What the Iran War means for China: Beijing fears US Volatility more than American Power

Zongyuan Zoe Liu

Chinese President Xi Jinping is getting the US he always wanted. Since US President Donald Trump’s return to the White House in 2025, Washington has grown less confident in its global purpose, less committed to the rules-based order it once upheld, and more willing to wield power in ways that unsettle markets, institutions, and allies. Washington’s global authority and credibility are wearing away. In one sense, this is good news for Beijing. A weaker, less moralistic Washington is harder for others to rally around. It offers a less compelling model. It has become less capable of organising coalitions and more likely to drive away the very partners it needs to balance China. For decades, Chinese leaders have wanted a US strong enough to keep the global economy afloat and prevent outright systemic collapse but no longer capable of shaping the international order in ways that constrain China’s rise. Xi is now closer to that outcome than any emperor or party leader of the past two centuries.
Yet this is not an unambiguous victory for China. Xi does not want simply a diminished US. He wants one that still helps to preserve a stable world order. That distinction is easy to miss in Washington, where analysts often assume that geopolitical competition works like a running scoreboard: if the US loses, China must win, and vice versa. But Beijing does not interpret every US setback as a Chinese gain, and Chinese leaders do not assume that every geopolitical opening must be exploited. More often, they wait, watch, and calculate their next move. They ask not simply whether the US has been weakened but whether the surrounding environment has become more stable or more chaotic. Beijing cares whether trade continues to flow, whether energy arrives on time, and whether global crises remain bounded rather than cascade. For China, stability is not a soft preference. It is the precondition for continued national strengthening.
The US-Israeli war on Iran, which has spiralled into a regional conflagration, is the most consequential test yet of China’s strategic restraint. Unlike Russia’s war in Ukraine, the war in Iran threatens China’s core strategic interests – not because of acute dependence on Middle Eastern hydrocarbons but because an increasingly volatile Washington is destabilising the global order on which Beijing depends. The danger for China lies not in immediate scarcity but in disorder. A US that is simply weaker is manageable; one that is unpredictable, violent, and unconstrained by the system it once championed is far more perilous. A fading US may create opportunity; a volatile US destroys the very conditions that allow those opportunities to materialise. What Beijing fears is not that Washington will lose power but that it will wield its remaining power in ways that make the world harder to navigate. Confronted with an increasingly reckless Washington, the Chinese leadership will act with caution, protect its vulnerabilities, and resist taking up global responsibilities that it is ill equipped to shoulder. China’s muted response to the war in Iran – diplomatic engagement, calls for a cease-fire, and avoidance of direct military involvement – reflects not indifference or opportunistic gain-seeking. It is a deliberate effort to manage systemic risk, preserve the external conditions necessary for trade and capital flow, and safeguard the foundations of China’s long-term ascent. China’s challenge, therefore, is not merely to rise within the global system but to survive its unravelling. In a world shaped increasingly by disruption rather than design, the greatest threat to China’s ambitions may not be US strength but American instability.
Between Worlds
Since reopening itself to the rest of the world in 1979, China has accumulated wealth and power within an international system built and sustained by the US. Beijing exploited that order, pushed against it, and built alternatives around it. But it still depended on the essential conditions the order provided: open sea-lanes, expanding markets, the ability to borrow and trade in dollars, and multilateral institutions sturdy enough to absorb geopolitical shocks before they could turn systemic.That dependence runs deep. As Xi has pushed the economy toward greater self-reliance in the name of security, Chinese industry has faced falling profits and mounting overcapacity – signs of the strain such a shift entails. To compensate, Beijing has developed an increasingly sophisticated toolkit of economic statecraft, leveraging access to its domestic market, supply chain dominance in rare-earth elements, loans and investment agreements, and coercive tools such as export controls and sanctions. But these tools are built on a critical assumption: that the international system remains stable, predictable, and governed by rules rather than raw power.
That premise is now in question. Washington’s recent military actions in Venezuela and Iran, undertaken with little regard for economic consequences or international law, underscore a reality that Chinese strategists cannot ignore: the US-led system they learned to navigate and exploit is fraying, and the reordering now underway may not serve Beijing’s interests. Chinese leaders view the US as a power in decline but one that is becoming more dangerous, not less. They understand that as Washington’s economic and diplomatic leverage wanes, it may increasingly turn to the one form of power it has in abundance: military force.
