Watching as missile bombardments threaten key shipping routes and blow up some of their trade deals in the Middle East, with Iran at the centre of the firestorm, Chinese exporters are feeling the heat. After finalising a deal with an Iranian buyer she met at China’s Canton Fair in April, Miya Yu, a trader of light industrial goods – valves, toys, aluminium containers, etc – collected the necessary materials to begin production and fill the order. Production never began. The contracted client vanished without a word as his country engaged in battle with the United States and Israel, putting Yu’s business plans at risk of becoming an economic casualty of the latest violent crisis in a region that is among the world’s most volatile. “We simply can’t tell whether delivery will still be possible,” she said on Monday. Meanwhile, Cai Zhan, a foreign trade entrepreneur from Wenzhou and a social media influencer with more than 1.2 million followers on Douyin – China’s version of TikTok – said in a recent video that she had cancelled August plans to attend an auto-parts expo in Iran, after clients warned her not to come, citing the “serious” security situation. “The ongoing conflict has severely disrupted business,” she said. And with clients cutting orders, shipping costs rising, and the outlook shrouded in uncertainty, she said many exporters in her network are tightening their belts. In terms of tremors of instability in the pulse of global shifts, few are more attuned than Chinese exporters navigating its shock waves in real time. In the Middle East, where security shocks and supply disruptions spill across the borders of Iran and Israel, many Chinese businesspeople are on, or near, the front lines, bracing for the geopolitical fallout. And there is a burning question they are asking with renewed urgency: How safe are Chinese assets in the Middle East? The Middle East remains a critical part of China’s belt and road ambitions. But now, it’s all about managing risk Mohan Malik, Near East South Asia Centre for Strategic Studies The Middle East, accounting for nearly half of China’s oil imports, sits at the crossroads of Asia, Africa and Europe, making it a vital transit corridor for China’s overland and maritime trade routes. China has built deep economic ties across the region, investing in sectors such as infrastructure, energy, telecommunications, ports and logistics through its ambitious Belt and Road Initiative. China has leveraged “economic diplomacy while carefully navigating the Middle East’s tapestry of conflicts, alliances and rivalries”, said Mohan Malik, a fellow at the US-based Near East South Asia Centre for Strategic Studies and a professor in the UAE. “The Middle East remains a critical part of China’s belt and road ambitions,” he said. “But now, it’s all about managing risk amid escalating conflicts in a polarising strategic environment.” For Iran, which is under a comprehensive set of US sanctions, trade with China has been declining in recent years, but it remains an important oil source for China. This gives Tehran an economic lifeline but leaves Beijing exposed to any potential tightening of US sanctions. In 2024, trade between China and Iran totalled US$13.37 billion, with China exporting US$8.93 billion worth of goods to Iran and importing US$4.44 billion, according to official data. The US House Committee on Financial Services reported that China buys more than 80 per cent of Iran’s oil exports. Other firms, such as commodity intelligence firm Kpler, estimated that China makes up 90 per cent of Iran’s oil exports. But these have never been verified by Chinese authorities. China is the world’s largest oil importer, getting more than 70 per cent of its supplies from abroad, having surpassed the US for that title in 2017. And about half of that oil comes from the Middle East. With that in mind, analysts say, the Strait of Hormuz has become a flashpoint. Iran threatened this week to close the strait following the US missile strikes. The strait has never been fully closed, but a potential blockade “would not only strike a major blow to Chinese energy security but also prompt a global spike in the price of oil, insurance and transport costs”, Malik said. Zhou Chao, a researcher with Anbound, an independent Beijing-based think tank, said: “The China-Iran relationship is largely a pragmatic arrangement shaped by converging regional interests and economic considerations, rather than a genuine strategic partnership,” without ideological alignment or alliance. China’s direct investment presence in Iran reached US$322 million in 2023, with total investment standing at more than US$3.9 billion by the end of that year, according to the Ministry of Commerce. “Granted, Iran’s chronic instability presents considerable risk for China’s plan for a transcontinental logistics network to Europe, on which Iran would serve as a key transit hub, but these networks are still in the planning stage and are not irreplaceable – alternative routes, such as through the Central Asian republics, remain available,” Zhou said. Iran’s theocratic nature, and the country’s strategic conflicts with Israel and the US, mean the hostility will be difficult to reconcile, Zhou said, adding that further sanctions and pressure could be coming, and economic strains could undermine Iran’s ability to further fund China’s local infrastructure projects. And he said that recent remarks by US President Donald Trump suggested that, if China were to buy more US oil, Washington may ease up on the China-Iran energy trade, potentially reducing international constraints on Chinese firms operating in Iran. Although the conflict between Iran and Israel and the US threatens China’s investments, key projects, trade flows and oil imports, China has long sought to hedge its bets with other regional states, including Saudi Arabia and the United Arab Emirates. The diversification – supported by new renminbi-clearing arrangements with the UAE and infrastructure partnerships in Duqm, Jebel Ali and Suez – helps Beijing insulate its ambitious belt and road footprint from the volatility of conflict-prone regions such as Iran, according to analysts. Some Chinese investors see the crisis as a potential catalyst for new export opportunities in the region. Cairo, while not far away from hot zones, feels quite peaceful to Xie Junping, a businessman from Zhejiang province who opened an overseas warehouse in Cairo this month to ship more Chinese products to markets in the Middle East and Africa. “Chinese products sell very well here, especially Chinese-brand cars,” he said on Monday, after arriving last week, noting that roads are also filled with Chinese cars, and that locals are friendly to Chinese businesspeople. “Cairo is building a new administrative capital, and much of the construction is being undertaken by Chinese companies,” Xie said. “Most of us Chinese investors here aren’t too worried about the safety of our investments here. In fact, I think that, after the conflict, there will be strong demand across the Middle East for infrastructure and essential consumer goods – from street lights to sofa fabrics – which will all be investment opportunities.” He said he knew of more than a dozen textile companies back in Zhejiang that were similarly invested in Cairo, “and their sales are pretty good”. It shows, he said, how Chinese enterprises can still enjoy relative safety in China-friendly Gulf states where political friction is lower, but nonetheless, the risk premium could increase due to “regional instability, US-China decoupling pressure, and the unpredictability of Iran-Israel and US dynamics”. The Middle East is a very big place Dany Qian Jing, JinkoSolar Dany Qian Jing, global vice-president for JinkoSolar, one of China’s biggest solar panel manufacturers, said the conflict between Iran and Israel had not impeded the company’s plan to build a factory in Saudi Arabia. It is still expected to be operational early next year. “The Middle East is a very big place,” Qian told the Post on the sidelines of “Summer Davos” in Tianjin, indicating that Chinese investments in Saudi Arabia were far enough from conflict zones. Chiang Chun Yuan, a veteran investor with ongoing projects in the UAE, said the crisis would not stop Chinese brands from “going global” in the Middle East market, despite short-term disruptions to shipping and trade. Ongoing experiments with cross-border payments and international supply-chain settlements – pushed through Hong Kong – could also unlock more opportunities in the Middle East, added Chiang, who is also executive vice-president of the Hong Kong Institution for International Finance. Chinese companies have a high risk appetite and are familiar with operating markets that are volatile, said Ben Simpfendorfer, partner and Asia-Pacific chief macro strategist at consulting firm Oliver Wyman. “Firms may pause but won’t postpone investments. The Middle East, Saudi Arabia and UAE, in particular, are real prizes that can’t be overlooked,” he told the Post, adding that the region has the appetite for the type of innovation that China delivers, including rechargeable batteries, electric vehicles and solar panels. Additional reporting by Ji Siqi