let’s deal with that problem next year”, the AI translates that exactly, and the Chinese group wrote down the date. But that isn’t what I meant. The meaning of that phrase would depend on on how the English speaker says it. Usually, we would mean that we don’t want to think about that problem right now; we have other priorities, and let’s come back to it later. But the AI runs off of probabilistic models, and will generate an answer based on what the speaker MOST LIKELY is trying to say.

And there were problems with time constructions. In the example, “we need to fix that in the next year”, the software said that it is one year from today—this date, next year. Maybe I mean that, but I may mean that it needs fixing before the end of the next year, which is 2027.

A professional translator—a person—would stop the conversation and ask me to be specific, because it could be translated in different ways. And a true “intelligent agent” software system should do that, too.

I learned that I need to be more careful, than ever, especially when we are discussing time, and money. We are impressed that these systems can handle obscure idioms, from both Chinese and English. But we are concerned that they throw off confusing translations for important issues in scheduling and budgeting.

The human element is everything. They are very powerful and effective tools, in the hands of people who know how to use them properly, and understand that what appears on our screens need to be carefully watched, and overruled.

These tools are used by everyone in China, in business and industry. They are ubiquitous in manufacturing, engineering, academia, medicine, law, and accounting and finance. But we are a long way from having the machines do the thinking or work that can replace deeply experienced people.

But that is not what was promised, by the Silicon Valley AI hyperscalers and AI giants. To illustrate that issue, consider the differences between how AI is being widely used here in China, compared to the United States, compared to the applications developed here in China. More to the point, what we thought we were supposed to have, compared to what we got.

Geoffrey Hinton won the Nobel Prize for Physics, for pioneering work in machine learning and artificial neural networks. The “Godfather of AI” is how he became known, and gave a speech in 2016 in which he predicted that AI would be so transformative in radiology, that it is a waste of time to even study it anymore. “People should stop training radiologists” right now. It’s “completely obvious that in five years deep learning” will be “better than radiologists.”

That prediction aged badly, it turns out. But imagine a kid born in the year 2000, who gets great grades, and who sees that speech from a Nobel Prize winner, and how that might inform future career choices. Should he go to medical school? Or is he better to head off to Wall Street or Silicon Valley instead?

The world doesn’t have enough radiologists, and that problem is particularly acute in China, and in developing countries. Here we have the technology and the machines to generate scans, but a shortage of the people who can read them.

In China, AI is being widely used in radiology, because it enables them to do more work, in less time. It’s an important tool in the hands of people who have top medical school training, and so AI coursework is bundled in at the university level. In medical imaging, AI technologies and the need for efficiency and accuracy in patient diagnosis are closely correlated, particularly in elder care. AI systems are rolling out across China’s hospital systems, first informed by top radiology centers across the country, then the tools given to other doctors—medical experts—in hospitals outside Tier-1 cities.

This is an issue we need to remember for later. China considers its citizens’ patient data as highly confidential, a national security issue, even. So it’s unthinkable that Chinese medical data will be shared with the large language models used by Silicon Valley:

The second sentence there, is true though—Chinese researchers do enjoy access to patient datasets from other countries, that are being used by those models.

So in China, and in neighboring countries, AI is being used across medicine to replicate the top advice and quality of diagnostic care that until recently were only available in the top cities. And that’s how it did play out in the United States, too. The radiology industry in the United States is doing just fine, and radiologists are making more money than ever, especially in the big cities. If you’re in an American hospital, you might be getting the top care from radiologists pulling down hundreds of thousands of dollars a year, while using the latest AI tools.

But it’s at the individual and household user level, though, where serious problems are. When the AI is used by normal people—not medical professionals-- the AI simply isn’t good enough, but the users do not know that. Tens of millions of Americans are getting health advice from chatbots, and the results are awful. This is a study that was just published by the Journal of the American Medical Association, which tried to measure the reliability of large-language models used in clinical environments. These 21 models were tested and failed over 80% of the time in cases where more than one medical condition might be present. When the researchers put in physical exam notes and lab results, the failure rate was 40 percent.

One in four US adults already are using OpenAI and the other bots for medical advice, and a lot of that motivation comes from the affordability issue: 41% said they either don’t want to, or cannot, afford to pay the bill. Over 60 million Americans are asking ChatGPT about, among other things, if their medical condition is serious, or if a particular rash is infected, or if the symptoms they have may be communicable disease, and 80% of the time are told the wrong thing. For lay users, the LLM’s hallucinate.

And that goes back to the adult supervision problem, and the question of what AI actually even is. When I use these tools, in my day-to-day life, and in my career, I can’t shake the feeling that I am seeing very, very fast search, bundled with other good software. The manufactured house company was simply running internet searches for Cape Cod houses, and the results were fed into CAD/CAM software. The obscure English idioms from American sports can also be looked up, online, and fed back. CAD/CAM isn’t new, and neither are internet searches.

What is new, is that these tools are on my iPhone, instead of my laptop. So are the heroes for this story the guys at Foxconn and Apple, who’ve put a faster processor and a better microphone in my smartphone? Is it the people at Huawei and ZTE, who have installed 5G everywhere? (These tools work poorly on 4G, or on older versions of electronic devices).

Perhaps most of all, I learned that almost nobody is paying for this technology. We all use it, heavily, but it’s free. That led me to wonder who is making investments of hundreds of billions of dollars, and how they hoped to get their investments back?

What is the justification for all that CAPEX? Those five companies—Amazon, Microsoft, Google, Meta is Facebook, and Oracle have quadrupled their capital expenditures just since the release of ChatGPT-4.

The biggest rise in their expenses comes from the high costs to run their large language models, which they are not charging users for. That’s to say that every one of those companies is losing money on AI, and fortunately for most of them they have massive operating cash frows from other divisions to cover the bills.

That is not true of Oracle, by the way. They are in a very different place. And today the industry is staring down a tsunami of maturing debt that funded all these expansions:

There is no magic bullet here, to pay debt down. It’s the same for every other company. That debt needs to be rolled over, most of it at junk bond rates. Or converted into equity, somehow, but you only do that if everyone has a gun pointed at their heads. Or it may be bankrupted away, unless these companies can suddenly get users of AI to pay a lot more to use the programs than they are paying now.

The companies need to pivot, and fast, away from the economic model that has underpinned this industry from the beginning. Users are not paying nearly enough for the AI services that they use, and now the investment thesis for the entire industry is threatened.

But there are strong ethical and moral questions to be raised as well. Karen Hao writes from inside the industry. She went to MIT, and knows personally a lot of the people in those companies that develop the AI. She wrote a really compelling book, and is appearing more often on podcasts. (Note to investors: if you have investments in the AI theme, you are well advised to spend some time, to ask yourself if the people running these companies conform with your values.)

Her takeaway is that, at a minimum, the people in charge of those organizations are mediocrities. They’re unimpressive. These are not, then, the people who brought us transistor or the word processor or the spreadsheet or the internet – they’re just guys who were given a lot of money to spend, but who cannot answer even basic questions about what their company even does, or what AI even is.

We’re still a long way from artificial general intelligence—machines who can learn and think on their own, and likely will never get there. And hopefully so, should say. The hundreds of billions of dollars that have already gone out the door haven’t bought much, besides answering basic questions and translating them, which are things we already had.

At best the industry has overpromised and underdelivered. But she also points out much worse: The human rights abuses. Privacy violations and labor exploitation. Human beings doing inhuman things, to make more money.

These are people she went to college with, were friends with, and she was left to wonder if the world would be a better place if these companies didn’t exist, and if the people who run them had never been born.

Now, the rest of the world is wondering that too. The Department of War has apparently outsourced missile targeting to Artificial Intelligence, and on the very first day of the War on Iran the United States committed war crimes. At least 175 people were killed, mostly kids, when a Tomahawk missile fired from the USS Spruance blew up a school. It was a “targeting mistake”; the school was once part of a complex on the military base nearby, and CENTCOM’s target coordinates came from old data.

Ten years ago, the school buildings were fenced off from the military base. The watchtowers were taken down, it was opened to the public, and the Iranians built playgrounds and athletic fields. DIA and other agencies have scores of analysts whose job is to develop target sets, using current satellite data.

“Military targeting is complex and involves multiple agencies”, and “many people are responsible to verify” the data are correct. “But in a fast-moving situation, like in the opening days of the war, the information is sometimes not verified.” We’ll stop right there and point out that these targets were selected before the war started, and everybody just mentioned so far is sitting in a safe, air-conditioned building far away. This was not a fog-of-war situation where a combat unit is taking fire from all directions and is making split-second life-or-death decisions, and collateral damage might result.

What most Americans might have expected here is that before a bomber or a missile gets sent launched toward a target, first we have a bunch of those people poring over that satellite data and make sure it really is a military base. Park a satellites over the place, watch it for a few days, then somebody might say, “is this really a rocket base? Because there’s no soldiers coming and going. It’s mostly little kids. Are we sure this isn’t a kindergarten? Because it looks a lot like a kindergarten.”

The New York Times; there’s an understatement: “one of the most devastating single military errors in decades.”

It was a war crime, and naturally everyone involved is trying to distance himself from it best he can, out of self-preservation. Here is the Miliary Times two weeks later: Democrats in the House of Representatives are asking about the Maven Smart System. Maven integrates AI and machine learning in logistics and targeting, and is embedded in CENTCOM operations. It’s built by Palantir, who got $1.3 billion from the Pentagon to handle the “information overload” problem. The system brings together satellite imagery, drone feeds, radar and SIGINT, then classified targets and generates strike packages, “compressing kill-chain reasoning and decision making into the fastest timelines ever seen.”

If this sounds to you a lot like the opening scenes from ‘The Terminator”, and that Palantir just built Skynet, you’re not alone. What’s more, Maven is bundled with Claude, from Anthropic, and the AI also writes legal briefs to justify each strike. In the first 24 hours, the system generated hundreds of targets, enabling the US to hit over a thousand targets in the first 24 hours.