From Beijing’s vantage point, the Trump administration’s interventions in Venezuela and Iran look less like confident imperial stewardship than like the flailing of a late-stage empire, one that seeks to exploit its residual military supremacy while it still can. A more volatile, less restrained US is no comfort to Chinese elites, who are sensitive to the risks posed by a hegemon that is no longer confident in its own order yet still possesses unmatched destructive capacity.
If US power were merely fading, China might be tempted to move quickly to seize the moment and consolidate its position. But if US decline takes the form of escalating economic coercion, the breakdown of global trade rules and institutions and military aggression, Beijing may instead find itself in the position of defending, at least rhetorically, elements of the existing order against the disruptive behaviour of the US. For the Chinese leadership, the issue is not that the US is disappearing as the leader of the global system. It is that the US may remain powerful enough to lash out while becoming less predictable in how it uses that power.
No Winners
The war in Iran illustrates this dynamic in stark terms. To many in Washington, another US military adventure in the Middle East appears to be a strategic gift to China. If the US is tied down in another regional conflict, the logic goes, that frees Beijing’s hand in Asia. But the Chinese leadership does not view the crisis as a zero-sum game. A more unstable Middle East does not translate neatly into a Chinese advantage. Neither Washington nor Beijing will escape the geopolitical and economic fallout of this war unscathed.
For China, the closure of the Strait of Hormuz to maritime traffic is not an abstract concern. China is the world’s largest importer of crude oil, with about 70 percent of its supply coming from overseas, roughly one-third of which must pass through the strait. Despite this exposure, China remains relatively insulated in the short term. In the weeks since the war began, gasoline prices in China have risen about 10 percent, compared with roughly 25 percent in the US. Iranian oil exports to China continue to transit the strait, and Beijing maintains the world’s largest strategic petroleum reserve, equivalent to several months of domestic demand.
A prolonged war that damages oil and gas infrastructure in Iran and neighbouring Gulf states would pose far greater risks, threatening China’s energy security and potentially triggering a sharp economic slowdown. China’s export-oriented economy depends on the smooth functioning of global trade. Exports account for roughly 20 percent of GDP, with nearly all of it moving by sea. Shipping delays, higher insurance costs, and rerouting around chokepoints would raise costs for exporters. At the same time, higher energy prices would dampen global demand, reducing foreign sales and quickly translating into domestic economic pressure. None of this serves Beijing’s interests.
These vulnerabilities matter not only economically but also geopolitically. China’s pursuit of strategic autonomy still depends on a global system that remains open and predictable. For Beijing, strategic autonomy does not mean autarky but the ability to operate within that system on favourable terms through the steady accumulation of economic strength. China has been preparing for a more turbulent world, but preparation does not imply preference. Its push for self-reliance is meant to reduce vulnerability, not to make China a relative winner in an unstable world.
Concerns over mounting instability are already showing up in China’s economic planning. In its latest Five-Year Plan, Beijing lowered its growth target to between 4.5 and five percent, the lowest in decades – an acknowledgment that the global environment that once powered its rise is becoming less reliable. Slower growth is no longer treated as a cyclical deviation but as a structural constraint driven by demographic pressures, external trade tensions, and rising uncertainty.
At the same time, Beijing is prioritising what it calls “new quality productive forces” – advanced technologies intended to sustain growth as sectors such as real estate slow. This shift makes external instability even more dangerous for China. Advanced manufacturing is capital-intensive and deeply dependent on stable inputs: energy, critical minerals, precision equipment, and globally distributed knowledge networks. Disruptions to any of these raise costs, delay production, and amplify financial risk. In a more volatile geopolitical environment, the sectors meant to secure China’s long-term competitiveness become more vulnerable to systemic shocks.
