Huge news in China today since Bessent actually sanctioned larger entities this time. Hengli is a huge deal. China is entirely willing to fight economic war over this from what I can see.

I will now talk about why Hengli is a big deal & why Trump admin stepped over the line.

https://twitter.com/DropSiteNews/status/2050658832234533140

Hengli in Dalian Changxing Island was built w/ 280B RMB in total investment. Dalian is 1 of China's 7 major petrochem base. 20mt/yr of refining, 1.5mt/yr Ethylene, 17mt of PTA + 5mt/yr of coal chemical.

It had 201B RMB in rev in 2025. Its parent Hengli group made 899B.

What is going on here?
China has 60% of world's silver refining capacity. Why did it go from world's largest Silver Ingot exporter to now a net importer (a large one too)

Why did US got from a major net importer of silver to net exporter?
Maybe it's the export license put in at end of last yr to restrict Tungsten, Antimony & Silver.

But so far in 2026, China's import of silver has significantly exploded vs previous yrs. Despite the higher px, where is the demand coming from?

Optical fiber is another huge constraint in AI DC expansion. YOFC is the mkt leader here, while Corning is the biggest player in US mkt.

in Q1, China's sales here grew 35% YoY w/ oversea orders growing by 55% YoY. Demand is very high to North America & Southeast Asia. Suppliers fully booked until 2027Q1. Px for certain product up 650% YoY.

In fact, supply is not coming online as fast as demand requires. Some major suppliers increasing product in 2026 includes HengTeng & Far East Smarter Energy.

As AI DC go fully optical, demand for optical fiber grew exponentially. Note demand in SEA, where many American & Chinese big tech are building Data centers. Note that Optical fiber is not the only part of optical supply chain in short supply.

Everything from OCS to FAU to EML chips to SiPo Chips to MT-FA are in demand. Also as described below, equipment makers need to expand. 40% are for coupling, 40% for pkg/assembly, 20% for SMT.

This is no longer about Iran, but US global empire. Someone explained to me 4 yrs why US had to enter a Taiwan scenario & same logic applies here.

It CANNOT tolerate losing its hegemony. Handing IRGC control of 20% of global energy supply would do that. Let me explain below:

https://twitter.com/ProfessorPape/status/2045546100761739471

US already withdrew from Afghanistan & Central Asia post GWOT, which China & Russia time to buildup transport network across Asia & Europe. China is connecting itself via rail to Iran.

Rail & energy link will be built to Iraq & rest of GCC:

https://x.com/tphuang/status/2040168249724109102

China long realized it had a "Malacca problem". By 2016, 15m bpd of crude passed thru SoM & SCS b4 reaching North Asia.

To mitigate, it built Central Asian, ESPO, POS1 & KyaukPyu pipelines to get crude/NG over land + North Sea Route.

+ its major SCS island build out since 2013

https://twitter.com/tphuang/status/2044181930816479662

In order to control SCS, PLA had to control major area of SCS that are far from Hainan.

It did 2 things:
1) fully built a huge naval base in Sanya (Southern most city in China) + other mil installation across Hainan.
2) expanded & militarized major reefs in SCS that it held.

45% of Saudi crude export to China was settled in RMB. 41% of Middle Eastern crude to China was settled in RMB, 52% in $ & 7% in EUR.

In March, RMB share of China's global payment is up to 56.37% while $ share dropped below 40% to 39.8%.

Could go higher after UAE visit to China
Saudis could very well be settling more in RMB due to shift from relying on Chinese weapons (directly + those operated by Pakistan) for its security vs reliant on US protection.

PAF will get J-35 & KJ-500 soon, which was speculated as a way for Saudis to get Chinese gear w/o offending Americans.

Unmanned transport is taking off in China & more logistics companies are using them.

Recently, XAC's HH-200 had its maiden flight. It carries 1.5t up to 2360 km long. 2 workers can load cargo w/ ordinary forkLift in just 5 min. Significantly lowers opex.

Recent development 👇 In China's recent low altitude conference, JD's logistics arm signed order/LOI for 160 AR-E800 drone w/ CHAIF, 20 HH-200 w/ XAC & 20 CM-100 w/ SAC.

Using unmanned transport allow 24/7 aerial ops for JD & utilizing remote airport due to minimal requirement for workers.