Did a human being at any time verify the accuracy—or even the validity—of the target? No answer yet, and we should be shocked if anyone actually steps forward and says, yes, that was me. Because this is a war crime and a reckoning is due. And what did the American taxpayer get for our $1.3 billion? Did we get a better system? The Maven system can correctly identify targets with a 60% accuracy. Human analysts are at 84%. So, no. And Maven performs even worse in bad weather. When the Air Force ran a test with AI, it scored just 25% accuracy in real conditions. But that may have been the result of being fed the wrong information, again under battlefield conditions.

Every single word of that is terrifying, and even that 86% accuracy rate for human analysts isn’t nearly good enough. But in the case of this school in Iran, it’s hard for a rational person to understand how this could have happened. The school had a website and was searchable online. Archives of satellite photos show the school being there for at least eight years, and recent images show school buildings and playgrounds.

So where was everybody? Who was there to make sure that what was coming out of Palantir’s AI wasn’t a hallucination? To ensure that it was true? No matter; the Pentagon is full speed ahead with Maven. It’s now the official program of record and is being rolled out across all branches.

And it’s not just the War Department. Palantir is working secretly with the FAA to overhaul the air traffic control system in the United States. This was after. This is dated April. Just six weeks after the Pentagon used Palantir’s software to blow up a school full of little Iranian girls, now the FAA wants them for a “stealthy program” to redesign the civilian air travel system.

This is nowhere close to over. Investigations are coming, and we already know how they’re going to go. Every single human being involved will do anything to take the heat off himself, out of self-preservation. You can legally delegate authority, but cannot delegate responsibility, so it will fall on the people who designed that system and turned it on. And everybody, from the top brass in the command centers to the guy who pressed the launch button to the members of Congress who rubber-stamped this war without even a discussion, will try to blame the AI. Whether or not the families of the Iranian girls get the justice they deserve is an open question, but the die on this is cast.

This cannot go on for much longer. It cannot. Americans have now seen what happens when we turn over these decisions to automated systems, from Silicon Valley companies and the people who run them, and are outraged. Up until now, nobody was asking hard questions, except for just a handful of people like Ed Zitron and Karen Hao.

That’s changing, finally. The New Yorker just dropped a very critical piece on Sam Altman at OpenAI, and before that Tucker Carlson did one of the most eye-popping interviews in the history of YouTube, which we’ll just link to and leave for you to draw your own conclusions.

These are the wealthiest and most powerful people, in the world. It is Wall Street and Silicon Valley and the White House and the Department of War. Now a lot more people are thankfully paying attention, and extra credit is especially due to the ones who questioned it from the very beginning, and did so at great risk to themselves.

It’s far too late in coming, but finally people are awake, to what this industry is, and who is in charge of it. The heads of these companies are deeply distrusted, even by their own boards of directors and business partners. They are deeply disrespected, even by their own engineering teams, because they don’t even understand the science or the technology that they’re supposedly in charge of.

For everyday Americans, it was always hard to see what we were getting out of this deal. Silicon Valley companies and Wall Street take our private data, our medical histories, our browsing habits, all of our banking transactions and what we like to shop for and buy and wear and read; even our own work product. Then they jam it into one of their closed-source large language models so they can charge companies to use it, who then lay off hundreds of thousands of people.

And by the way in order to make all that work we have to agree to let them build giant new power plants, which only their data centers are allowed to use. Because according to them, we don’t need doctors anymore. Or air traffic controllers. Or military analysts who can see a school in a photograph and cancel a missile strike. We don’t even need lawyers to write up the legal briefs after the fact. Just trust those guys.

As horrifying as this is to normal Americans, we shouldn’t wonder how it all reads and sounds in Beijing. Or in the capital of any responsible country. We shouldn’t wonder if China is reconsidering, for example, their policy about sharing their citizens’ private medical data with Silicon Valley companies who want to use it to build better LLM’s in medicine, which Wall Street investors can then charge money to use. It’s out of the question.

This is Jensen Huang. Mr. Huang is CEO of Nvidia, and Nvidia builds the GPU’s and chips which in turn are used by the data centers where all those superfast searches and outputs happen. Nvidia is a $5 trillion dollar company, and Jensen Huang is not one of Karen Hao’s mediocrities who is only good at getting investors to hand over their money, and who cannot explain what his own company does. He can. He has a deep understanding of the engineering; he has a deep understanding of the science.

He also has a deep understanding of China, and so he knows he and Nvidia have a big China problem. He appeared on this podcast, and starting from one hour 3 minutes in, we can see what’s at stake for Nvidia, and the other companies in the American AI industry.

He makes repeated reference to the 5-layer AI stack. Some people call this the 5-layer cake of AI. At the bottom, the foundation, is energy. Because it takes a lot of energy. Then comes the chips, which is where his company is. On top of chips come the data centers, which need lots of chips and lots of energy. Then come those large-language models, and on top of everything is the applications layer. Applications is who is using this technology, and for what, and are those users paying enough to pay the bills of everybody else and everything else underneath them.

Jensen Huang knows that China already owns four of those layers in that stack, and Nvidia is barely hanging on in chips. So he is gravely concerned here, about what it means from now on if China’s large-language models can run on chips from Huawei (which is a Chinese semiconductor manufacturer, along with lots of other products like 5G towers and downstream products that use AI.)

China has abundant energy and an abundance of smart people, and when Chinese-built applications that are used by their billion users here and a couple billion more from across the world, and that includes all of Chinese factories and supply chain nodes and trading partners—and that all happens on a fully-integrated and fully made-in-China stack, it’s game over for the American AI industry:

But that transition is already in motion. “Delete America” is official China government policy, and it’s just what it sounds like. In 2022 regulators directed all state-owned companies in China to replace foreign software by 2027.

The regulation covers everything from finance, energy, and supply chain management, and is part of a long push for self-sufficiency in everything, including semiconductors. Jensen Huang knows what that means for his company, which is that Nvidia needs to stay so far ahead of Huawei, and the other Chinese chipmakers, that he can push further out the day that Chinese chips replace Nvidia’s across Chinese LLM’s. When those models are optimized to run on Chinese architecture, and that AI is then adopted by rest of the world, the future of tech will be all-China.

DeepSeek is a Chinese large language model. Its Version 3 ran on old Nvidia chips, using old Hopper system architecture. DeepSeek v4 was just released, and the first reports are that it does run on Huawei Ascend chips, and they’re already taking orders for hundreds of thousands of units. Two more models are coming, also built to run on Chinese semiconductors.

That leaves Huang to explain what the problem is: Everyone assumes that Nvidia chips just perform so much better, and that Nvidia’s tech is so far ahead, that Huawei chips will just run those models less well. He insists that’s not true. China can just use more of those chips, stacked differently, because electricity in China is basically free, which means the cost of compute is far below the bills the Silicon Valley companies run.

Abundant energy is the first layer in that stack. China has it, and the United States and Europe do not. If AI data centers were one country, it would be the fifth largest consumer of energy in the world. The United States is 45% of that consumption, which will more than double by 2030. So that is the equivalent of adding an entire Canada worth of power consumption to the American grid, just for the data centers.

That’s not going to happen, anyway—the pushback is already severe, and the data centers that were supposed to be finished last year—2025—still aren’t done, and much of the capacity that was supposed to come online this year have not even begun construction:

The centers are not being built, and that means that the power will not ever be there to turn on all those machines that companies have already ordered from Nvidia.

Those energy bottlenecks do not exist here in China; they do not even register as a concern in this discussion.

In 2024, China generated more power than the United States, the European Union, and India combined. In the US, power generation rose slightly over the past 25 years, from just under 4 thousand terawatt hours to just over 4,000. The EU dropped slightly. In that same time China went up over 10x. In just four years, China built more power capacity that the entire United States did, in over a hundred years. In a single year China ADDS more power than most countries produce:

Infrastructure is 5G towers and data centers, mainly. And data centers run on chips, which come from Nvidia and Huawei and others. There are 561 data centers in operation in China, right now, and surprisingly many of them were built and operated by the Silicon Valley hyperscalers. And in more bad news for Nvidia, the newest ones are running on Chinese semiconductors instead of Nvidia’s. Alibaba also builds chips, in addition to building the Qwen Large Language Model, in addition to running the biggest B2B exchange in the world for manufactured products.

And while data centers in the United States and Europe are not getting built at all, in China they’ve done for data centers in AI what they do in every other industry: they overbuild, to create excess capacity today in anticipation of future demand, instead of in response to current demand. So, in China they’ve got the exact opposite of the conditions that exist in North America. Now there is so much capacity, so many chips, that the market is falling apart. Just a year ago an Nvidia H100 chip would go for $28,000 on the black market, and today the price has fallen so much they’re not getting bids at all. The costs are plunging, and so are the profits.

Even recently that was a big business, buying and renting high-priced GPU’s from Nvidia for the Chinese large language models to run on. But that industry is dead. And the main driver of why, is that the Chinese LLM’s just run differently, than the ones from Silicon Valley. The newest Chinese models are optimized for computing power, which means the need for the high-performance, but high-energy-consumption chips from Nvidia goes away. Rental costs for those GPU’s have dropped by more than half and are now at an all-time low. Nvidia chips are just more expensive to run, while the prices paid by end users have fallen, so data centers running Nvidia can’t even pay their electric bills, even though the electricity in China is practically free.

It was DeepSeek that transformed the industry’s approach to that problem, and blew up the math on how much it costs to develop the newest and best AI systems. It also cast doubt on all that CAPEX by Silicon Valley hyperscalers. This is a strong summary of the steps involved in developing a new LLM, and where the costs come from.

