Energy supply shocks triggered by the Middle East war are rattling the global economy, but China could emerge as a medium- to long-term beneficiary in renewables despite near-term pain, a report said.
According to the International Finance Center’s report, titled “China’s windfall gains from the Middle East war,” the conflict has exposed vulnerabilities in global energy supply chains, prompting governments and businesses to accelerate adoption and conversion to renewable energy.
With instability in the Strait of Hormuz — a route for 20% to 30% of global crude oil shipments — becoming a reality, international oil prices have jumped more than 50% from prewar levels, rapidly increasing the burden on countries heavily dependent on energy imports.
China is also expected to face a short-term hit. As the world’s largest crude importer, accounting for 19.3% of global oil imports, higher oil prices could quickly raise manufacturing costs and add pressure for slower growth. The report also warned that rising raw material prices could lift production costs and weaken export competitiveness.
Still, the crisis may speed up the shift in energy systems. The more supply-chain instability repeats, the more countries are likely to reduce reliance on fossil fuels and expand investment in renewables.
The report said China’s advanced renewable energy industry is likely to benefit. In recent years, production of electric vehicles, solar power equipment and batteries has surged. As of last year, output was up from 2019 by 1,080% for EVs, 340% for solar and 240% for batteries.
China’s global dominance in these markets is also strong. As of 2024, China’s share of global production of solar, wind and batteries was about 80%, reinforcing its role as a central hub in renewable energy supply chains, the report said.
Renewables have already become a growth driver for China’s economy. One analysis cited in the report said that without the sector, China’s economic growth rate last year would have been about 3.5%, making it difficult to reach the 5% target.
The report concluded that while China is bearing the burden of high oil prices in the short term, the war is creating an “asymmetric benefit structure” in which China can absorb rising demand for energy transition over the medium to long term.
It also cautioned that if the United States and Europe intensify supply-chain restructuring and efforts to reduce dependence on China, China’s renewable energy lead could face trade restrictions.
Kim Woo-jin, a senior researcher at the International Finance Center, said rising global demand for renewables is expected to help ease oversupply problems as well as boost China’s exports. But he added that policymakers in major countries including the U.S. and Europe are wary of growing reliance on China, citing concerns that Chinese-made solar panels and EVs with wireless connectivity could be remotely disabled.
* This article has been translated by AI.
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