China: Energy resilience under Hormuz shock – Commerzbank

Commerzbank’s Dr. Henry Hao argues China is better positioned than other Asian economies to withstand energy disruptions from Middle East tensions and Strait of Hormuz risks. The report highlights China’s diversified crude sourcing, large strategic reserves, and falling fossil fuel intensity, while warning that sectoral pain, especially in transport and chemicals, and prolonged volatility could still challenge China’s growth outlook over the coming months.

China buffers regional energy supply shocks

"To further mitigate the immediate shock of volatile energy markets, Asian nations are deploying their strategic reserves with varying degrees of efficacy. Advanced economies like Japan, South Korea, and Taiwan maintain robust national petroleum reserves to insulate their domestic markets, whereas developing nations such as India, Thailand, and the Philippines possess limited strategic inventories and thus remain highly exposed to prolonged supply disruptions."

"While Asian economies face acute energy vulnerabilities, China leverages strategic reserves and policy interventions to absorb the shocks. This short-term resilience remains under pressure as geopolitical volatility continues."

"Conversely, China has actively pursued a diversification strategy in recent years. While the world's largest oil consumer still faces considerable exposure, the proportion of Chinese crude oil sourced from the Middle East is the lowest among major Asian economies and has been steadily declining since 2022."

"Furthermore, the evolution of China's overall energy mix provides an additional layer of structural resilience. By steadily reducing fossil fuel consumption per unit of GDP and integrating renewables, China is systematically decreasing its hydrocarbon reliance."

"However, this macro-level stability could mask the diverging impacts hitting specific industrial sectors differently. The economic pain inflicted by the conflict is uneven across the Chinese industrial landscape."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)