What DeepSeek did was upend the trend of just throwing more money at compute. In DeepSeek’s financials they claim it cost under $6 million to train their Version 3, which doesn’t include some major costs, but the comparable costs to train US models are many times higher. DeepSeek did it by redesigning the network architecture of the system itself. The company did NOT have access to the best chips, and that forced them to innovate, and it resulted in a product that was completely different, while also costing much less to run.

What’s more, DeepSeek is open-source, and was quickly adopted by developers across the world with few restrictions. This paper compares apples to apples, the DeepSeek, and ChatGPT, and Gemini, and explains that these crazy cost differences derive from hyper efficient algorithms and cloud systems, and overall better resource optimization.

This group believes that the total development cost of DeepSeek is probably over $500 million, but the overall efficiencies of the DeepSeek model will immediately be copied by Western labs. It was a quantum jump in capability, and they conclude that it doesn’t really even matter much how much it cost to build DeepSeek, it’s just a much better model given the cost inputs required to generate results.

Kimi is an LLM from Moonshot AI, and developers that previously were using proprietary API’s--from Anthropic or OpenAI, probably--are migrating over to Kimi. It is already foundational to AI systems. “It’s becoming infrastructure.”

So Chinese large language models are taking over, because they are at least as good as the ones that come out of Silicon Valley, and cost far less to run. And Nvidia’s worst nightmare is already here, because those LLM’s run on chips that come from China, and so nobody here needs Nvidia chips anymore and the prices are collapsing. So Jason Huang has a lot of things to worry about, along with investors who have big bets on US firms in the AI stack.

The application layer is everything, by far the most important. That’s users. It’s companies and creators and factories and managers and engineering teams -- who use these tools to do their jobs better. The application layer was always going to be China, anyway, by default. Because China is where the factories are. All the world’s supply chains run through here, and global logistics. The BRICS bloc and the Global Majority countries have built a financial system outside of SWIFT and Western banks and regulators, and the US dollar, to handle all that trade. And remember again that it is the official policy of the Chinese government, that not a single piece of software from the United States will be used to run any of it.

This industry, the AI Industry, is not going away. It’s already too important, already a key driver to productivity in manufacturing, and supply chain, and in medicine and in IoT and in clean energy and in transportation and logistics and shipping and finance. It will be critical in everything, because it’s such a valuable tool in the hands of people who are using it ethically, and who are watching over the results carefully.

But the industry will go away from the United States, because our companies were set up to enrich and empower only themselves, instead of their users, and all under the pretense that their AI was smart and good enough to replace smart people and good people. But it never was.

Be Good.

Resources and links:

The Stargate Project: Trump and OpenAI announce $500 billion AI venture
https://mashable.com/article/stargate-project-trump-openai-oracle-softbank-500-billion-venture-ai-infrastructure

Nuclear Powered Data Centers: Microsoft Bets on SMRs to Fuel the Cloud
https://www.captechu.edu/blog/nuclear-powered-data-centers-microsoft-bets-smrs-fuel-cloud

Meta signs 3 deals for nuclear energy to power AI data centers
https://www.cbsnews.com/news/meta-nuclear-power-deals-ai-data-centers/

How China Won the Open-Source LLM Race — and Why It Matters

This Week in AI

How China Won the Open-Source LLM Race — and Why It Matters

If you were trying to “get into AI” in early January 2025, you weren’t alone. This newsletter itself was born out of that moment…

Read more

5 months ago · 25 likes · 5 comments · This Week in AI

Dario Amodei Doubled Down On His AI Jobs Warning. Here’s What’s Different Now
https://www.forbes.com/sites/kolawolesamueladebayo/2026/02/21/dario-amodei-doubled-down-on-his-ai-jobs-warning-heres-whats-different-now/

Sam Altman May Control Our Future—Can He Be Trusted?
https://www.newyorker.com/magazine/2026/04/13/sam-altman-may-control-our-future-can-he-be-trusted

Energy demand from AI
https://www.iea.org/reports/energy-and-ai/energy-demand-from-ai

Nvidia’s Jensen Huang warns Huawei chips for DeepSeek AI models would be ‘horrible’ for US
https://www.scmp.com/tech/article/3350460/nvidias-jensen-huang-warns-huawei-chips-deepseek-ai-models-would-be-horrible-us

YouTube, Dwarkesh Patel and Jensen Huang – Will Nvidia’s moat persist?

Exclusive: DeepSeek’s upcoming new AI model will be able to run on Huawei chips, a major milestone in China’s quest for semiconductor self-sufficiency.
https://www.reuters.com/world/china/deepseeks-v4-model-will-run-huawei-chips-information-reports-2026-04-03/

DeepSeek’s V4 model will run on Huawei chips, The Information reports

DeepSeek’s New AI Model Will Be a Victory for Huawei
https://www.theinformation.com/articles/deepseeks-new-ai-model-will-victory-huawei

China Added 543 Gigawatts in New Power Capacity in 2025
https://oilprice.com/Latest-Energy-News/World-News/China-Added-543-Gigawatts-in-New-Power-Capacity-in-2025.html

China’s Four-Year Energy Spree Has Eclipsed Entire US Power Grid
https://www.bloomberg.com/news/articles/2026-01-28/china-s-four-year-energy-spree-has-eclipsed-entire-us-power-grid

Top power-generating countries in 2024
https://www.globaltimes.cn/page/202506/1335418.shtml

Ranked: Top Countries by Annual Electricity Production (1985–2024)
https://www.visualcapitalist.com/ranked-top-countries-by-annual-electricity-production-1985-2024/

I Spent 2 Months Building on Kimi K2 — It’s Quietly Becoming AI’s Open-Source Backbone
https://medium.com/@mohit15856/i-spent-2-months-building-on-kimi-k2-its-quietly-becoming-ai-s-open-source-backbone-d1e0cd3d885c

Development Cost Data + Statistics Comparison: DeepSeek R1’s $5.6M vs. ChatGPT-4 and Google Gemini Ultra
https://softwareoasis.com/development-cost-comparison/

DeepSeek Debates: Chinese Leadership On Cost, True Training Cost, Closed Model Margin Impacts

SemiAnalysis

DeepSeek Debates: Chinese Leadership On Cost, True Training Cost, Closed Model Margin Impacts

The DeepSeek Narrative Takes the World by Storm…

Read more

a year ago · 2 likes · Dylan Patel, AJ Kourabi, Doug, and Reyk Knuhtsen

Why building big AIs costs billions – and how Chinese startup DeepSeek dramatically changed the calculus
https://theconversation.com/why-building-big-ais-costs-billions-and-how-chinese-startup-deepseek-dramatically-changed-the-calculus-248431

DeepSeek’s hardware spend could be as high as $500 million, new report estimates
https://www.cnbc.com/2025/01/31/deepseeks-hardware-spend-could-be-as-high-as-500-million-report.html

Alibaba-backed Moonshot releases its second AI update in four months as China’s AI race heats up
https://www.cnbc.com/2025/11/06/alibaba-backed-moonshot-releases-new-ai-model-kimi-k2-thinking.html

Millions of Americans Are Talking to AI Instead of Going to the Doctor, and It’s Giving Them Horrendously Flawed Medical Advice
https://futurism.com/artificial-intelligence/millions-americans-ai-instead-doctor-bad-advice

Large Language Model Performance and Clinical Reasoning Tasks
https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2847679?utm_campaign=articlePDF

There Are Signs of a Massive AI Backlash
https://futurism.com/artificial-intelligence/signs-massive-ai-backlash

Global energy demands within the AI regulatory landscape
https://www.brookings.edu/articles/global-energy-demands-within-the-ai-regulatory-landscape/

Energy Markets Race to Solve the AI Power Bottleneck
https://www.morganstanley.com/insights/articles/powering-ai-energy-market-outlook-2026

Military Times, Deadly Iran school strike casts shadow over Pentagon’s AI targeting push
https://www.militarytimes.com/news/your-military/2026/03/24/deadly-iran-school-strike-casts-shadow-over-pentagons-ai-targeting-push/

The Growing Problem of Radiologist Shortage: China’s Perspective
https://www.kjronline.org/pdf/10.3348/kjr.2023.0839

AI in Chinese healthcare: From medical imaging to AI hospitals
https://daxueconsulting.com/ai-healthcare-china/

New York Times, U.S. at Fault in Strike on School in Iran, Preliminary Inquiry Says
https://www.nytimes.com/2026/03/11/us/politics/iran-school-missile-strike.html

China is already a powerhouse in AI for radiology and medical imaging. Next they’re going global.

The Nobel Prize, Geoffrey Hinton
https://www.nobelprize.org/prizes/physics/2024/hinton/facts/

Ed Zitron’s Where’s Your Ed At

https://www.wheresyoured.at/

Karen Hao on AI tech bosses: ‘Many choose not to have children because they don’t think the world is going to be around much longer’
https://www.irishtimes.com/culture/books/2025/08/09/karen-hao-on-ai-tech-bosses-many-choose-not-to-have-children-because-they-dont-think-the-world-is-going-to-be-around-much-longer/

Maven Smart System
https://www.missiledefenseadvocacy.org/maven-smart-system/

Bombed Iranian girls school had vivid website and yearslong online presence
https://www.reuters.com/investigations/bombed-iranian-girls-school-had-vivid-website-yearslong-online-presence-2026-03-12/

FAA quietly developing AI-enabled air traffic management system
https://theaircurrent.com/air-traffic-control/faa-smart-ai-predictive-air-traffic-management-system-palantir-thales/

Wall Street Journal, China Intensifies Push to ‘Delete America’ From Its Technology
https://www.wsj.com/world/china/china-technology-software-delete-america-2b8ea89f

Sanctions against Huawei fail, then birth “Delete America” campaign across China’s supply chains

China Data Center Locations (561)
https://www.datacenters.com/locations/china

Alibaba launches data center with 10,000 of its own chips as China ramps up AI push
https://www.cnbc.com/2026/04/08/china-alibaba-data-center-ai-chips-zhenwu.html

China built hundreds of AI data centers to catch the AI boom. Now many stand unused.
https://www.technologyreview.com/2025/03/26/1113802/china-ai-data-centers-unused

AI Whistleblower: We Are Being Gaslit By AI Companies, They’re Hiding The Truth! - Karen Hao

Silicon Valley Insider EXPOSES Cult-Like AI Companies | Aaron Bastani Meets Karen Hao

“The problem is Sam Altman”: OpenAI insiders don’t trust CEO
https://arstechnica.com/tech-policy/2026/04/the-problem-is-sam-altman-openai-insiders-dont-trust-ceo/

Nearly half of US data centers planned for 2026 are facing delays or cancellation
https://www.techspot.com/news/111947-nearly-half-us-data-centers-planned-2026-facing.html

YouTube, Tucker Carlson, Sam Altman on God, Elon Musk and the Mysterious Death of His Former Employee

Blockades of the Persian Gulf are a boon to the American oil and gas industry, with exports of fossil fuels hitting all-time records.

