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Middle East conflict sends ripples through China's economic plans
China remains shielded from immediate energy shortages due to stockpiled oil reserves but is closely monitoring the long-term fallout of the Middle East crisis on its global ambitions, analysts say.
With thousands of Communist Party delegates convening in Beijing this week to outline the country's economic roadmap, the conflict adds another layer of uncertainty to an already fragile recovery. China set its annual growth target at its lowest level since 1991 on Thursday, as it grapples with weak domestic consumption, a protracted property slump, and mounting local government debt.
Energy security and trade routes at risk
While China's oil reserves are sufficient for several months, a prolonged conflict could disrupt critical shipping lanes like the Strait of Hormuz, a vital chokepoint for its energy imports. Nearly 12% of China's crude oil-about 1.38 million barrels per day-comes from Iran, much of it allegedly relabeled as Malaysian to bypass sanctions, according to the Center on Global Energy Policy at Columbia University.
Floating storage in Asia holds over 46 million barrels of Iranian oil, with additional volumes in bonded storage at Chinese ports like Dalian and Zhoushan, where Iran leases tank space. Analysts warn that sustained instability could strain these supply chains, complicating China's efforts to stabilize its economy through exports.
A transactional partnership with Iran
China and Iran formalized a 25-year strategic partnership in 2021, with Beijing pledging $400 billion in investments in exchange for steady oil supplies. However, experts say only a fraction of the funds have materialized, and the relationship remains largely transactional.
"There's no real ideological or cultural bond between China and Iran. Beijing's strategy was sometimes served by Iran being a thorn in the U.S.'s side, but that's a fragile foundation," said Professor Kerry Brown, director of the Lau China Institute at King's College London.
Professor Kerry Brown
Allegations persist that China has supplied Iran with surveillance technology used in crackdowns on protesters, and U.S. intelligence has accused Beijing of aiding Tehran's ballistic missile program. Despite these ties, China has refrained from direct involvement in the conflict, issuing a muted call for a ceasefire while condemning U.S. and Israeli strikes on Iranian soil.
Superpower limits and global positioning
China's response to the crisis underscores its limited ability to project military power beyond its region. While Beijing positions itself as a counterbalance to U.S. dominance, analysts note it lacks the capacity to protect allies like Iran from direct intervention.
"The U.S. is demonstrating what being a superpower really means-the ability to force outcomes globally. China, despite its economic might, is not equipped to do the same," said Philip Shetler-Jones of the Royal United Services Institute.
Philip Shetler-Jones
Beijing has sought to capitalize on the conflict's fallout, framing Washington as an unpredictable actor. The People's Liberation Army has amplified this narrative on social media, while Chinese officials, including Foreign Minister Wang Yi, have criticized U.S. actions as destabilizing. Wang's recent calls to counterparts in Oman and France, along with plans to dispatch a special envoy to the region, signal China's interest in mediating-though cautiously, given its upcoming meeting with U.S. President Donald Trump.
Economic and diplomatic calculations
The conflict's economic repercussions could hit the Global South hardest, exacerbating food shortages and fracturing Western alliances. Professor Steve Tsang of SOAS China Institute noted that disruptions to energy and air travel may have "far greater ramifications" for developing nations than for Western economies.
For China, the crisis presents both risks and opportunities. A prolonged war could disrupt African economies, where Gulf investments have fueled growth-a key pillar of China's Belt and Road Initiative. Conversely, Beijing may exploit perceived U.S. overreach to bolster its image as a stable alternative to Western leadership.
"China's argument will be that Trump has exposed Western hypocrisy and the fragility of the liberal international order," Tsang said.
Professor Steve Tsang
As China prepares for Trump's visit later this month, its strategy remains twofold: avoid entanglement in the conflict while probing U.S. intentions on other flashpoints, particularly Taiwan. Shetler-Jones suggested that if the war proves unpopular in the U.S., it could accelerate a shift toward restraint in American foreign policy-potentially giving China more room to maneuver in its own neighborhood.
