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 of 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 on 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 neighbours 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 in 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 centres and other critical infrastructure across the region. The seaborne transit not only of energy but also of goods carried on giant container ships through the Strait of Hormuz is imperilled.
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 William and 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 the projects have been built by Power Construction Corporation 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, United Arab Emirates, 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.
The New York Times