Governments worldwide have concluded that their dependency on fossil fuel imports -- from anywhere -- constitutes a grave national and economic security risk.

The long-term solution for countries is to electrify their economies via clean tech, renewables, and nuclear and to shift away from fossil fuels.

But that means exchanging one dependency for another, as the Chinese enjoy monopolies on the technologies, materials, and expertise in solar and wind power.

With few alternatives, even countries closely allied with the United States now look to China, who alone can quickly build and export the crucial technologies at scale.

Report:

Good morning.

There is an new energy race underway, between electrification and fossil fuels. China is the world’s dominant producer and exporter of the technologies and hardware for power generation from renewable sources, while the Persian Gulf and North America are the primary suppliers and exporters of crude oil and other fossil fuels.

Before the war on Iran, it was Chinese exports of those clean energy technologies that were slowly taking over markets. Last August, those exports hit a record, with $20 billion shipped. These data for 2025 are through July, so seven months in to the year, and China’s exports of clean energy tech were $120 billion, plus another $20 billion for August. Through July, the US shipped $80 billion worth of oil and gas. What’s more, those exports from China were booming, even while solar energy costs on a unit basis were falling. Solar equipment and panels are falling in price.

It’s a different world today, just 10 months later. Oil prices are soaring, because of the closure of the Strait of Hormuz. And so oil tankers that ordinarily would be filling up in the Persian Gulf are sailing halfway across the world to get supplies from the United States. Exports of American crude oil will hit new record highs this month, as over 70 supertankers are enroute to ports in Louisiana and Texas. The President said that the US navy blockade of Iran’s blockade of the Strait of Hormuz is a great opportunity for the American oil and gas industry, and even more so because American households are also paying a lot more for fuel.

In theory, two million barrels a day outbound Iran to China would be cut off—assuming the tankers aren’t just going around -- which in itself would drive global prices higher. And then 20% of the world’s daily demand of oil and LNG are stuck behind Iran’s blockade, so all this is demand that needs to be satisfied from elsewhere.

Last year, on average, 27 supertankers per month bought crude from US ports. There are 70 very large crude carriers on the way right now. That translates to 5 million barrels a day of export for this April, and another record in May. Last year US exports were 4 million barrels a day, so it’s a 25% jump in exports, by volume. Also, those exports now come at a far higher price, per-barrel. Exports of refined products will also rise, from 3 million barrels of gasoline, jet fuel, and diesel.

It good to remind ourselves that just a tiny handful of countries in the world are self-sufficient in energy, and the United States is not one of those countries. Last year the United States imported 6.2 million barrels a day, primarily from Mexico and Canada, because of how the North American refinery industry works to process sweet and heavy grades of crude.

Two takeaways here then, that even with those booming exports hitting records of 5 million bpd, those are still below US imports of crude, and those prices are also going up. Jet fuel and diesel markets are also in shortage, even in the United States, and trucking companies are responding by slowing down their driving—which lengthens delivery times—or parking their rigs completely. Airlines are raising ticket prices, grounding places, and the Trump Administration is already promising to bail out Spirit Airlines because of the shortage of jet fuel.

The United States produces around 13 million bpd of oil, but most of that production is already under contract. And any increased production from oil fields hits a bottleneck at seaports, which are already at full capacity and can’t load any more or any faster than they already are. So prices are going up for everyone, even in the United States and in other energy producing countries. It’s a world market, and the world doesn’t have enough.

The long-term answer to this crisis, for governments across the world, is to move away from fossil fuels as soon as possible. But the obvious issue there is that they are just trading one dependency for yet another. In the European Union, policymakers shifted their supply chain for energy from Russia, to the Persian Gulf states, and now they can’t get it at all.

They now realize that their industrial economies, their modern way of life, is wholly in the hands of others because they are powered by fossil fuels that come from somewhere else. Asian economies were faced with the same problem. The Ukraine War didn’t involve them at all, but the energy shock was global, practically, and drove inflation rates higher:

The fallout from War on Iran is much worse. But let’s look back at how two of those countries, Pakistan and Bangladesh, responded to the high prices following the Ukraine War. Pakistan had a “solar revolution”, while Bangladesh signed contracts for Liquefied Natural Gas from Qatar. Now those shipments are stuck, Qatar declared the contracts null and void because of the war, and Bangladesh needs to buy LNG on spot markets, at twice the price as two months ago. They cut working hours and public spending “to stabilize the energy situation”, as Bangladeshi supply chains have been blown up from the US-Israeli war on Iran.

Pakistan is in a much better spot. That solar revolution there is less than three years old, and Pakistan cut its dependence on imported fossil fuels from a third, to just a quarter. Pakistan has not had to buy any natural gas on spot markets, and the country is an object lesson on how to bullet-proof their economy from the volatility in fuel prices and supply disruptions. This is the change in just four years, with big drops in both imported and domestic fossil fuels, while renewables jumped to about 17% of their energy mix, and combined with hydro and nuclear supplies more than half of Pakistan’s energy demand:

All that was possible by virtue of Pakistan’s tight partnerships with China. In 2024, Pakistan bought 16 gigawatts of solar panels from China, compared to under 5 GW in 2023. By the middle of last year, total cumulative imports were 36 GW of solar, which is three fourths of Pakistan’s total power generation, mostly from rooftop and small-scale solar. Coal was also added to the mix, and high imports of Chinese lithium batteries allowed for storage. For many households in Pakistan, this marks the first time they enjoy uninterrupted power. At the national level, large wind and solar projects were built.

That all is compelling to other governments, who can’t buy energy from Russia, can’t get shipments past the Iranian and American navies, and are waiting for their supertankers to get back from Houston. Clean, domestic energy sources are obvious solutions, long term. But there is no getting around the China dependency problem: China alone can supply the technologies and materials, at scale, and quickly.

China’s global share of solar photovoltaic equipment is far larger than the rest of the world, combined. The blue bars are 2024, and the green are the 2030 forecast, from the International Energy Agency. Modules, solar cells, wafers, polysilicon—today and in the future, China will be the global source of more than three fourths of it. For overall production, it’s over 90%:

There is also nowhere to hide from China, when it comes to wind power, and the rare earth magnets that go into turbines. This chart is magnet production from 2024, orange is China, blue is everyone else not China:

Pakistan and China are partners in clean energy, and as a result are two of just a few countries in Asia who are not flopping around, scrambling for new foreign suppliers. China also has big investments in Spain, which is also better insulated from the energy crisis, compared to other countries in the EU. Spain’s solar power industry is the second largest in Europe, but just in March alone, China’s solar equipment exports—in a single month—was equal to Spain’s total installed capacity of solar.

Across the EU, energy import costs jumped by 22 billion Euro in just six weeks. The war in Iran reminded everybody that they are exposed to risks beyond their control. So even NATO countries are booking flights to Beijing. Germany, Spain, the UK, Finland, Ireland:

That’s a big change too. Wasn’t that long ago that officials from the EU were flying here to tell the Chinese that they had too much capacity. Now they are flying back, and China’s “overcapacity” is the only thing that can save them.

Be Good.

Resources and links:

Bloomberg, China Is Beating the US in the Battle for Energy Export Dominance
https://www.bloomberg.com/news/articles/2025-10-05/china-s-clean-energy-exports-are-beating-us-fossil-fuels
IEA, Renewables’ global growth, driven by solar PV, remains strong amid rising headwinds
https://www.iea.org/reports/renewables-2025/executive-summary

China and Pakistan strengthen renewable energy ties with strategic agreement
http://en.ce.cn/Insight/202502/18/t20250218_39295559.shtml

China’s green investment in Pakistan: Solar dreams, debt shadows, and the politics of a rapid transition
https://globalvoices.org/2025/12/18/chinas-green-investment-in-pakistan-solar-dreams-debt-shadows-and-the-politics-of-a-rapid-transition/

Reuters, Iran war exposes cost of Asia's fossil fuel reliance
https://www.reuters.com/sustainability/boards-policy-regulation/iran-war-exposes-cost-asias-fossil-fuel-reliance-2026-04-16/

Reuters, Europe's response to the Iran war energy crunch
https://www.reuters.com/business/energy/europes-response-iran-war-energy-crunch-2026-04-22/

Escape route from Iran energy shock leads to China, US allies find
https://www.politico.com/news/2026/04/20/iran-war-china-beijing-global-clean-energy-dominance-00880124

Reuters, Bangladesh cuts working hours to save energy amid Middle East crisis
https://www.reuters.com/sustainability/boards-policy-regulation/bangladesh-cuts-working-hours-save-energy-amid-middle-east-crisis-2026-04-03/

Wall Street Journal, U.S. Oil Blockade Is Set to Boost American Exports—and Prices at the Pump
https://www.wsj.com/business/energy-oil/u-s-oil-blockade-is-set-to-boost-american-exportsand-prices-at-the-pump-005e1a70

Oil Price, Tanker Fleet Heads to Load U.S. Oil as Middle East Supply Crumbles
https://oilprice.com/Latest-Energy-News/World-News/Tanker-Fleet-Heads-to-Load-US-Oil-as-Middle-East-Supply-Crumbles.html

Reuters, Trump administration nears $500 million Spirit rescue as Iran fuel shock hits airlines
https://www.reuters.com/business/trump-administration-nears-deal-rescue-spirit-airlines-wsj-reports-2026-04-22/

Nikkei, Iran war pushes China's solar exports to record high in March
https://asia.nikkei.com/spotlight/iran-tensions/iran-war/iran-war-pushes-china-s-solar-exports-to-record-high-in-march

Chinese jet fuel and the myth of energy independence

US crude oil exports decreased by 3% in 2025 despite higher production (+3%)
https://www.enerdata.net/publications/daily-energy-news/us-crude-oil-exports-decreased-3-2025-despite-higher-production-3.html

Petroleum & Other Liquids, Imports by Country of Origin
https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epc0_im0_mbblpd_a.htm

How much oil does the US import, and why?
https://www.afpm.org/newsroom/blog/how-much-oil-does-united-states-import-and-why

China invested heavily over decades to develop their domestic mining industry.

