\n<\/p>\n
China is vulnerable to a prolonged closure of the Strait of Hormuz \u2014 despite its leaders\u2019 insistence to the contrary \u2014 because of the knock-on effects on its export markets, a leading analyst argued.<\/p>\n
China is the world\u2019s largest importer of oil and gas, with about half its crude oil imports, and roughly 30% of its natural gas imports coming from Persian Gulf suppliers who must ship through the Strait of Hormuz. And yet, at least so far, Beijing seems to be taking Iran\u2019s closure of the strait in stride.<\/p>\n
At the China Development Forum in Beijing this week, Chinese leaders denounced the US and Israel for attacking Iran, a country with which China has forged strong diplomatic ties and inked a wide-ranging economic cooperation pact in 2021. But they dismissed concerns that a prolonged closure of the strait might pose a threat to the world\u2019s second-largest economy.<\/p>\n
Alicia Garci\u0301a-Herrero, Taipei-based chief economist for French investment bank Natixis, concurred that China\u2019s economy is resilient to energy shocks in the short-term \u2014 because of its ample strategic and commercial energy reserves and Iran\u2019s willingness to allow ships carrying discounted oil to China safe passage through the strait.<\/p>\n
But she warned that if the conflict drags on for months instead of weeks, China\u2019s economy will be uniquely vulnerable because of its dependence on exports, particularly to Southeast Asia and Europe. The two regions, she estimated, absorb 15% and 13% of China\u2019s exports respectively, have scant energy reserves, and would be devastated by a protracted spike in oil prices.<\/p>\n
\u201cFor China, the main threat from the Iran conflict is that it could retard consumption globally, with obvious consequences for Chinese exports,\u201d Garci\u0301a-Herrero wrote in a recent Bruegel essay<\/a>.<\/p>\n \u201cIt all depends on what happens with global demand,\u201d she told Semafor in an interview.<\/p>\n \u201cIf this is just an inflation shock and governments support consumption with subsidies, China will be fine\u2026 But if we\u2019re looking at a global recession, and governments are afraid to support consumption \u2014 and most of them don\u2019t feel they have fiscal flexibility to do that \u2014 China has more to lose than anybody else.\u201d<\/p>\n Officially, China has about 95 days\u2019 worth of oil reserves \u2014 that figure is closer to 115 or 120 days, or just about half of Japan\u2019s capacity, once you take into account Beijing\u2019s commercial reserves. China also spent the months of January and February stockpiling fuel, and may hold additional reserves offshore.<\/p>\n Meanwhile, Beijing continues to receive discounted Iranian oil. Tehran is still able to export at least 1.5 million barrels per day, Garci\u0301a-Herrero noted, meaning that China is getting around 50-70% of its pre-war imports.<\/p>\n<\/p><\/div>\n