Turan Research Center

Beijing is gaining ground economically and diplomatically, but avoiding the risks – and rewards – that global leadership can bring.

The war in Iran and the blockade of the Strait of Hormuz are, depending on whom you ask, either a strategic windfall for Beijing or a black swan event that could eventually undermine its export-driven economy.

But after months of war — and a new phase shaped by tenuous cease-fire talks and a U.S. blockade of Iranian ports — the reality is more complicated. The war has proved a mixed blessing for Beijing, exposing its unwillingness to take up the mantle of global leadership.

Rising yuan transactions, new frictions between the United States and its allies, and a U.S. strategic pivot back to the Middle East from the Asia-Pacific all benefit Chinese policymakers. But the war in Iran is also showing Beijing’s limits as a power broker and revealing that its superpower ambitions remain confined, for now, to trade hegemony.

China has moved to seize some opportunities, capitalizing on rising anti-American sentiment and strengthening its global standing amid the fallout. But Beijing has stayed on the sidelines, opting for a slow, diplomatic approach: prioritizing opportunistic inroads, shielding its economy, and stabilizing its rivalry with the United States ahead of a high-profile summit between U.S. President Donald Trump and Chinese leader Xi Jinping scheduled for mid-May.

Beijing would prefer that the global economic uncertainty brought by the war did not exist at all. Its actions should therefore be viewed less as a bid for greater influence and more as a defense of stability — both at home and in an increasingly disrupted Middle East.

Playing Defense In A Disrupted Global Economy

Since U.S.-Israeli strikes on Iran on February 28, Beijing has cast itself as a pillar of international stability and as a foil to a more erratic White House. That strategy has yielded real dividends. China has edged ahead of the United States in recent Gallup polling, and longtime U.S. partners like the United Kingdom and Canada — already navigating frictions with the current administration — have looked to repair and deepen ties with Beijing as a hedge against American volatility amid the war.

Other secondary benefits have followed. The blockaded Strait of Hormuz and rising oil and gas prices have boosted demand around the world for China’s green technology sector, driving orders for Chinese-made solar panels and electric vehicles.

The war has also fueled fresh enthusiasm about the yuan’s prospects to rival the U.S. dollar. The currency has become a main form of payment for ships that have paid illegal tolls to Iran for safe transit through the Strait of Hormuz. and the volume of yuan-denominated crude oil sales has increased due to the war. Chinese state media report that the nation’s Cross-Border Interbank Payment System (CIPS) — China’s alternative to the U.S. SWIFT payment system — has logged record highs, surpassing 1.22 trillion yuan ($178 billion) in single-day transactions for the first time in April.

Beijing has also sought diplomatic gains elsewhere. Both Xi and Chinese Foreign Minister Wang Yi have been quick to denounce U.S. actions and frame Beijing as an arbiter of international norms, with the Chinese leader calling the disruptions brought from the war a “return to the law of the jungle.” Some reports, including comments from Trump himself, have also suggested China played a role in bringing Tehran to the table for cease-fire talks in Islamabad.

But it is unclear how much strategic gain Beijing actually reaps. The stepped-up activity likely reflects Chinese anxiety that the war’s economic fallout could rebound on China itself. Rising commodity prices driven by Middle East supply disruptions could squeeze profit margins.=, while sustained oil price increases could weaken global demand and slow orders for Chinese manufacturers.

China has also held back from a larger play for influence. Beijing’s strategic petroleum reserve is the largest in the world, with the commodity intelligence firm Kpler estimating that Chinese refineries stockpiled between 1.2 and 1.4 billion barrels of oil before the war began. China is also the world’s second-largest exporter of fertilizer and holds stockpiles of industry-critical materials. Some analysts have suggested that Beijing could contribute a portion of its oil reserve to a global stability pool and extend similar support with fertilizer to head off a potential food crisis in the Global South.

Instead, it has restricted exports to bolster domestic security and an economy still grappling with the aftershocks of COVID-19 policy missteps and a collapsing property sector.

A Fragile Partnership and a Tightrope in the Middle East

This defensive posture is also visible in China’s complicated relationship with Iran and its delicate balancing act with the Gulf States.

China is Iran's largest oil buyer by far, taking up to 90 percent of the country’s crude. Beyond providing discounted oil, Tehran has also been a reliable anti-Western bulwark. In return, Beijing has become Tehran's largest trading partner and an increasingly important source of technology and security cooperation — vital to Iran's ability to withstand Western political and economic pressure.