But outbound investment soared since 2013, under the Belt and Road Initiative. China has thereby locked up critical raw materials supply chains in countries that are far more friendly with China, than with the United States.

Beijing has enacted export bans on the use of those metals, for use by weapons makers. For the Pentagon, the obvious answer is to build an end-to-end supply chain for rare earth metals and other minerals, to get around those export bans.

But the problem is a lack of engineers and mine workers. Across the United States and Canada, a severe shortage of skilled tradesmen preclude an expansion of the mining industry.

Report:

Good morning.

This map is a strong example of how the world has changed in just two decades. Country by country, who is the bigger trading partner, the United States, or China? In 2000, almost everyone did more trade with the United States, than with China. In the Western Hemisphere, Cuba was the lone exception. All of Europe, even Russia.

By 2024 it’s a different world. All of Africa. Australia and New Zealand. Most of South America. All of Eastern Europe, except for the Baltic states. So these trading relationships represent real investments, and real-world buying and selling, and China is a dominant trading partner for most of the countries on the world map today.

And Pentagon officials and weapons makers are confounded with the problem now, that China has global monopolies on the mining and refining of rare earth metals, which are crucial for modern manufacturing, and particularly for those big Pentagon contractors. China has export bans on rare earth metals that are used by defense contractors, and now there are shortages of all of them, outside China and the BRICS countries that are friendly with China.

The reliance on China for this supply chain is almost total. The US Geological Survey published their list of 50 critical minerals, and the United States relies on imports for 31 of those fifty – with imports over 50% of demand. And for nine of them, China was the exclusive supplier.

The Pentagon is especially dependent on China, with 78% of military systems reliant on critical minerals from China. They got there after decades of investment and development of their mining industry, at home and across the world. They built universities and research centers that produce more patents in the industry than in the rest of the world combined. They also are dominant in the refining industries, of these metals. Across the US, Europe, and Japan there is just a handful of people who know how to do that work, whereas China has thousands of them.

But we need to refer again to that trading map, and understand that this was the result of decades of deliberate national policy. China’s Belt and Road Initiative was launched in 2013. The purpose was to reinforce—make stronger—bilateral cooperation between China and 150 countries across the world, and to lock down raw materials supplies needed by China’s industrial sectors. In particular, the metals and minerals that are essential to electronics, power generation and distribution, and consumer and household products. The technologies of tomorrow, in other words, as well as what we need right now to sustain modern life. The Foreign Direct Investment was strongly encouraged by Chinese government authorities, which would develop a global value chain system, and strong relationships with partner countries. China’s industrial needs would be coupled with development strategies in partner countries.

For the metals, cumulative Chinese FDI is on that dotted red line, and now stands at $250 billion. The Belt and Road Initiative not only expanded FDI, but also redirected the investment flows: before 2013, Australia claimed a third of Chinese outbound investment. Since 2014, it’s just 4% to Australia. Massive new investments from China into Indonesia, up over five times. Democratic Republic of Congo and Peru, more than doubled. Double-digit percentage increases in over a dozen countries, in absolute terms:

Taking one country, Peru, as an example of how this has played out, over time. In 2003, Peru’s exports of copper ores to China were under one million tons, which was 40% of Peru’s total. So China was a major buyer, and Peru’s copper ores industry grew rapidly until 2013. China Belt and Road was announced in 2013, along with huge increases in outbound FDI to Peru. Now China takes 80% of Peru’s global exports of copper, which today is six million tons:

And the trade is two-way—raw materials are going out, manufactured products going back. 2025 was a trade war year between the United States and everybody, but China most of all, and Chinese exports to the US dropped by over 10%, to $215 billion in the first six months. But that was easily made up for, with export booms to ASEAN countries, up to over $300 billion. South America exports, up to $141 billion, Africa now over a hundred billion.

Countries in the Belt and Road program develop new metals and mining industries and exports to China boom, and feed the Chinese factory sectors. Then ships going the other way are modernizing and electrifying economies in the Global Majority countries at the fastest pace in history.

So again the Pentagon problem comes from the fact that the same minerals and metals they need to build bombs, are the same ones Africa and South America and Asia need for power stations and cars and refrigerators and smart phones, and mining companies across the world seem to be much happier doing that business with China. And let’s hit this point again, which is that civilian manufacturers in the United States are able to get these metals from China; the export bans only apply to companies that build things that blow up people, and it’s those companies that can’t get the raw materials they need.

The obvious solution is to build an end-to-end supply chain for these metals, in North America. We’ll focus this time on just the first part, the mining; getting the raw materials out of the ground, and in particular the people problem.

China is already far ahead. In the 1980’s, the United States had more than twice as many mining schools as today. Those schools now turn out around 300 mining engineers per year. In China, it’s over 3,000 per year. That ratio, by the way, holds firm across many other disciplines: 1.3 million Chinese graduates in engineering, every year, compared to 130,000 in the United States. That is a 10-to-1 ratio, and we pointed out previously that many of the engineering graduates from US universities are not US citizens in the first place, and after picking up their degree head back to where they came from.

So the pipeline of new engineers isn’t anywhere close to where it needs to be to make mining in the United States even viable, let alone competitive. Six hundred new mining engineers a year are needed, and American schools produce only half that. At the other end, workers are leaving. The workforce for the mining industry is old, and on the verge of retirement. More than half of the workforce will retire in the next four years.

It’s an industry-wide problem, and it’s the same story up in Canada. Besides a severe shortage of mining engineers, the industry doesn’t have enough of everybody else that mines need to run. Industrial electricians, mechanics, welders—they’re all at critically short levels too. For example, a Canadian company in the nuclear industry is short fifty welders.

This isn’t a money problem. These companies have plenty of money; what they lack is people. The unemployment rate for skilled tradesmen—and they’re almost all men—is basically zero. And for young people with those skills, there are other options besides hazardous work in extreme weather, usually far from home. Just six percent of mining workers in Canada are under the age of 25. And so well-funded mining projects can fall apart if anything goes wrong on the staffing side—there is just no slack in this system, industry-wide. In China and in the Global Majority countries, there is excess capacity. This scenario, described here, is unthinkable on a Chinese mining project, where one guy isn’t feeling well and the whole company shuts down until he’s better:

The thesis here, from this think tank, is that the only way out is through high levels of immigration. The thinking is that since the Pentagon isn’t allowed to import the rare earth metals and minerals their contractors need to build weapons systems, they will instead import the people who already know the mining business. Like Chinese, I guess. Or the guys in Peru.

So that’s the plan now.

Be Good.

Resources and links:

Building a domestic critical mineral workforce through immigration
https://www.niskanencenter.org/building-a-domestic-critical-mineral-workforce-through-immigration/

'The hottest it's ever been': Skilled labour shortage is tapping the brakes on Canada's mining boom
https://ca.finance.yahoo.com/news/hottest-ever-canada-mining-sector-150822574.html

Building a domestic critical mineral workforce through immigration
https://www.niskanencenter.org/building-a-domestic-critical-mineral-workforce-through-immigration/

US mining's talent crisis
https://www.miningmagazine.com/americas/news-analysis/4528102/us-minings-talent-crisis

Urgently needed: more mining workers
https://www.theglobeandmail.com/business/adv/article-urgently-needed-more-mining-workers/

Mining.com, Mining growth creates trades worker gap in Ontario
https://www.mining.com/blog/mining-growth-creates-trades-worker-gap-in-ontario

China graduates 1.3 million engineers per year, versus just 130,000 in the U.S. We need AI to bridge the gap
https://fortune.com/2026/01/14/china-graduates-1-3-million-engineers-per-year-us-shortage-ai-tools/

U.S. Mining Push Faces Workforce Shortage
https://nationaltoday.com/us/tx/el-paso/news/2026/02/25/u-s-mining-push-faces-workforce-shortage/

Visual Capitalist, Mapped: Top Destinations for Chinese Exports in 2025
https://www.visualcapitalist.com/mapped-top-destinations-for-chinese-exports-in-2025/

Private Equity companies have rolled up manufacturers of ambulances, fire trucks, and other first responder equipment tools.

As a result, a small handful of companies control supply and pricing, and have aggressively raised costs and increased order backlogs.

Equipment in the North American market are ten times more expensive than for comparable tools from China, and wait times are three years or longer.