That is why Beijing prefers the restoration of stability over an expanded role in a more turbulent order. It wants access to energy, markets, and influence in the Middle East – not the burdens of regional stabilisation or balancing among competing powers. Regardless of how long the war in Iran continues, China is unlikely to escort shipping through the Strait of Hormuz, pressure Tehran, or attempt to replace Washington as the region’s policeman. This reflects not indifference but caution. Chinese leaders remain deeply wary of foreign entanglements, especially in the Middle East, where great powers have a long record of bleeding prestige and treasure into conflicts that yield little strategic benefit.
The Chinese leadership brings the same cold arithmetic to Taiwan. A distracted US could indeed create a military or political opening. Beijing notices when Washington is stretched across multiple theatres. But here again, American analysts often assume that the mere existence of an opening will compel China to act. Beijing’s calculus is more layered. Chinese leaders do not ask only whether the US is distracted. They ask also what kind of US they would be confronting in a showdown over the island.
The answer to that question is sobering. A US that is less stable, more militarised, and increasingly reliant on force as its clearest comparative advantage may be more dangerous in a Taiwan crisis, not less. If Beijing believes that Washington is behaving like a late-stage empire – declining in legitimacy and confidence but still unmatched in hard power and eager to use it – then provoking a clash becomes far riskier.Moreover, Chinese leaders recognise that an invasion or blockade of Taiwan would not occur in a vacuum. It would disrupt trade, destabilise financial markets, strain global shipping, and threaten relations with key export markets, particularly Europe and Japan. For Beijing, that is a deeply unattractive combination.
The Crumbling Palace
To be sure, Beijing does want to revise the regional balance in Asia, weaken US alliances, absorb Taiwan, and build a world less susceptible to US pressure. But China’s preferred methods remain incremental and asymmetric: industrial policy, market access as leverage, political influence operations, ‘gray zone’ tactics such as maritime encroachment and cyber-espionage, and the gradual buildout of a parallel financial system that bypasses the dollar. Beijing seeks to accumulate advantage without detonating the system.
Xi still has reason to pursue a good working relationship with Trump. China benefits from a bounded relationship with the US centred on predictable and profitable trade. An erratic US that alternates between protectionism, military adventurism, and strategic improvisation is no gift for China. Beijing wants competition on terms that remain intelligible. For Xi, the upcoming meeting with Trump in Beijing presents a political opportunity. Chinese officials prefer conducting power politics through controlled optics rather than through military conflict or disruptions to commerce. Although no formal agenda has been announced, observers expect the summit to extend the truce in the trade war and potentially initiate a broader rapprochement between Beijing and Washington. But the war in Iran has forced Trump to postpone the much-anticipated meeting, which was originally scheduled for late March. The longer the war in Iran continues, the harder it will be for Beijing to stabilise relations with Washington and shape the terms of future competition.
As it waits on Washington, Beijing will continue to exercise caution. Despite the tectonic shifts in US foreign policy under the Trump administration, the Chinese leadership’s overarching objective remains unchanged: balance short-term risks, including energy shocks, trade disruptions, and market volatility, against its longer-term objective of strategic autonomy and stable relations with Washington. That calculation reflects something fundamental about China’s worldview. Beijing sees its international relationships less through ideology than through commerce. It does not divide the world into friends and foes as much as into customers and vendors. That does not make China less strategic. It makes its strategy more material, more transactional, and more concerned with preserving business as usual than with pursuing a civilisational destiny (and the conflicts and costs that come with it).
The great paradox, then, is that Xi has gotten both what he most desired (a US that is less reliable, less confident, and less capable) and what he most feared: a more volatile international system. A declining US may prove more dangerous than a strong one: an unsteady superpower increasingly tempted to use force while it still can. Chinese leaders understand what American policymakers often miss: not everything that weakens the US strengthens China. The Trump administration’s missteps do not advantage China as much as destabilise the system both powers still depend on.
There is an old Chinese idiom for times of upheaval: not even the strongest timber can hold up a crumbling palace. In Beijing, officials are racing to brace the structure, while in Washington they are knocking down walls to add a ballroom.

The writer is Maurice R Greenberg Senior Fellow for China Studies at the Council on Foreign Relations and Senior Research Scholar at the Institute for Global Politics at Columbia University’s School of International and Public Affairs. She is the author of Sovereign Funds: How the Communist Party of China Finances Its Global Ambitions.