But the relationship has also been marked by mismatched expectations and behind-the-scenes frictions. The two countries signed a comprehensive strategic partnership in 2016, culminating in a highly touted 25-year strategic cooperation agreement in 2021. Reports suggested the deal envisioned up to $400 billion in Chinese investment in Iran, but only $2-$3 billion has been confirmed to date, with many Chinese firms steering clear due to U.S. secondary sanctions. This gap has spilled into public view: in 2023, then-Iranian President Ebrahim Raisi said that there was a “serious regression” in ties with Beijing and that the economic dimension of the relationship had become unsatisfactory for Tehran.

The war has also tested China’s dual-track approach in the Middle East. As Beijing has maintained its partnership with Tehran, it has meticulously deepened its ties with Arab states, with energy as a key focal point. China currently sources more oil from the Gulf than from Iran, and Qatar was the country’s top LNG supplier prior to the war.

This represents another tension Beijing will find increasingly difficult to balance. As China calibrates its support for Tehran — seeking to prevent regime collapse while avoiding a wider regional war — it must also account for the interests of Gulf nations facing Iranian attacks.

That has opened a door for Beijing. The war’s disruption has prompted many traditional U.S. partners in the region, including Saudi Arabia and the UAE, to question their strategic reliance on Washington, and Beijing has moved to exert greater influence. Xi hosted Abu Dhabi Crown Prince Sheikh Khaled bin Mohammed in mid-April, vowing to make the partnership between China and the UAE “more solid, resilient, and dynamic.” That was followed by a call with Saudi Arabia’s Crown Prince Mohammed bin Salman — the first in more than three years — in which Xi pledged to deepen mutual strategic trust and called on Middle Eastern nations to “hold their future in their own hands,” according to a Chinese readout.

But the war has also exposed the limits of Chinese influence and how much skin Beijing is willing to put in the game. Both Saudi Arabia and Iran have called for China to play a bigger role as a mediator, but China’s leadership has so far kept its distance and appears unwilling to get further entangled in a crisis that it did not create.

Calibrating the U.S.-China Rivalry

Perhaps the most striking display of China’s slow approach to the war in Iran is how it has managed its rivalry with the United States. There have been no vitriolic denunciations of U.S. strikes and no visible attempts to exploit the thinning of American military forces in the Asia-Pacific.

This partly reflects hard lessons learned from China’s era of “Wolf Warrior” diplomacy — a confrontational and nationalist style of public diplomacy adopted by some Chinese diplomats — that damaged its global image in the aftermath of the COVID-19 pandemic and provoked backlash in multiple regions.

There is also a strong incentive to keep relations with Washington stable for the time being. The Xi-Trump summit, set for May, was already rescheduled once, and Beijing believes it holds a strong hand with the United States following their earlier trade war. The summit will focus on a range of trade, technology, and military issues, but Beijing has its sights on possible changes in the U.S. posture on Taiwan or a reduction of arms sales to the island. It is no coincidence that Xi hosted Cheng Li-wun, the leader of Taiwan’s opposition Kuomintang (KMT), in April and offered incentives to a future KMT government for bilateral cooperation.

This may indicate that Xi has no near-term designs on Taiwan —a view recently expressed by the US intelligence community — but also that China's leader is wary of rocking the boat amid fears of another escalating crisis. For all the criticism of Washington's moves on Iran, it has been a formidable display of American military power that Beijing cannot rival, particularly given a hollowed-out military leadership following successive purges.

Xi appears to have decided that the war in Iran is not Beijing’s moment. The United States remains a military and financial superpower, occupying a role on the world stage that China is not ready for — and may never be willing to fully assume.

Chinese leadership appears focused on weathering the global shocks of the war and is content to wait for an outcome in Iran before engaging in the aftermath. This offers a playbook for a country that still primarily defines success by its domestic situation at home, not one of a government ready to assume the risks and reap the rewards of global leadership.

Reid Standish is a journalist covering Chinese foreign policy across Eurasia and is RFE/RL's Prague-based China Global Affairs Correspondent. He has reported extensively on Chinese investment, security policy, and political influence across Eastern Europe and Central Asia. Prior to RFE/RL, Reid was an editor at Foreign Policy magazine and its Moscow correspondent. He has also written for The Atlantic, Politico, and The Washington Post.