Report:

Good morning. Last week our team was in Hubei province, with a large factory group that builds vehicles for the specialized trucking segment. They have a manufacturing division for emergency vehicles and disaster response. The company is one of the top makers of ambulances.

The company is ChengLi, or CLW, and this is one of their top sellers, an ambulance on a Mercedes chassis, for about $30,000 if you’re buying just one.

This is one on a Ford chassis for under $60,000. When you open the product pages we can read the specifications, and details about the factory itself. So this model can run on diesel or regular gasoline, and the company can build 5,000 of them per year.

Delivery times run 90 days, on average, and these companies have no problem sourcing chassis from Ford, or Benz, or a dozen other manufacturers. All the major Western and Japanese brands have production centers here in China that keep the markets well-supplied with chassis and other parts.

So now we know where ambulances come from, how much they cost, and how long it takes, for all the buyers of ambulances who are allowed to buy from China. Unfortunately that is exclusive of buyers in North America, who cannot do so. And that fact is now a crisis for local governments across the United States, who are paying more than ten times the prices, compared to buyers of Chinese equipment, and are waiting for three years instead of three months.

This is one of the best Substacks around, and it’s the same guys who did a deep dive into why Southern California caught fire and the richest communities in the United States couldn’t put it out:

It’s true that a major issue in that story was the dysfunction and incompetence that’s more the rule than the exception these days in American big cities. But even the best-run local governments can’t buy new fire trucks, and can’t buy replacement parts to keep their old ones running.

That is a feature – not a bug -- of our economic system, and that report on Substack eventually led to Congressional hearings that featured the original author of that piece, and some fire chiefs from across the country, and the CEO’s of the emergency equipment manufacturing companies. We should expect nothing whatsoever to come of that investigation; these are usually just photo ops so Congressmen can pretend to care about a problem.

Here though is that Substack again with a new expose of North American ambulance makers, which dropped at almost exactly the same time we arrived at the big Chinese factory group that builds a hundred ambulances a day. Business travel doesn’t leave me much free time, and I might have missed the Substack piece were it not for a friend of mine who forwarded the link to me, knowing it would set me off.

Evanston is a suburb of Chicago, Illinois, and is home to Northwestern University. Their city council just approved the purchase a new ambulance, on a Ford chassis, for $498,000. It’s a 2026 model, but won’t be delivered for at least two years because of production backlogs. The city is trying to switch to electric vehicles, but “there are no electric versions that are comparable.” This is also true in the American market, though not here. Evanston bought their previous ambulance13 years ago, kept it well maintained, and finally decided to buy a new one. And that price, half a million dollars, let’s call it, is over 4 times more than the one it’s replacing. The overall inflation rate during that time was 40%, while the cost for ambulances grew about 300% faster.

North Olmstead is in Cleveland, in Ohio. They just ordered a new ambulance from Horton, which is in Columbus. That also is on a Ford chassis. $495,000. Fire chief said that they have “had good luck with Horton, they are reliable” and local. In 2021, the fire department paid $353,000, so the new model is far more expensive, and will come in 925 to 950 days.

That puts the ETA sometime in 2028, which doesn’t sound especially lucky, or reliable. But “the days are gone when you could just call up a manufacturer” and get one by the end of the year. “That doesn’t happen anymore.”

Respectfully, but yes, it does. Ambulances in China are out the factory door in under 90 days. They could arrive at the Port of Long Beach in mid-August and be on the job in Cleveland or Chicago by Labor Day. The rest of the world does not deal with this problem. In every single country not named the United States or Canada, the problem doesn’t exist.

These price moves also do not exist. From 2000 through 2012, ambulance prices held steady, at between $140,000 to $180,000. Now the vehicles cost half a million dollars per, and the lines have gone vertical just in the past three years. At Horton, they increased prices by $68,000 in just one month. The Big Substack guys were curious why, and were told to call the local Horton dealer, who then suggested they call the spokesman for the REV Group. REV is the big Private Equity rollup that owns Horton and 13 other brands. A company spokesman is supposed to speak for the company, but never called back.

But the questions answer themselves. Private Equity groups have taken over this industry, and now run effective monopolies economy-wide. They move the prices up, and their profits follow:

That is the only rational conclusion. An ambulance is not any more complex to build than in the past. This is a reddit group of emergency workers, with 93,000 visitors a week, and this redditor points out that ambulance designs are the same since the turn of the century:

Companies perform a slight improvement, pretend it’s a new model, and jerk up the price. It’s true that an ambulance costs more than a truck on that same Ford or Benz chassis, because they need it to go faster and carry a bunch of medical gear, but that has always been true, and that is also true of ambulances built by Chinese factories for a tenth the cost and time.

Guilford County is in North Carolina, and they’re trying to explain here why their new ambulance set them back $600,000. Orders for ambulances are rising, and that is purportedly straining the supply chain for them. Delivery time used to be 4 months or less, now it’s two or three years. And the main driver of the cost increases and backlogs is not supply chain, it’s a function of how Private Equity companies make money, and emergency services is now a Private Equity industry. American Industrial Partners started scooping up ambulance companies, starting in 2006. Ten years later it had a portfolio of companies which they rolled into REV group, which they took to a public offering. In 2024, the company estimated they had about 70% of the manufacturing market share in the United States.

Up in Canada, another PE group, DBCM, got busy, rolling up manufacturers in the US and Canada. And after a decade of consolidating whatever companies REV didn’t get their hands on, today those two groups—REV and DBCM—control at least three fourths of the market in North America. They eliminated competition by buying them out, and closing manufacturing lines.

That strategy pays off. Backlogs are more profitable, and “investors love them.” Last year REV had over $4 billion in backlog orders for fire trucks and ambulances. The CEO even said on a conference call that the company loves order backlogs, because they turbo-charge profits. Earnings there increased 149% in 2024 from the previous year, and jumped another 65% in 2025. The stock price more than doubled, which far outgained the overall market:

All that consolidation — the industrial concentration — does not exist here. On made-in-China.com we looked for for ambulance models, direct from the factory manufacturer. Over 28,000 results were returned. I stopped counting when I got up to 40 different manufacturers, nationwide. In Hubei province alone, there are at least 15 companies, building over seven thousand various models and types.

The consolidation of his industry in the US has resulted in a duopoly; two companies that control pricing for the whole market. But this is their next trick, and the other big difference, which is that these companies’ dealer networks control everything from the procurement process to the cost of replacement parts. Local dealers have territories and can set their own prices, with big markups. That, again, is the crucial difference.

Chinese factories are direct to their buyers, and mechanics who need a new muffler can have one put on a plane tonight. A new motor can go on a ship the day after tomorrow. No middlemen are in the way. The reason that Private Equity groups operate this way, is that they can. They can afford to raise prices, then tell their buyers you can’t have a new ambulance before 2028. The reason Chinese factories do not operate that way, is that they cannot. They cannot afford to raise prices, and neither can they afford to tell their buyers the vehicle won’t arrive after a few months. Because there are dozens of other factories who can do it for a fair price, and faster.

I grew up with what I thought was a solid understanding of capitalism. Of the virtues of competition, which drives companies to build superior products for a fair price, for customers who have a lot of choices in the market. That’s not what we have anymore, in the United States, and so only a handful of cities across the country can afford to buy a new fire truck or ambulance, and no matter how much money they’ve got, they can’t get it for three years.

Be Good.

Resources and links:

Emergency Prices: How Private Equity Captured the Ambulance Market

BIG by Matt Stoller

Emergency Prices: How Private Equity Captured the Ambulance Market

Dan Geller is a Staff Attorney at Antimonopoly Counsel and can be reached at dan@antimonopoly.us…

Read more

2 months ago · 245 likes · 14 comments · Matt Stoller and Dan Geller

What your favorite make and model of ambulance?
https://www.reddit.com/r/ems/comments/1lfvstb/comment/myvfhsf/

North Olmsted fire department set to purchase new $495,000 ambulance
https://www.cleveland.com/community/2025/10/north-olmsted-fire-department-set-to-purchase-new-495000-ambulance.html

New ambulance to cost nearly $500K
https://evanstonnow.com/new-ambulance-to-cost-nearly-500k

Did a Private Equity Fire Truck Roll-Up Worsen the L.A. Fires?

BIG by Matt Stoller

Did a Private Equity Fire Truck Roll-Up Worsen the L.A. Fires?

Today’s piece is written by antitrust lawyer Basel Musharbash…

Read more

a year ago · 712 likes · 27 comments · Basel Musharbash

Sounding the Alarm: America’s Fire Apparatus Crisis
https://www.hsgac.senate.gov/subcommittees/dmdcc/hearings/sounding-the-alarm-americas-fire-apparatus-crisis/

Inside China Business, Chinese factories build fire trucks for $400,000 in six weeks. In the US it's $2 million in 4 years

The war in the Persian Gulf has shut down oil flows, and the price of diesel fuel has rocketed higher, everywhere.

Trucking companies are driving fewer miles, slowing delivery times, and rejecting loads outright while waiting for lower prices.

Even before the war, the total cost of ownership comparisons skewed clearly in favor of electric over diesel, even in areas with low fuel prices.

But with the new higher operating costs, and local bans on operating diesel trucks during nighttime hours, even energy-rich countries are electrifying their trucking fleets.

China enjoys significant competitive advantages in this shift. Deep experience in electric vehicle batteries are now fully developed for heavy trucks, and domination of global supply chains, mean strong cost savings when sourcing electric trucks from Chinese manufacturers.

Report:

Good morning.

We’re in Suizhou this week, at a factory that builds specialty heavy trucks. Chinese electric vehicles are taking over markets, wherever they’re allowed to be sold to car buyers. We will see that same dynamic in electric heavy trucks.

