China’s Hormuz Problem

The highlights this week: The Iran war disrupts China’s oil supply, Taiwan’s parliament approves a new U.S. arms package, and the Chinese public goes wild for artificial intelligence tool OpenClaw.

China Feels the Pressure on Hormuz

Only Iranian tankers are guaranteed passage through the Strait of Hormuz amid the ongoing war—and their oil is heading to China. The country buys around 90 percent of Iranian oil exports, but the disruption is still hitting its supply hard.

Before the war, China received 5.35 million barrels of oil per day via the Strait of Hormuz, but that figure has dropped to roughly 1.22 million (coming exclusively from Iran). Some analysts have suggested that this oil shock will ultimately benefit China by accelerating its green energy transition. But Beijing hardly needs another push in a sector it already dominates.

If anything, the crisis may speed the rest of the world’s adoption of Chinese green technologies, as FP columnist Jason Bordoff and research scholar Erica Downs write.

China’s more immediate concerns are economic. Its post-pandemic recovery remains fragile, and the costs of losing both oil supplies and agricultural imports due to the Iran war could deepen its slowdown. Tehran, meanwhile, appears eager to cultivate goodwill in Beijing by reportedly offering to allow tankers to transit the strait if the cargo is in yuan.

In practice, coordinating such an arrangement during wartime seems implausible, especially given the uncertainties around insurance, GPS interference, and sailors’ personal safety. Still, some Chinese-flagged ships have managed to pass through the strait, though many others remain stranded.

U.S. President Donald Trump has called on China and other countries to send “war ships” to the Strait of Hormuz. In an interview with the Financial Times on Sunday, Trump said that China gets 90 percent of its oil from the strait—roughly double the actual figure—and warned that failure to cooperate could delay his planned summit with Chinese President Xi Jinping at the end of the month.

Then, on Monday, Trump announced that because of the war, he asked to delay the summit “a month or so,” and on Tuesday he confirmed that his trip had been postponed. But Chinese support for a U.S. operation to unblock the strait is—to put it gently—not likely.

Even long-term U.S. allies Australia and Japan have made it clear that they will not join such an effort. China maintains a small anti-piracy task force in the Gulf of Aden that has cooperated with the United States in the past, but that is a very different matter from providing military support for a U.S.-led war against a key partner.

The question is whether Trump views Chinese participation as a real possibility—and how he would respond when Beijing inevitably refuses or ignores the request. If this is Trump’s typical bluster, it won’t matter much. But if he genuinely believes that China might be persuaded to help force open the strait, it doesn’t bode well for the prospects of the U.S. president’s visit to China.

There may be other reasons that the Trump-Xi summit was delayed. Trump’s main interest in attending is likely the spectacle of announcing a major deal, something that would be difficult to stage amid the war and an unsettled global economy. But I also heard last week from multiple Americans with contacts in the Chinese government that Chinese officials were having difficulty reaching their U.S. counterparts to coordinate arrangements.

At this point, I’d bet on the Trump-Xi summit being delayed for more than just a few weeks.

What We’re Following

U.S. missile defense redeployment. The United States is relocating components of its missile defense system from South Korea—where they are deployed to defend against North Korea—to the Middle East to replace damaged units. Seoul is understandably upset. It paid a significant price when it agreed to host the system in 2016, as Chinese state-organized boycotts drove out South Korean businesses.

Chinese media is crowing over the development, while also insisting that the missile defense system is both threatening and ineffective. But for South Korea and neighbors such as Japan, the move may prompt leaders to think twice about complying with future U.S. military requests.

Taiwan arms deal. Taiwan’s parliament approved a $9 billion arms package with the Trump administration last Friday, drawing the usual rebuke from China. Even larger deals are likely later this year. War in the Middle East may complicate the U.S. ability to deliver, though, as it strains to replenish its own munition stocks.

However, the Iran war may also shape Taiwan’s thinking, as it watches the conflict closely. Iran’s ability to threaten shipping with relatively inexpensive missiles and drones—despite formidable U.S. conventional air superiority—bodes well for Taiwan’s ability to threaten Chinese troop transports in its own strait in the event of an invasion.

FP’s Most Read This Week

Tech and Business

OpenClaw craze. The Chinese public has gone wild for OpenClaw, an artificial intelligence product introduced by an Austrian developer last November. OpenClaw is what’s known as an “agent harness”—a tool that connects to and can execute tasks through existing large language models such as ChatGPT or DeepSeek.

Installed on a phone, for instance, you can tell OpenClaw to buy flowers for an anniversary or pay an electricity bill, essentially functioning as a virtual personal assistant. Its easy integration with other systems has driven rapid adoption in China, where users are already accustomed to powerful so-called everything apps such as WeChat.

But OpenClaw is a security nightmare: It requires extensive permissions to access personal data, often makes mistakes, and is very vulnerable to hacking. For most users, that could mean identity theft or credit-card fraud, but for users in banks or government agencies the consequences could be far worse.

To that end, Chinese authorities moved swiftly last week to ban the tool’s usage in those settings.

Panama clash. It’s a rough time for Chinese shipping, as Beijing has instructed Chinese firms—most notably state-owned giant Cosco—to steer clear of Panama. This follows a January ruling by Panama’s Supreme Court that a deal allowing a Hong Kong firm with close ties to the Chinese government to take over operation of two Panama Canal ports was illegal. The decision came after heavy U.S. pressure on Panama to break off the agreement.

Financial considerations suggest the disruptions will be temporary. The Panama Canal exists for a reason, after all, and there is no cost-equivalent alternative route. But China has a long memory when it comes to political and economic slights—as Norway, for instance, has learned.