The Strait of Hormuz crisis has sparked a new round of debates on the implications for China of the U.S.-Israel war against Iran. Citing China’s reliance on imports of oil and liquified natural gas (LNG) that pass through the largely closed strait, some experts argue that China has limited capabilities to protect its own strategic and commercial interests in the region. But this analysis is based on a false assumption about Chinese energy policy.
It is true that China is the world’s largest importer of oil and natural gas. But Beijing has long recognized the importance of energy security and the dangers of relying on a single source of energy imports. Over the years, China has diversified its energy import channels and sought to transition away from fossil fuels. The potential loss caused by the disruption of the Strait of Hormuz would therefore be bearable, or at least not crippling , for China.
And Beijing is already taking new steps to protect its energy security amid the war. Earlier this month, China held its annual “two sessions” — in which the National People’s Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC) set major economic targets and approve policy changes for the year — and introduced its 15th Five-Year Plan (FYP), placing a renewed emphasis on technological self-reliance. China’s leading role in green energy, reflected in its large market shares of t electric vehicles (EVs), lithium-ion batteries, and solar cells, has helped spark growth across its economy. The green transition would not only help China reduce its dependence on fossil fuel imports but also enable China to use inexpensive and reliable green energy infrastructure to support its high-tech development. In this year’s government work report , Chinese Premier Li Qiang mentioned new infrastructure projects aimed at forging a new form of “intelligent economy,” in which the term “electricity-computing coordination” appeared for the first time. Later, a social media account affiliated with Chinese Central Television (CCTV) pointed out that China is expanding electricity infrastructure as the foundation of computing power, and lower electricity prices will ultimately lower the inference costs of AI models. A similar expression has been included in China’s 15th FYP , underlining the government’s commitment to promoting the coordinated deployment of green electricity and computing power. In practice, provinces like Ningxia, which are home to computing hubs, have explored a green power aggregation supply model combining solar, wind, and the grid network. Green energy is affected by the weather conditions and can be intermittent, but this a new aggregation supply model ensures a stable, efficient, and low-cost energy supply to data centers. The primary motivations behind this policy shift are the increasing energy demand of AI data centers as well as concerns about AI’s environmental footprint. Without green energy, the electricity to power data centers is likely to come from fossil fuel power plants, which would be incompatible with China’s commitment to reaching peak greenhouse gas emissions by 2030 and achieving carbon neutrality before 2060. As recent geopolitical developments have shown, a fossil fuel-based approach would also leave China badly exposed to geopolitical risk.
Within this context, the new infrastructure that promotes “electricity-computing coordination” would not only meet AI’s energy demand and optimize energy efficiency. It would also make AI-related businesses more profitable and competitive while aligning with China’s climate goals. In the long run, Chinese leaders hope the mutually reinforcing deployment of green electricity and data centers will give Beijing an upper hand in AI development. These efforts have placed China in a far stronger position than its neighbors in East Asia. U.S. allies, including Japan and South Korea , have already released oil reserves to mitigate pressures on the energy market. Compared to China, they are more heavily dependent on the Strait of Hormuz for oil and natural gas. For example, Japan imported 90% of its oil from the Middle East prior to the crisis. Even if the Strait of Hormuz is fully reopened soon, countries that rely heavily on energy imports are at a crossroads. They face a choice between, on the one hand, continuing dependence on fossil fuel energy, which is subject to growing geopolitical risks, and, on the other hand, a green energy transition.
Both paths have pros and cons. Shifting from fossil fuels to green energy might lead to increased dependence on China, given its dominance in both green technology and markets. Many energy-importing countries — including U.S. allies — may feel uneasy about this reliance. For example, many trade disputes between China and the European Union focus on green energy-related industries, such as EVs and solar panels. China’s weaponization of export controls on critical minerals further deepens Europe’s distrust toward Beijing and concerns about supply chains. Importing green technology and products from China will likely exacerbate these qualms and hinder the development of European green technology. But a green transition also has significant strategic upside. They are environmentally and economically advantageous, helping to achieve global climate goals. And unlike fossil fuel energy, green energy such as wind and solar can be generated locally, while its infrastructure can serve for decades, reducing exposure to global supply disruptions. Both paths carry energy supply and supply chain risks. However, neither path is mutually exclusive. The optimal strategy for energy-importing countries should be to diversify their energy supply, and after a resolution of the Strait of Hormuz crisis, to prepare for the future development and proliferation of AI. Amid the intensifying U.S.-China AI race, the United States is at a crossroads as well. The current Trump administration does not seem to be a fan of green energy, and its deep-rooted interests in fossil fuel energy would pose obstacles to green energy development. However, as the current crisis shows, oil is a global market. A secure domestic energy supply does not insulate regular Americans from the price shock of a war-induced supply cutoff in the Middle East. Given that China is ready to deploy new infrastructure that integrates green electricity and computing power, the United States faces a difficult question. If Washington chooses not to cooperate with Beijing on green energy – either by importing Chinese green products or building technological know-how to develop its own – then how can it fuel the consistent growth needed to lead the world in AI development?