Xi Jinping is fond of saying that the world is undergoing changes unseen in a century, and on that one, he’s not wrong. Alliances are shifting, cold war thinking informs superpower activity on every continent (including Antarctica), and trade barriers once thought regressive and self-destructive are now treated as essential (albeit unfortunate) planks of any coherent security platform. And in the middle of that environment, I have a simple request for Western media institutions and public intellectuals all over the world: please, stop telling me that Chinese leaders are playing the long game.
They’re not.
They won’t.
In fact, they can’t!
Mind you, this is not a call for reflexive China criticism, but perhaps a bit of realism. The West spent about 20 years underestimating Chinese ambitions and strategic thinking, and much of the Western pundit class has spent recent years determined to over-correct for that error.
Look around today, and there’s a seemingly endless supply of Western commentary that frames Xi and the CCP as a kind of uniquely shrewd, exotic species of world leader that is immune to short term pressures, has planned for every outcome, and will inevitably exploit every Western decision to China’s benefit and ultimate triumph. These stories are tiresome not only because they are predictable, but also because they are generally incorrect.
China and the Iran War
The canard persists, though, and has been especially pervasive during the Iran war. I’m thinking here of a recent Economist cover channeling Sun Tzu, a near-daily supply of Western stories making some version of the claim that “China is winning by watching”, or CNN’s Fareed Zakaria traveling to Beijing and Shenzhen a few weeks ago and returning with a video essay to note a conspicuous absence of “thunderous denunciations of the war” from Chinese leadership, and explain that “understanding why will help us better grasp Beijing’s long game.”
Drawing on conversations with “officials, think-tank scholars and business leaders,” Zakaria continues with a monologue that praises Chinese manufacturing prowess, and then (I think, though it’s never quite made explicit) concludes that China has not denounced the war in Iran because its leadership sees the war as an opportunity to deepen the international community’s reliance on Chinese green energy systems as a replacement for oil, thereby expanding China’s sphere of influence, locking countries into Chinese-made systems, and perhaps even peacefully reunifying with Taiwan.
That theory of Chinese benefits from the war in Iran is not new and is sort of a facile read on the energy implications of any of this, but I have no doubt that Chinese interlocutors are delivering that message to Westerners like Zakaria. It’s unfortunate for the world that China is arresting due diligence firms, limiting the release of economic data, and expelling real foreign reporters from the country, but it’s perceptive on the CCP’s part to realize they are much better off trusting famous Western intellectuals to “tell China’s story well” after lavish junkets in Tier 1 cities.
In any event, the real reason Chinese leaders are not denouncing the war is simpler: they can’t denounce the war without upsetting very important allies. China has put billions and billions of dollars toward productive relationships with Saudi Arabia and the UAE, two countries that emphatically support what the U.S. has been doing in Iran for the past two months. Together, those countries are responsible for 21% of China’s oil imports, and they’re likewise important to Beijing as sources of foreign investment in Chinese companies and as export markets for Chinese goods and infrastructure.
Beijing’s relationship with those countries is already a bit complicated given their reliance on the United States for security and China’s longstanding support for an Iranian regime that has roiled the region with instability. That instability jeopardizes the economic security of Beijing’s regional partners, and specifically the AI investments those countries are making and seeking to anchor their future. It would be risky for China to tip the scales further by denouncing the region’s collective efforts to restore order, or even worse, openly backing the IRGC and its efforts to retain power. So instead, last week, rather than patiently allowing a global energy crisis to compound and drive green energy customers into China’s arms (Zakaria’s theory of the case), Xi Jinping joined Saudi Arabia’s MBS and called for the Strait of Hormuz to be reopened.
China, of course, has its own reasons to want this war to end and for normal Strait passage to be restored. Per the Washington Post (and Thailand’s Foreign Minister), “China has 70 of its own vessels stranded at the chokepoint that it is struggling to get free.” Per Bloomberg, Chinese industrial hubs have “seen some electricity prices almost double due in part to constraints on the supply of natural gas from the Middle East.” Per the New York Times, factories have halted production and employees are protesting as “costs for plastic, which is made from oil and natural gas, surged after traffic slowed through the Strait of Hormuz.” And as an op-ed in the Financial Times reminds us, all of this comes as the Chinese economy continues a deflationary spiral at home, while an oil shock in Chinese export markets “pushes factory-gate prices lower, squeezes margins, discourages new investment and perpetuates the wage and income stagnation that China has been suffering from for years.”
None of those notes should be construed as evidence that China is at risk of a crisis in the face of the war, but the idea that China is “winning by watching,” or that the war is “Making China Great Again” because it can afford to export some of its oil reserves to Asian neighbors, is farcical.
China has been hurting, the war is making it worse, and while further binding the world to Chinese green energy components sounds nice in theory, just this week there were indications that Europeans may now correctly identify that dependence as a national security problem. Also, as I wrote back in March, the very worst-case scenario for China would be deepened Saudi and UAE reliance on the U.S. (via, e.g., swap lines) and permanent American leverage over the Hormuz chokepoint (counting sanctioned Iranian barrels that have been re-routed through Malaysia, about 55% of Chinese oil imports travel through the Strait, to say nothing of the LNG, petrochemicals and plastics that are essential to China’s export engine).