We were looking at the assembly line here, in this workshop for new energy vehicles for municipal governments. Garbage trucks, street sweepers and other sanitation equipment — there is booming demand for this equipment across the world. Several of the trucks on the line are headed to Moscow, and it’s good to wonder just why a country that is complete self-sufficient in oil and gas, like Russia is, would need to electrify their truck fleets. And when we dig into why engineers from Moscow are buying electric trucks from this factory in Hubei, we see soon enough that this factory -- and a handful of others just like it -- are taking over this industry.

Diesel trucks are loud. And cities across the world have restrictions on the use of diesel during nighttime hours. That means that diesel trucks can only be operated during the day, which is also when street traffic is the heaviest. Electric trucks are quiet, far quieter than trucks running on diesel. By switching to electric, operators can run their trucks round-the-clock. Drivers and companies can make better use of equipment and time, and can make deliveries at night instead of just during the day. European countries are relaxing the rules for electric trucks. Sweden, Austria, Italy, and Norway have exempted electric trucks from the nighttime bans on other trucks.

In the United States, local governments across the country have noise abatement laws around public buildings and hospitals which apply not only to diesel trucks, but also to construction equipment.

For companies located in urban areas, and in countries that have strict regulations for noise levels, electric trucks open up the rest of the day, and the calendar. They can bid for construction and municipal contracts, and run their operations 24/7 and thereby avoid heavy traffic for half the day.

That’s new. What else is new is that the total cost of ownership comparisons between diesel trucks and electric have blown out, now unambiguously in favor of electric because of the war in the Persian Gulf. The United States also has a lot of oil and gas, but diesel prices are rocketing higher anyway, across all markets, and now over $7 a gallon in California. Truck drivers in the US are cutting deadhead miles—those are miles driven when the truck is empty—going after lighter loads, and reducing speed, which means longer delivery times. Some drivers are just parking their trucks, waiting for lower fuel prices.

Similarly jumps in prices in the UK. In Australia diesel prices have more than doubled, and it’s a full-blown crisis. Driving companies are requoting contracts, there is a shortage of trucks that will lead inevitably to supply chains locking up completely, soon:

Sixty million people live in Kenya, and Africa has the same problems everyone’s got now.

The Total Cost of Ownership calculations take into account upfront costs, and then the ongoing fuel and maintenance expenses, comparing diesel trucks to electric. This study is from the United States, and pre-dated the war against Iran. It’s true that electric vehicles cost more than diesel. But over a 5-year period or longer, the lower operating costs for electric equipment mean they’re a better buy long-term. In California, the cost to buy and operate a battery-powered vehicle for 5 years costs $1,600 less than diesel. In Texas, surprisingly, the cost savings of BEV vs diesel after five years is $11,000, because Texas has less expensive electricity.

Even before these huge jumps in diesel fuel costs because of the war on Iran, the breakeven costs of electric vehicles were trending lower. Now diesel is prohibitively expensive, to the point that trucking companies across the world are parking their rigs and waiting for lower prices. Then we have the noise problem, and that governments are allowing electric trucks to operate 24 hours a day. Those all factor, heavily, in the switch to electric trucks.

But the reason it will be Chinese trucks taking over this industry is this part right here:

A key assumption of these Total Cost of Ownership analyses is that the upfront cost of an electric truck is far higher than for buying diesel, on average 2.5 times higher in the United States. But in China, electric trucks cost only 30% more than diesel equivalents, and Chinese diesel trucks also cost far less than diesel rigs in North America or Europe.

Chinese electric trucks offer value so compelling that two months ago Russians were booking flights to Hubei. In two months from now we’ll be seeing a lot more Africans and Australians. And in two years even the Americans will come.

Be Good.

Resources and links:

U.S. Diesel Prices Hit $5.40, Top $7 in California
https://www.truckinginfo.com/news/us-diesel-prices-hit-540-top-7-in-california

The economic case for zero-emission vehicles is often hidden in plain sight: The ICCT’s Total Cost of Ownership (TCO) Calculator reveals it
https://theicct.org/the-economic-case-for-zevs-is-often-hidden-in-plain-sight-the-iccts-total-cost-of-ownership-calculator-reveals-it-mar26/

Kenya fuel prices rise sharply despite reduction in tax due to Iran war
https://www.bbc.com/news/articles/cgrlll7qgdzo

'Out of control' diesel prices threaten Australia's crucial freight industry
https://www.bbc.com/news/articles/cde5d8y8lx9o

How much does it cost to run an electric truck?
https://www.flexiblepowersystems.com/news/how-much-does-it-cost-to-run-an-electric-truck/

Heavy Construction Equipment — Diesel or Electric? The Impact of Noise Ordinances on Construction Equipment”
https://www.nussgrp.com/heavy-construction-equipment-diesel-or-electric-the-impact-of-noise-ordinances-on-construction-equipment/

All is quiet at E-Trucks Europe
https://e-truckseurope.com/en/all-is-quiet-at-e-trucks-europe/

Sweden opens door to night-time operations for electric heavy trucks
https://www.electrive.com/2025/11/27/sweden-opens-door-to-night-time-operations-for-electric-heavy-trucks

The Iran War and the closure of the Strait of Hormuz have taken Qatari energy supplies completely off the market.

Russian natural gas fields were shut out of Europe beginning in 2022, and energy giants there invested massively into new pipelines to Asia.

China was a ready buyer for Russian oil and natural gas, and also invested heavily into huge strategic stockpiles of crude and natural gas storage.

Now Russian energy production flowing East, and China is already well-supplied.

Liquefied Natural Gas of Russian origin is offered at 40% discount to spot, to induce long-term supply relationships.

As a result, Asian economies are shifting their supply chains from the Persian Gulf to Russia-China. Meanwhile, EU countries are unable to get LNG at all.

Report:

Good morning.

The War on Iran has completely scrambled the supply chains for energy, and Russia and China are huge beneficiaries, along with—ironically—Iran itself. How we got here is a strange story, and it’s a combination of massive Russian energy production, and China’s so-called “overcapacity”, that Russia and China have become now a lifeline for Asian countries that are cut off from energy sourced from the Persian Gulf.

Russia did face a serious problem, when Europe cut off their purchases of Russian energy. It eventually turned out to be a far bigger problem for Europe than for Russia, but it did compel the Russians to seek out other export markets for their oil and natural gas. Russia hoped to find buyers for the 4 million barrels a day that were going to Europe.

The first place they looked was China, who is the world’s largest importer of crude oil, and Russia at the time was China’s primary supplier. China was also furiously building out petroleum reserves. The problem was the there weren’t enough pipelines at that time to move the crude and natural gas that used to go to Europe, over to China:

That’s to say that Russia was a desperate seller, and China an eager buyer, but they needed more pipelines to get it here. The ESPO pipeline contract called for 30 million tons a year from Russia to China in 2022, and China actually took 35 million tons.

So the question fast became this one—how to supply China with even more energy product? Last year the Power of Siberia 2, which is a natural gas pipeline, began construction, which will bring 50 billion cubic meters of gas a year. And two other existing pipelines were expanded, Power of Siberia One, to 44 billion cubic meters and Far East Gas to 12 billion.

Power of Siberia One was Russia’s biggest infrastructure investment in decades, and Siberia 2 will cost even more when it’s done. And just as in the crude oil markets, Russia needed China to take on demand to replace what was lost from the European markets. The EU had said they would shift their suppliers to Norway, the US, and the Middle East.

So Russia needed to develop new markets across Asia, and quickly. China is right next door, so they started here: In 2021, 10% of China’s natural gas imports was of Russian origin. By 2024, it was 25%, so Russian exports of natural gas to China more than doubled. Over a third of China’s pipeline imports came via Power of Siberia 1. 27 billion cubic meters. That was 2024.

In 2025, 38 billion cubic meters came through Power of Siberia One. As Russia expanded their pipelines, the Chinese did buy more--a lot more than the original contracts called for. What’s more, China was the only country who could take on the extra supply, anyway. These natural gas fields that used to supply Europe are a long way from China; the distance is vast. But Russia’s production costs are low, and as long as China is a buyer, it paid to build out the pipelines.

China’s energy demands continue to rise, China’s electricity production continues to grow faster than the rest of the world combined, and gas—that red part of those bars, still represents a small percentage of China’s overall energy mix.

This was an expensive gamble, on Russia’s part, to invest all that money on new pipelines East, to China, when in theory Europe could change their minds and resume buying Russian gas at any moment, or China may pull back their purchases that exceeded contract levels. But then the Middle East blew up, and all of Asia is now a hungry buyer for energy, no matter where from.

And here is where things get strange again—Russia has so much natural gas, and China already so well supplied, that they are offering discounts to new buyers in Asia, to lock up new gas business forever. The Strait of Hormuz is closed. Liquefied Natural Gas plants in Qatar have been blown up. A fifth of the world’s supply of LNG is off the market. Russia nevertheless is selling at a discount—when at first glance they could charge whatever price they want—but the objective is to expand markets and diversify their customer base in Asia. Trading companies in China and Russia will take the sanctioned energy in trade, and resell it to Asian buyers at a 40% discount to the spot market price.

Iran has taken Qatari LNG off the market completely until the Strait of Hormuz is open. And even were the war to end today, Qatar is looking at tens of billions of dollars for infrastructure repairs, and almost 13 million tons a year of LNG offline for five years at $20 billion per, which adds up to around a hundred billion dollars’ more in losses.

Qatar declared Force Majeure on long term contracts to Europe. So the EU said no thanks to Russian oil and natural gas, moved their supply chains to Qatar, and now they can’t get any at all. Qatar also told China and Korea there’s no LNG going their way either, but thankfully for countries elsewhere in Asia, there were already lots of pipes built and expanded, and China already had lots of strategic reserves and so can afford to help their Russian friends expand into new markets.

And Russia got more good news on crude oil, too. Exports of Urals crude are blowing higher, hitting the highest levels in years:

Be Good.

