Key facts
- China is seen as the sole winner in Asia from the Strait of Hormuz crisis.
- The crisis, triggered by US and Israeli strikes on Iran, has sent global energy prices soaring.
- China's substantial oil reserves and extensive renewable energy infrastructure have mitigated its exposure to the energy shock.
- The country's dominance in solar and clean technology supply chains has allowed it to capitalize on increased demand.
- Beijing aims to position the US as a destabilizing force in the Middle East.
- The crisis might lead China to reassess potential military actions against Taiwan.
China has emerged as the primary beneficiary in Asia from the crisis surrounding the Strait of Hormuz, according to a report by the Asia Group thinktank. The closure of the vital waterway, which handles a significant portion of global oil and gas, has sent energy prices soaring, particularly impacting Asian markets.
The report highlights that before the closure, approximately 80% of oil and nearly 90% of liquefied natural gas transiting the strait were destined for Asian markets. The crisis was triggered by US and Israeli strikes on Iran on February 28, which resulted in the death of Iran's supreme leader, Ali Khamenei.
Researchers analyzed the economic and political repercussions for Asia's largest economies—China, India, Japan, and South Korea—as well as emerging markets in Southeast Asia. They concluded that China's extensive strategic energy reserves and its ambitious rollout of renewable energy infrastructure have made it less vulnerable to the energy shock compared to its regional peers.
China has been actively building up its energy stockpiles, taking advantage of low prices. Its crude imports have increased, with a substantial portion directed to reserves. Furthermore, the country has significantly expanded its renewable energy capacity, particularly solar power, aiming for a substantial portion of its energy mix to come from non-fossil sources by 2030.
The report notes that China's dominance in the global supply chain for solar and other clean technologies has also allowed it to benefit from increased demand, with substantial growth in electric vehicle and solar panel exports. While Beijing has called for a ceasefire, the crisis allows it to frame the United States as a destabilizing actor in the Middle East.
However, some risks for China exist. Experts suggest that while a loss of US credibility might seem beneficial, China does not necessarily seek to replace the US as a hegemon in the Middle East. Additionally, the crisis might cause Beijing to reconsider any future military actions against Taiwan, given the demonstrated difficulties of navigating ships through hostile territory.