Weekly update on Iran conflict. Since ceasefire got announced, # of trips actually lowered for a couple of days there. This is the real pain for global economy.

Not that many tankers from the Gulf got out in March & they seem to be all headed to East Asia, likely Iran -> China.

Even w/ the Iranian & Russian supply, China banned Sulfuric Acid export recently + started tapping commercial oil reserves (not SPR).

It's unclear how much of 1.4B bbl are SPR vs commercial reserves, but China will only draw down latter, 1m bpd just keeps refineries going.

My weekly update on Iran conflict:
See Dimi's 3-day moving avg on Iranian firing rates + UAE's report on missile & drone attacks from yesterday.

Holding steady w/ higher launches yesterday likely due to reduced air pressure as US military was doing SAR missions in Iran.
US allies in the region are running out of interceptors after a month of attack & Strait of Hormuz remains shut unless you have a deal w/ Iranian & "pay the toll".

Iran's position in the conflict is increasing since more of its strikes can get thru & threaten GCC countries more

Since 2025/5, China established regular rail freight traffic from Xian to Tehran thru Kazakhstan & Turkmenistan.

This reduced travel time from 30-40 days over sea to just 15 days. China supply chain + machineries to Iran in return for oil products. Why this is important? Iran would provide a Russian-free rail option to Europe that is not limited by Caspian Sea. Can go through newly constructed CKU rail & Turkmenistan or thru Afghanistan or thru Kazakhstan+Turkmenistan or thru Pakistan.

Can also go thru Iran into GCC countries & Egypt.

As we are 1 month in, the most noticeable change comes from the Coalition missile expenditure both on offense & defense.

RUSI report of 1st 16 days + Tomahawk report -> huge interceptors & standoff missile depletion on frontline. Effect of this is quite evident from past week.


Yesterday, another few tankers + 1 or 2 E-3 got taken out (only 6 E3 in theater in total), huge loss for USAF.

Israel saw Dimona & ICL struck earlier this wk + Ben Gurion airport -> Iranian missiles & drones are able to get thru w/ much fewer interceptions.

This wk, China & Vietnam signed 4 docs on planning for 2 standard-gauge railway lines: Hanoi-DanDong & Hai Phong–Ha Long–Mong Cai.

This is on top of the Lao Cai–Hanoi–Hai Phong railway line that Vietnam started construction in 2025/12/19.

What does this mean for China/Vietnam? Lao Cai - Hai Phong project connects Northern Vietnam from border w/ China in Yunnan to the biggest city next to Halong Bay.

390 km in total across 6 provinces & 32 stops & supporting 21mt freight/yr.
Complete by 2030.

China lowered project cost to $7.7B w/ preferential loan for 64% of total cost.

What would a mass foreign outflow from GCC countries look like? UAE by itself holds $720B in foreign capital. If $570B flows out from all GCC countries to Singapore, HK & EU.

Impact on Singapore & HK would be huge. Total economic impact for HK & Singapore would be $236B & $295B respectively, which would be 39% growth to GDP, which likely will not just stay in these 2 cities but also spread to greater China area, Thailand, Malaysia & Indonesia.

It would be one of the biggest boost to Southeast Asia economy ever.

As such, I think China will take a different approach w/ UAE going fwd. Whereas China was seeking UAE capital b4, now it just seeks relocation of foreign professionals & capital to East Asia.

https://x.com/tphuang/status/2035760127597215996

A massive outflow of foreign capital from UAE would be total economic annihilation there. It would be 2x as bad as Great Depression & lead to massive contagion, bank runs & currency collapse across GCC countries, b4 spreading to global banking sector.

China's approach toward LNG will fundamentally change after the current energy crisis.

China imported > 84 BCM LNG in 2025 & that cannot continue. LNG supply from Qatar is not secure, nor does China need it.

Expect more pipeline gas, shale gas, green hydrogen & heat pumps to reduce the current reliance on unreliable LNG tankers.

https://x.com/tphuang/status/2033252541064945884

There are 2 major gas pipeline projects under way to China:
Phase 4 of the Central Asia Pipeline network (add 25 bcm/yr from Turkmenistan & Uzbekistan)
Power of Siberia 2 (add 50 bcm/yr when complete)

when complete, China will import 95 bcm from Russia, 70 from Central Asia & 12 bcm from Myanmar via pipeline

Weekly update on Iran conflict:
Iranian strikes were trending up b4 last couple of days when their New Yr & Egyptian president visits slowed down attacks. Expect it to trend up again tonight.

