For China, billions of dollars are at risk from a widening war

The New York Times - With oil prices surging and the conflict in the Middle East intensifying, the economic stakes for China are rising.

The cost of oil on Monday hit levels not seen in four years, one week after the United States and Israel launched an attack on Iran, an ally and financial partner to China. Fighting has halted virtually all traffic through the Strait of Hormuz, a critical passageway for China’s energy and goods.

China has a lot to lose in a widening conflict. In Iran, China found a cheap source of oil in recent years. Across the region, it found governments keen for its know-how in renewable energy and technology. China grew reliant, like much of the rest of the world, on the Middle East’s supply of both oil and gas.

The region’s importance to China became even more pronounced this past year, as the country’s trade rivalry with the United States escalated and it was unable to sell many goods to the U.S. market, once China’s biggest market. The United Arab Emirates became the fastest-growing market for Chinese cars. Demand from Saudi Arabia and its neighbors for Chinese steel doubled. China’s exports to the Middle East grew nearly twice as fast as its exports to the rest of the world in 2025.

Chinese investment, too, is growing faster there than anywhere else in the world.

“The region is basically considered the biggest growth potential for China,” said Dan Wang, China director at Eurasia Group. From 2019 to 2024, China invested $89 billion directly into the Middle East, Ms. Wang said.

The region's importance to China became even more pronounced this past year, as the country's trade rivalry with the United States escalated and it was unable to sell many goods to the U.S. market, once China's biggest market. The United Arab Emirates became the fastest-growing market for Chinese cars. Demand from Saudi Arabia and its neighbors for Chinese steel doubled. China's exports to the Middle East grew nearly twice as fast as its exports to the rest of the world in 2025.

Chinese investment, too, is growing faster there than anywhere else in the world.

"The region is basically considered the biggest growth potential for China," said Dan Wang, China director at Eurasia Group. From 2019 to 2024, China invested $89 billion directly into the Middle East, Wang said.

These trade ties are now in the line of fire as the U.S. and Israeli militaries attack Iran, and Iran strikes back at ports, ships, pipelines, desalination plants, data centers and other critical infrastructure across the region. The seaborne transit of not only energy but goods carried on giant container ships through the Strait of Hormuz is imperiled.

China also has credit at risk, having extended loans for contracts and projects throughout the region.

The portion of China's global portfolio of loans and grants to the region doubled to 10% in 2023, according to AidData, a research institute at the College of William & Mary in Williamsburg, Virginia. State-owned financial institutions extended loans to oil refineries and seaports that finance the production and transport of commodities.

In Qatar, Chinese banks are helping to fund and build a major expansion of a liquefied natural gas production facility. China's state-owned oil giant Sinopec holds a stake in the facility's North Field East expansion project. The facilities were attacked last week.

Chinese investors have funded the expansion of Israel's Haifa Port and the Emirates' Khalifa Port, and the resulting terminals are owned and operated by Chinese companies.

In Iran, dozens of Chinese companies have financed, built and run infrastructure, electric grids and petrochemical plants.

China is also the largest investor in desalination in the Middle East, where potable water is scarce. Nearly all of the projects have been built by Power Construction Corp. of China, with projects in Saudi Arabia, UAE, Oman and Iraq.

"There are so many countries and so many assets spread across the region," said Brad Parks, the executive director of AidData. "We could see in the deal flow there was just a lot of enthusiasm about doing more and more work in the Middle East."

Major Chinese technology companies including Huawei, Alibaba and Tencent have set up offices in Dubai, UAE, where employees work in a complex that includes Microsoft, Meta and Google. Three Chinese smartphone brands -- Transsion, Xiaomi and Honor -- are gaining market share in the region, after South Korean giant Samsung, according to Omdia, a tech research firm.

It's not only large companies seeking fortunes in the Middle East.

In 2018, Haiyang Zhang, a Chinese entrepreneur, moved to Dubai, the Emirates' largest city and a hub for international finance and visitors. She left a job at a Chinese-company this year to start her own business helping Chinese investors expand in Dubai. Some of her partners are in the new energy sector. Zhang believes Dubai remains a secure place for certain Chinese investors to put their money, she said, but is concerned about the impact of a sustained conflict.

Over the past week, several Chinese companies with growing presences in the Middle East instructed their employees in the region to work remotely. On March 1, tech giant Baidu said it would pause its robotaxi services in the Emirates. Chinese food delivery platform Keeta has indicated that its services in the region may be suspended or temporarily limited.

Despite China's deep financial ties in the Middle East, it is facing the same risks as other countries, including the United States, that are heavily invested in and dependent on the region.

China has condemned the strikes by Israel and the United States and called for a cessation of the fighting. As the conflict has escalated, China's top diplomat, Wang Yi, has held calls with counterparts in Iran, Oman, Israel, Saudi Arabia and the UAE.

But Iran's threats have caused traffic in the Strait of Hormuz to plunge. And it's not just energy that is blocked. The Chinese shipping giant Cosco stopped bookings through the strait, and Maersk, the Danish company, suspended certain critical routes in the Middle East.

Zhang, the Chinese entrepreneur in Dubai, said she observed American businesses and executives evacuating from the region, and to her that spells opportunity.