Zooming out, then, Beijing has no good options. Leaders can’t earnestly push for a re-opened Strait and the fall of the IRGC, because that would risk a Western-allied replacement in Iran. But they also can’t denounce the war too loudly and risk alienating regional allies, let alone going mask off and actively assisting the IRGC’s efforts to retain control and prolong the war (a move that could alienate all of Europe, too). That’s why the world has been hearing CCP leaders offer milquetoast calls for peace and reading reports of covert assistance to the IRGC, while Western commentators who loathe the Trump administration twist themselves in knots to convince everyone this upheaval will all redound to Xi’s benefit.
Party Goals and Party Needs
The key point, though, is that reading grand strategic instincts into China’s passive stance obscures what’s actually happening and why. And more generally, treating Xi Jinping like a modern version of Sun Tzu is a horrible heuristic for understanding the motivations and implications of Chinese policy, which is a lesson that shouldn’t be confined to conversations about Iran—CCP industrial strategies are proactive and planned across decades, yes, but the Party’s geopolitical and domestic strategies are generally reactive, and often counterproductive.
Consider the restrictions on rare earth exports that began last May and were dramatically expanded last October. Those rules were put into play to secure relief from U.S. tariffs that were at nearly 60% and throttling China’s economy, and they did work to secure some moderate tariff relief (in exchange for suspending the rare earth restrictions). But crucially, using that leverage last year meant forfeiting it in the future. It’s 12 months later now, and Western producers have formed new trade alliances and made more tangible progress decoupling from Chinese rare earth suppliers than they had in the previous two decades. If China’s “long game” is rooted in a plan to bind the world to Chinese supply chains, at least in this area, they are on the way to losing.
Elsewhere, the Party wants to cleave Europe away from the U.S. but cannot correct impossible trade imbalances without incurring an unemployment crisis at home, continues to support Russia’s war in Ukraine, and this week threatened the continent with countermeasures if the EU passes a law to erect trade barriers that will favor domestic green energy producers and protect jobs across critical industries. There, again, China didn’t make those threats in a bid for long term diplomatic stability and influence, but because in 2026, with pressures bearing down throughout its domestic economy, Beijing can’t afford to tolerate a modern environment that sees Chinese exports hit with trade barriers on every continent.
Similar dynamics are at play inside China as well. Foreign investment into China has plummeted over the course of the decade, foreign firms have been attempting to diversify their Chinese supply chains, and as of two weeks ago, the companies and employees still in China may be subject to criminal prosecution if they attempt to relocate elements of their operations. That’s not a policy conducive to bringing foreign investment back, but it’s an attempt to at least stop the bleeding as the rest of the world works to reduce its exposure to China.
Meanwhile, the CCP harbors visions of recruiting global talent to come to China and innovate (if you take nothing else from this article, please look at Huawei’s “European” campus), but its businesses lack legal protections comparable to those of the West, and foreigners are occasionally banned from leaving the country. Likewise, China wants to cultivate robust capital markets to spur innovation and rival the United States, but even its national champions are seeing profits cut in half amidst the deflationary spiral, while the upside of the finance industry has been limited by a years-long, politically driven “austerity” drive to rein in salaries and corruption and to ensure political obedience.
Finally, there’s also the persistent dream (construed by Western op-eds on a monthly basis, all year long, every year, in perpetuity) that the renminbi will become a global reserve currency that rivals the dollar. There are lots of reasons that dream is unrealistic, most of them related to the durability of the dollar’s network effects, but it should also be noted that a useful reserve currency requires that the currency in question not be habitually depressed and that holders be afforded financial freedom, policy predictability, and legal security that are antithetical to the Chinese system (but don’t take my word for it, ask upwardly mobile Chinese citizens how confident they are in local currency).
The RMB is actually a perfect microcosm of the whole story. The CCP does have long term goals (including for its currency), but they’re often in direct tension with short term imperatives to preserve domestic stability or ideological commitments to ensure the primacy of the Party. And for the all strategic thinking and grand ambitions that exist in Zhongnanhai, prioritizing ideology and political stability will win out just about every time.
The Export of the Chinese Model
As for the strategic thinking elsewhere in the world, I think a secondary problem with all the cover stories and columns marveling at China’s overwhelming strength and infinite wisdom is that they not only mischaracterize Chinese motivations today, but they confuse the qualities that were the primary drivers of this story all along. China became a superpower not because of uniquely clever or patient industrial planning (which was tremendously successful, but not particularly novel), but first and foremost because of a political and corporate culture that was both entirely rational and absolutely relentless about understanding and capitalizing on Chinese advantages (winning on scale and service with a massive and unusually skilled workforce, leveraging a billion consumers to lure foreign investment, and offering the world lax environmental and labor laws that helped them grow their economies), while simultaneously exploiting a raft of weaknesses in the Western system. The West’s greed and complacency became Chinese tailwinds, IP theft was rampant, expertise and trillions of dollars were willingly transferred, industrial and institutional leverage was ceded, the PLA was modernized, and now here we are.
The CCP did so well executing its modernization playbook that the game has now become much clearer to all the other players. Xi Jinping’s rhetoric and policies have certainly helped in that regard, but I think the story of the past few years has been less about China’s strategy than about everyone else, particularly the United States, slowly realizing that they can play, too. Chokepoints can be secured, new alliances can emerge, supply chains can be fortified and diversified, and economic coercion can also be employed by the largest economy on earth.
The world is undergoing changes unseen in a century, yes. But interestingly enough, it may ultimately be Xi who wishes we could go back to the way things were.
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