Centcom attacks trending down as USAF is forced to operate farther away & Lincoln CSG moved farther away & Ford is under repairs in Crete.

Things trending in the right direction for Iran & wrong direction for coalition forces.
If you need to know how things are going:
B-52 continues to launch JASSM. F-35 got shot down when it got too close to Iran. USAF is avoiding part of Iraq air space where resistance fighters have taken over & attacked Victoria base & green zone so much that NATO & others have withdrawn from there.

Update on Iran's attack tempo:
Its attack tempo noticeably slowed down earlier this wk as it shifted to longer range & more powerful BM while reducing attacks on GCC countries, especially UAE.

But that look to have changed last 2 days as Saudis & Jordan are getting attention

A simple look at the US tanker fleet action would point to the importance of Saudi Arabia, Jordan & Iraq toward continually supporting Coalition strikes on Iran.

As such, Iran has dialed up attacks on US bases & radar/command sites in this line.

Impact of Sulfur supply interruption will hit Sulfuric Acid production, which is needed for phosphate (fertilizer & LFP battery), chemicals, metal processing (leaching for Cu, Ni, Co, U, Zn, Fe & Ag), refining & more.

Thread on Sulfur industry, China's role & Hormuz risks👇

https://twitter.com/tphuang/status/2028910743404593464

Most common use is fertilizers.
Sulfur is needed to produce Sulfuric Acid.
Sulfuric Acid + Phosphate rock is need to produce phosphoric Acid.
Which is the main feedstock for several types of phosphate fertilizers.
Phosphate demand recently have jumped due to LFP batteries.

In 2025, China continued to import large qty of Rare Earth in order to produce RE alloys & magnets.

RE Oxide in 2025 is up 15% YoY, which has made up for decline of 56% on RE concentrate & 28% in RE compounds. Overall tonnage import remains flat while value increased by 12%, since Oxide are more processed & are higher valued.

China also imports small qty of magnets. Big change in import this yr is caused by no longer getting Rare earth ore from US (for obvious reasons), but more RE Oxide from Myanmar & ore from Laos.

56% of import from Myanmar, 25% from Laos & 19% from US. I'd expect the US import to drop to ~0 in 2026.

A thread on China's auto export for 2025:
7.08m passenger vehicles: 3.26m ICE, 2.21m BEV, 1.06 PHEV & 506k hybrids
1.065m trucks: 681k diesel, 220k gasoline, 85k BEV & 53k PHEV
106k coaches/buses: 64k gasoline, 24k diesel & 17k BEV
Overall, this was 30% growth vs 6.41m in 2024. Overall, the goal of China's auto industry is to surpass Japan. Composition of China's oversea sales need to shift from export to local production.

See below where Japan Inc sold 24.62m overseas in 2018, but 19.8m (80.4%) was produced in oversea factories. Big shift from 1985 when just 15% was produced overseas.

In China, provinces make their own yearly dev plans. I was really impressed in Jan, when I read Inner Mongolia's 2026 plan & here is a look:

It wants to be China's main strategic energy base & produce 1.2B ton of coal, 3.1mt of crude & 31 BCM of NG every yr.

It wants to build 500kV grid along major centers w/ 15 projects. For renewables, it plans to add 40GW to the grid for 170GW in cumulative installation & generate 300 TWh of electricity.

Plans to expand the major renewable bases along desert regions & deliver to other provinces.

Also build 0-carbon industrial parks, lithium industry & modernize coal-to-chemical plants to integrate green energy (like methanol).

Greatly build up the usage of RE magnet in NEVs & wind turbines.

China's wind industry had a banner yr in 2025 w/ 119GW of installation, which was up big time from 37GW in 2022 & 79GW in 2024. Cumulative installation thru 2025 is now up to 640GW.

1130 TWh electricity was generated from wind in 2025. This likely goes up quite a bit in 2026 as most installed capacity was toward end of the yr. See below for wind installations in 2024 (yellow) & 2025 (green).

There was a bump in May due to reforms starting in June, but installation exploded in Dec w/ 36.8GW of installation just in that month.

Bid result would indicate 2026 installation should surpass this total.