The intense military operations in Iran, led jointly by the US and Israel, are a destabilising force for global equilibrium – for now at least. A war of choice for one country and a war of necessity for the other, with unclear objectives: destruction of Iran’s most dangerous military assets, regime change or internal fragmentation? How should we judge whether means and ends are aligned, or how far the campaign remains from its intended outcome? Are observers witnessing well‑designed strategic ambiguity or a poorly prepared venture whose execution will falter?
In any case, neither the duration of military operations nor the extent of oil‑et‑gas price increases will suffice to define the world economy’s contours post‑conflict, particularly in light of a growing shroud of uncertainty. At least two additional dimensions matter: (i) Middle Eastern geopolitics, in Iran of course, but also relations between the region’s major players – is stabilisation underway and the road to more cooperation open? – and (ii) China’s position, both towards regional actors and towards the major external protagonist, the United States.
Let us focus on this second dimension. Beijing has interests to defend. Over 50% of its crude imports come from the Middle East, and 38% of global crude passing through Hormuz is destined for China. For gas, the figures are 27% and 16%. Large shares of Chinese exports to Europe typically transit via the Red Sea and the Suez Canal. Regional stability is therefore a strategic priority for Chinese diplomacy.
Within the region, Iran occupies a unique place for China, not because of trade volumes per se – Iran only represents 1% of China’s trade, though Iranian crude did once represent over 10% of Chinese imports – but because of the partnerships built: the Belt and Road initiative, which Teheran joined in 2019; a strategic partnership signed in 2021 involving more than €100bn of Chinese investment in Iranian energy, telecommunications and infrastructure (avoiding passage through the Strait of Hormuz by building a China – Pakistan – Iran route); and Iran’s entry in 2023 into both the Shanghai Cooperation Organisation and the BRICS.
An Iranian regime weakened by blows from the United States and Israel poses a strategic challenge for Beijing. This follows the US commando capture of Venezuela’s president, Nicolas Maduro, and the oversight Washington subsequently imposed on the country, depriving China of roughly 13% of its discounted crude imports! From Beijing’s viewpoint - and not only Beijing’s – US interventionism is troubling. Washington presents the rest of the world as responsible for its trade deficit, justifying unilateral tariffs. Spheres of influence are back as tools of foreign policy: the American continent is claimed as a US domain (as shown in Venezuela), and now, arguably, there are claims over the Middle East (as shown by the military operation in Iran). Where does this ambition stop? Western Europe has close cultural, economic, financial and defence ties with the US. And many countries in the Asia-Pacific have privileged relations with Washington. What remains for China in this logic? Its ambitions for economic development, geopolitical influence and ‘restoring its rightful place’ in world affairs are directly challenged.
This leads to an observation and a question. A US intent on limiting China’s rise and a China convinced it is being constrained, within an unstable multipolar world marked by nationalist sentiment and doubts about globalisation, paints a picture reminiscent of the early 20th century before the First World War. Taiwan becomes, metaphorically, both the Alsace‑Lorraine and the Sarajevo of our era, as Yale historian Odd Arne Westad has suggested.
The prospect is frightening. And if it is taken seriously – as Chinese officials surely do – preparation is essential. An open confrontation is not imminent, but China will not tolerate being trampled. Last year’s experience showed that calibrated firmness (not too much, not too little) could force the White House to pull back. As tariff leverage has weakened, thanks to China’s stance and the US Supreme Court’s ruling, the US‑Israeli ‘excursion’ in Iran (President Trump’s term) must bog down. Beijing will not contribute directly, but it will certainly welcome the prospect. The mismatch between US short‑term constraints and Iran’s capacity for endurance will assist.
Yet, despite tensions between the Xi and Trump administrations, high‑level communication channels remain open. The two presidents are due to meet soon (after a postponement owing to the Iranian war disrupting Washington’s timetable).
What does each country’s economic situation suggest about the steps they may take to stabilise or at least smooth the bilateral relationship?
Start with the cyclical picture. Both economies performed well in 2025: US GDP grew by 2.1%, China’s by 5%, roughly in line with historical averages. Inflation is somewhat too high in the US, and too low in China. Three further dimensions matter:
- Recent indicators in the US suggest a return to normal after a few faster‑growing quarters. China shows a steadier tempo. But how will the war affect these trajectories?
- Tech‑sector investment is booming in the US; exports played a decisive role in China’s good performance.
- Both economic models generate large external imbalances: a current‑account deficit of nearly 4% of GDP in the US (aggravated by tariffs and labour shortages), and a surplus of slightly under 4% in China. These imbalances raise questions about sustainability.
It is essential to assess the economic ambitions of each leadership. In the United States, the agenda is threefold: boost investment, promote innovation and raise productivity, thereby increasing incomes. To maximise the return on this triple action, three conditions must be fulfilled: (i) technological and industrial dominance, with diversified global supply chains alongside the reshoring of critical products; (ii) a broader domestic investor base focused on long-term growth and diversified financial products; and (iii) an economic policy favouring deregulation, competitiveness and mutually beneficial partnerships. Reducing fiscal and external deficits is not explicitly on the agenda. One might optimistically assume that successful implementation of this strategy could gradually correct these imbalances, though there would be no clarity on timing.
In China, economic strategy continues to focus on upgrading industrial capabilities and increasing R&D, all while aiming to consolidate macro-financial stability (reducing property‑sector debt, managing local‑government debt and eliminating deflationary forces), unifying the domestic market to curb over-investment, and strengthen the contribution of consumption to growth. This implies a lower growth target (around 4.5% rather than 5%), continued dependence on exports and reduced dependence on imports. Like the US, China seeks greater technological and industrial autonomy, including militarily (already in the case in the US). This suggests its external surplus will remain large.
There is nothing illegitimate about countries seeking technological mastery, industrial strength and greater competitiveness. But for the global system to function, ‘every country for itself’ cannot be the dominant rule. International exchange must remain as close as possible to a win‑win process. Subordinating economics to national security leads to supply‑chain restructuring, decoupling and risk‑reduction strategies. Efficiency suffers. This is increasingly the reality for the US and China, whose rivalry drives both to absorb additional costs to reduce mutual dependence. The consequences are not bilateral but global. Given their weight in world affairs (both economic and political), tensions around any geopolitical flashpoint in which both have interests amplify instability worldwide. And today, such flashpoints are multiplying.
Political leaders on both sides recognise this danger. Efforts are being made to reduce tensions, whether through export‑licensing decisions or tariff adjustments. But a world in which major powers prioritise narrow interests over a comprehensive understanding of the broader implications of their decisions risks producing intractable situations. Is that not precisely the risk we all face today?
Hervé Goulletquer, conseiller économique principal, Accuracy