China Remains Resilient to Middle East Energy Shocks Amid EV Growth and Renewables Expansion

China’s position would be relatively stronger than many countries if the Hormuz Strait were closed, largely because it has scaled electric vehicles and expanded renewable power. The Hormuz Strait is a critical route for global oil shipments, and China is the world’s largest oil importer through the strait.

Why a Hormuz closure would hit some countries harder

The closure would create difficulties for many economies that rely heavily on oil transported through Hormuz. China, however, imports oil through Hormuz at a level described as equivalent to the combined imports of India, Japan and South Korea, yet it would likely be less affected than peers due to its ongoing energy transition.

Lauri Myllyvirta, co-founder of the Clean Energy and Air Research Centre (CREA) in Finland, said China’s current position closely matches what Chinese planners have envisioned for decades.

Electrification of transport reduces oil dependence

China’s shift toward electric vehicles has accelerated. Beijing set a target for the EV share of new car sales to reach 20% by 2025, and by last year the share had reached about 50%.

According to BMI, China’s EV sales in 2025 are expected to reach 12.9 million units, accounting for 62% of global EV sales. In the passenger-car segment, more than half of new vehicles sold are NEVs, increasing the share of road transport powered by batteries rather than gasoline.

CREA estimates that these EVs reduce gasoline and diesel consumption equivalent to imports from Saudi Arabia, helping curb fuel consumption after decades of rapid growth.

EV makers report improving profitability

Alongside rising EV penetration, more Chinese EV manufacturers have reported profits after several quarters of losses, including Leapmotor, Nio and Xpeng.

• Leapmotor, backed by Stellantis, posted a profit of $78 million in 2025, after a loss of $410 million the previous year.
• Nio posted an adjusted net profit of $104 million in Q4.
• Xpeng posted a net profit of about $55 million in Q4, compared with a loss of $190 million in the year-ago quarter.

The article also notes that profitable EV players now include BYD, Xiaomi and Li Auto.

Renewables expansion supports a lower-carbon power system

China’s clean energy build-out is described as expanding faster than Beijing’s targets. The electricity mix relies mainly on coal and renewables, with the share of coal power falling sharply. The article states that much of the electricity needed to support annual growth can be offset by new wind or solar capacity, which helps reduce coal and LNG imports.

According to Ember, in 2024 renewables supplied about 80% of the economy’s added electricity demand.

Muyi Yang, senior energy analyst for Asia at Ember, said the Middle East energy shock from the Iran conflict could reinforce China’s path. She said the situation highlights the risks of relying too heavily on imported oil and that the energy transition should include decarbonization across the entire economy, not only more wind and solar power plants.

Oil-price shock resilience and sector impacts

Analysts from OCBC Bank said that, over the long term, electrification of transport and a higher share of renewables should help the economy be less affected by oil-price shocks.

The article also points to the impact of the energy transition on traditional oil businesses. It says the three largest Chinese oil companies saw profits fall in 2025. Sinopec, described as the world’s largest refining company by capacity, saw a 36.8% drop in profit versus 2024.

It adds that gasoline and diesel output fell last year by 2.4% and 9.1%, to 62.6 million tonnes and 52.6 million tonnes, respectively.

Diversified supply and infrastructure reduce exposure

Energy risk is also mitigated by a diversified supply strategy. The article says China buys oil from multiple suppliers and does not rely on more than 20% of imports from a single country, unlike many Asian nations. It cites Japan as importing nearly 80% of its oil from Saudi Arabia and the UAE.

China, it says, buys from eight countries, including large volumes from Russia, Venezuela and Iran—countries under U.S. sanctions.

The article further notes that China has expanded gas pipelines, reducing dependence on sea-borne imports. It says LNG can be imported via pipelines from Russia, Myanmar and Central Asia, which it describes as an advantage that Japan or South Korea do not have due to geography.

Outlook for oil demand

With decades of policy planning and growth in EVs and renewables, China is gradually decoupling growth from foreign fossil-fuel supply. Chen Lin, vice president at energy research firm Rystad Energy, projects that China’s oil demand could peak this year and then ease.

He said the situation is unlikely to worsen even though the share of crude imports remains high.

Bảo Bảo (via Reuters, CarbonBrief, CNBC).