China's Strategic Balancing Act Amid Rising Tensions in the Gulf
China's Economic Interests in the Gulf
Despite being a close ally of Iran, China's support is increasingly influenced by its substantial economic stakes in the Gulf region. Over the last twenty years, under President Xi Jinping, China has invested approximately $270 billion in the Middle East, as reported by the American Enterprise Institute’s China Global Investment Tracker. This investment has primarily focused on infrastructure, energy, and technology initiatives in nations such as Saudi Arabia, the UAE, and Qatar. Following the pandemic, Chinese firms have rapidly expanded in the region, aligning with Gulf countries' efforts to diversify their economies beyond oil into sectors like clean energy and tourism, which complement China's capabilities. This strategic engagement has made the Middle East a crucial component of China's Belt and Road Initiative.
Moreover, China has surpassed the US as a key financier in the region. From 2014 to 2023, Beijing provided approximately $2.34 for every dollar that Washington lent or donated to Middle Eastern nations, according to Brad Parks from AidData. However, the ongoing conflict poses significant risks to these investments. George Chen, a partner at The Asia Group, noted that China's interests in the Gulf are substantial, encompassing various risks including those related to people, investments, and energy resources. He emphasized the need for Beijing to navigate its relationships carefully, supporting Iran's de-escalation while assuring Gulf nations of continued cooperation.
China's UN representative, Fu Cong, echoed this sentiment, condemning US and Israeli strikes as violations of international norms while advocating for the protection of shipping lanes and energy infrastructure.
Increasing Risks and China's Long-Term Strategy
War Risks Rise, But China Is Playing the Long Game
On the ground, the risks associated with Chinese investments are becoming apparent. At least three infrastructure projects financed by China in the Gulf have been targeted, with another twelve located in high-risk zones, putting around $4.66 billion in funding at stake, according to AidData estimates. Nevertheless, thousands of Chinese workers remain in the region amid the conflict. Prior to the war, approximately 370,000 Chinese nationals were residing in the UAE, as reported by China's state news agency Xinhua.
One Chinese worker, James Wang, remarked on the ongoing infrastructure boom in the region, likening it to China's development a decade ago. He expressed optimism about the opportunities available, stating, 'It's just a matter of whether I can catch this wave while it lasts.' Despite the escalating tensions, many construction projects are still progressing. A worker shared on Douyin, 'The construction site is still in full swing.'
Experts suggest that this indicates China's reluctance to withdraw from the region, even as risks increase. She Gangzheng noted that the Gulf is no longer the straightforward 'gold mine' it once seemed for China, as both physical security and broader confidence have been compromised. However, some analysts view the current crisis as an opportunity. William Figueroa stated, 'I don't expect to see any major scaling back of its investment in the region.' He likened the conflict to a hurricane, something beyond China's control, and suggested that Beijing is focused on weathering the storm and rebuilding afterward. For now, China is attempting to maintain a delicate balance—supporting Iran diplomatically while safeguarding its substantial investments across the Gulf.