Resources and links:

Russia crude oil pipeline capabilities to mainland China—The ESPO crude oil pipeline
https://www.spglobal.com/energy/en/research-analytics/espo-crude-oil-pipeline

Power of Siberia 2 reshapes China's energy security calculus
https://eastasiaforum.org/2025/10/31/power-of-siberia-2-reshapes-chinas-energy-security-calculus/

Russia's Gazprom supplied 38 bcm of gas to China via Power of Siberia pipeline in 2025
https://www.reuters.com/business/energy/russias-gazprom-supplied-38-bcm-gas-china-via-power-siberia-pipeline-2025-2025-12-25/

Russia’s Oil Windfall From Middle East War Keeps Growing
https://www.bloomberg.com/news/articles/2026-04-14/russia-s-oil-windfall-from-middle-east-war-keeps-growing

Exclusive: Iran attacks wipe out 17% of Qatar’s LNG capacity for up to five years, QatarEnergy CEO says
https://www.reuters.com/business/energy/iran-attack-damage-wipes-out-17-qatars-lng-capacity-three-five-years-qatarenergy-2026-03-19/

Hubei province is home to China's automotive industry, with over two thousand local suppliers.

Suizhou is a major manufacturing center for the specialty and heavy truck segment.

Chinese factory groups work directly with companies and governments across the world, thereby going around middleman companies, agencies, and dealer networks, which are prevalent in North America and Western Europe.

By dealing directly with Chinese factories and their engineering teams, global buyers slash their procurement costs, and maintenance and repair expenses.

Hubei province is home to China's automotive industry, with over two thousand local suppliers.

Suizhou is a major manufacturing center for the specialty and heavy truck segment.

Chinese factory groups work directly with companies and governments across the world, thereby going around middleman companies, agencies, and dealer networks, which are prevalent in North America and Western Europe.

By dealing directly with Chinese factories and their engineering teams, global buyers slash their procurement costs, and maintenance and repair expenses.

This is a transcript, for the YouTube video found here:

Report:

Good morning.

We are in Suizhou for the week. Suizhou is in Hubei province, and it’s the home to CLW Group, who is one of the biggest manufacturers of specialty trucks in the world. Our company works for buyers of their heavy trucks, and so we work closely with CLW’s engineering and sales teams here. For this particular visit, we are with their divisions for emergency vehicles, new energy equipment and trucks -- for municipal government buyers—and heavy specialty truck. We also needed to learn how dump trucks are made.

This factory group is more interesting that almost any of the others we work with, because they make such a wide variety of products. They use assembly lines, but for their orders there is a very high degree of customization involved. So they have heavily automated production of their raw materials, molds, laser cutting, but there is a far higher degree of hands-on, skilled labor that puts the vehicles together.

It’s typical to think of an assembly line in the traditional way, where the factory is making the same thing a hundred times, or a hundred thousand times. But the factories our company works with are different—the capsule house factory has 50 going at a time, all slightly different, and here at CLW they have six different truck types on the same line, and that same story on two hundred different assembly lines.

The videos for YouTube this week are going to be a little different. We’ll shoot video when we can, in between everything else we’re doing.

Over 8,000 people work here, including hundreds of engineers and skilled technicians, on the dozens of production and assembly lines. But on a given day there are hundreds of foreigners here as well.

This company is typical of a factory group that does OEM and ODM. Hundreds of thousands of companies across the world go to China for OEM for electronics, or household appliances, or fashion, or consumer goods. CLW is also an original equipment manufacturer, but for the heavy trucks and specialty equipment segment. Over 200 automative and trucking brands from across the world outsource their design work and manufacturing to CLW. So for companies with a strong local reputation, not only can they save money by buying directly from the factory, but they also put their own company’s name on the equipment.

Chinese factories, and China’s industrial system itself, have created a new business model. And it is one that is quickly being adopted--and preferred--by business enterprises, and especially for governments. CLW and factory groups like this one do not have distributorships across the world, for most of their product lines. Their customers buy directly from this factory. Customer service and equipment maintenance and repair—that is also direct with the factory here and its engineers.

So there are two things working strongly in favor of that business model, especially compared to manufacturing companies and processes in the United States. First, the rate of production is very high compared to manufacturing centers in North America and Western Europe. For example, about 5,000 fire trucks are built and sold in the United States each year. Oshkosh / Pierce is the leading maker of fire engines in the US, with output of around a thousand each year. Just in these three big buildings here in Hubei, CLW produces over 20,000 a year.

Then comes the fact that buyers are direct with the factory. Again, using the fire truck example. A city that buys fire trucks from Oshkosh, or Volvo, also signs a maintenance and repair agreement to have its trucks serviced by the dealer networks, who can set their own prices locally. That feature is a major driver of future profits for the manufacturers and their dealer networks. That’s not how it works with Chinese factory groups. Buyers are dealing directly with the factory, and when new parts are needed for routine maintenance, or from damage, the engineers here just put the part on a plane and send it over. Fire departments and companies who use heavy trucks typically have qualified mechanics who can swap out parts anyway, so this is a major cost savings. So everything is faster and less expensive with no middlemen in the way.

We’re in Hubei province, and another key advantage for this particular factory, in this particular industry, and at this particular location, is China’s industrial clustering policy. Last month we were in Foshan, which is where all the furniture in the world comes from now. Next month we’ll be in Henan and Shandong, where all the heavy construction and ag machinery gets built.

Hubei province is automotive. Over 2,000 suppliers in the automotive industry are here. This is Suizhou, where the niche segments are, like specialty trucks. This factory group has over 400 suppliers, all within an hour away.

And that’s the trick. It’s how this company can offer over a thousand different varieties of specialized trucks and vehicles, across over a hundred countries, and still deploy the push-pull production and inventory management system. CLW does not have giant piles of raw materials or parts that may be used, eventually. Raw materials and components are ordered when needed, and equipment is produced as ordered.

This is a supply chain channel. We look hard at where things come from, and try to understand why things come from there. And there are just a lot of reasons why everything comes from China now.

This is Wuhan. In Hubei. Be Good.

Resources and links:

China's Hubei Auto Industrial Cluster at a Glance
https://autonews.gasgoo.com/articles/news/chinas-hubei-auto-industrial-cluster-at-a-glance-2031619805872771073

Get to Know Sutphen, Which Has Been Making Fire Engines in the United States Since 1890
https://www.sutphen.com/get-to-know-sutphen-which-has-been-making-fire-engines-in-the-united-states-since-1890/

Major Industrial Clusters in China
https://www.china-briefing.com/news/chinas-industry-clusters-comprehensive-overview/

WATCH HOW Space Capsule Houses are built and shipped to AirBnb's, ADU dealers, and resort properties

Three days at the Louvre: How China took over the global furniture industry

BYD is the world's largest maker of electric vehicles, and KFC is China's largest fast-food chain.

BYD and KFC have a new partnership, combining 9-minute car charging and KFC's fast-food.

Though BYD is growing quickly in foreign markets, it struggling in China, with sales down over 30% on the year.

Report:

Good morning.

This does make sense, business-wise. And it’s good to get away from the Persian Gulf War and the supply-chain shocks that are hitting almost everyone almost everywhere, just for one day. BYD is the world largest manufacturer of electric vehicles. KFC is KFC. They’ve just announced a partnership to build a network of 9-minute, one-stop drive throughs that combine these companies’ core strengths, of fast car charging, and fried chicken.

KFC is the biggest fast-food chain in China, and they’re crazy about KFC in ways Americans cannot appreciate until we see it for ourselves. For example, in the US it’s almost impossible to find a KFC outlet that is open past ten, or one that serves breakfast. Business hours are 10 to 10. In China, they open early morning, and many of them don’t close at all. There are four within a five-minute walk of my apartment, and three of them are open 24 hours.

KFC’s in China are a lot bigger, and their menus here feature a much wider selection. China has more KFC restaurants than the next ten countries combined, and three times more than in the United States.

KFC doesn’t need help from anyone to sell chicken in China. So this partnership is to benefit BYD, who is now struggling to sell cars.

BYD’s sales are growing fast across the world, but they’re getting killed in the Chinese market by Leapmotor, Nio, Xiaomi, and other brands. BYD then is teaming up with KFC to offer a solution to a problem we didn’t know we had, until today: They’re breaking down the boundaries that currently exist between charging your car and eating chicken, which used to be two completely different things.

This is from BYD’s Wechat account, and we’ve translated it. The objective is a “9-minute one-stop human and vehicle power replenishment.” BYD has thousands of charging stations across the country, and they’re building tens of thousands more. But unfortunately for BYD car drivers, the nearest KFC may be a few hundred meters away.

This map is the KFC locations in my own neighborhood in Kunming. And that is something Americans can understand, the hassle of walking for a few minutes.

Be Good.

Resources and links:

比亚迪与肯德基达成战略合作，携手打造9分钟一站式人车补能生态
https://mp.weixin.qq.com/s/u1qAswbCn6-weyWII6Smlg

Fast food, faster charging? BYD and KFC China collaborate to offer 9-minute refueling stations
https://www.cnbc.com/2026/04/09/byd-and-kfc-collaborate-to-offer-9-minute-refueling-stations-in-china.html

BYD sales drop 36% as domestic EV rivals gain ground in China
https://www.cbtnews.com/byd-sales-drop-36-as-domestic-rivals-gain-ground/

BYD Under Pressure : Home Market Collapse vs. Global Boom

China Business Spotlight

BYD Under Pressure : Home Market Collapse vs. Global Boom

Pressure on BYD is mounting as sales in the Chinese market are falling sharply and domestic momentum is slowing noticeably. Whilst the car market as a whole has made a weak start to the year, the combination of a price war, waning demand and the political climate is hitting the manufacturer particularly hard. At the same time, however, a contrasting tre…

Read more

2 months ago · 9 likes · 4 comments · China Business Spotlight