[China Trends #26] - Energy Security First: What Hormuz and Chinese Sources Reveal About Beijing’s Strategy

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By Joseph Dellatte

The current energy crisis has revealed a paradox at the heart of China's rise. Over the past two decades, China has built the world's largest energy system. It has become the leading producer of electricity, the dominant manufacturer of renewable energy technologies, the world's largest electric vehicle market, the largest consumer of oil and importer of liquefied natural gas (LNG), and one of the principal drivers of global energy investment. Yet despite this extraordinary transformation, China has become more vulnerable to external energy shocks. 

More than 70 percent of its oil consumption depends on imports. Significant portions of its natural gas supply originate abroad. Even the rapid expansion of its nuclear sector increasingly relies on foreign uranium. The Hormuz crisis has therefore exposed not a temporary weakness, but a structural feature of China's development model, a continued dependence on energy resources and supply chains beyond its control. It has also revealed once again that when confronted with external energy shocks, China ultimately falls back on its vast domestic coal resources as its ultimate energy security insurance policy.

When one looks at Russia and natural gas, China's exposure to Middle Eastern oil, or raw uranium supplies, from Kazakhstan notably, these appear to be separate issues. In reality, they tell the same story. Together, they reveal the central organizing principle of China's energy strategy which is the persistent effort to reduce strategic vulnerability in an increasingly unstable world.

This perspective helps explain many of the apparent contradictions in Chinese energy policy. Natural gas, for instance, is frequently described as a transition fuel capable of facilitating the shift away from coal. Yet Beijing remains reluctant to allow gas to occupy a dominant place within its future energy system. The reason is straightforward: An increasing portion of China's gas must be imported. Whether supplies originate from Russia, Central Asia, Australia or Qatar matters less than the dependence itself. From a climate perspective, gas may be preferable to coal. From a security perspective, however, it creates vulnerabilities that Chinese policymakers are unwilling to deepen.

The debate surrounding the Power of Siberia 2 pipeline illustrates this logic particularly well. Despite the strategic partnership between Moscow and Beijing, China continues to resist excessive reliance on Russian supplies. The objective is not to replace one dependency with another, but to preserve strategic flexibility by ensuring that no supplier becomes indispensable. In this respect, Sino-Russian gas relations reveal less about geopolitical alignment than about Beijing's determination to maintain leverage over all its energy partners.

Oil presents an even greater strategic challenge. Unlike natural gas, where multiple sourcing provides some room for maneuver, China's dependence on imported crude remains a structural vulnerability with more limited substitute. The Strait of Hormuz crisis has once again demonstrated the extent to which China's economy remains exposed to instability in the Middle East, even more now that Venezuela’s resources are back under US influence. Strategic petroleum reserves, state intervention, alternative transport corridors and long-term supply contracts can cushion the impact of disruptions, but they cannot eliminate the underlying exposure.

For Chinese policymakers, the challenge extends well beyond the physical security of oil supplies. Higher oil prices affect industrial competitiveness, household purchasing power, inflation and economic growth. In an autocracy where economic stability underpins political stability, imported oil represents not only an energy concern but also a macroeconomic and geopolitical risk. Beyond the direct effects of higher energy costs, Chinese policymakers are equally concerned that sustained oil price shocks could trigger a broader slowdown in the global economy, weakening external demand for Chinese exports. In that sense, oil dependence also represents an indirect financial risk through China's continued reliance on international markets.

It is therefore unsurprising that Chinese debates increasingly focus on reducing the role of oil within the economy. Some analysts advocate greater use of the renminbi in global commodity markets or stronger financial instruments to reduce external exposure and as a strategic vehicle to enhance China’s global power. Others argue for larger strategic reserves and more sophisticated resource governance. Yet the dominant long-term response points in another direction: electrification.

The uranium question reveals both the opportunities and the limits of this strategy. Nuclear power offers Beijing an attractive combination of low-carbon electricity generation and enhanced energy security. Yet China's rapidly expanding reactor fleet has created another external dependency. Domestic uranium production remains insufficient to meet future demand, forcing Beijing to secure supplies through overseas acquisitions, long-term partnerships and large strategic stockpiles. Astana’s growing importance within China's uranium strategy reflects the same logic that underpins its approach to oil and natural gas, reducing concentration risk while strengthening resilience against future disruptions or opting for technologies still insufficiently financially viable.

Taken together, these three sectors reveal the defining characteristic of China's energy strategy. Beijing is not yet capable of implementing autarky. Complete energy independence is still far ahead but is a strategic ideal direction. Instead, China seeks to build an energy system capable of absorbing shocks, surviving disruptions and maintaining economic stability under adverse geopolitical conditions. Diversification, redundancy, stockpiling, domestic production, overseas investments, and infrastructure development all serve this objective.

The current crisis has demonstrated both the strengths and the limitations of this model. Strategic reserves, state-owned enterprises, centralized planning, and extensive infrastructure have allowed Beijing to weather external shocks more effectively than many other major energy importers. At the same time, structural vulnerabilities remain. Oil dependence persists. Uranium imports are likely to continue to increase. Natural gas continues to expose China to international market volatility. Most importantly, the crisis has once again highlighted the enduring tension between energy security and decarbonisation. Faced with uncertainty, China has repeatedly fallen back on its most reliable domestic resource: coal. Despite impressive progress in clean energy deployment, security and cost considerations continue to define the boundaries of what is politically acceptable.

The significance of the current crisis therefore extends far beyond temporary disruptions in oil, gas or uranium markets. It offers a window into the deeper logic shaping China's energy choices. What emerges is not simply a story about decarbonisation, nor even one about technological leadership. It is the story of a great power seeking to reconcile continued economic growth with the realities of strategic vulnerability. Understanding this objective may well be the key to understanding China's energy policy-and, more broadly, its evolving conception of national security-in the decades ahead.

Copyright Image : CN-STR / AFP
The introduction article to this edition of China Trends by Joseph Dellatte was also published by The Diplomat.

By Michal Meidan

China’s exposure to Middle Eastern oil is consequential. But the Hormuz crisis has-on the contrary-highlighted Beijing’s strength in mitigating supply shortages. In this article, Michal Meidan, Head of China Energy Research at the Oxford Institute for Energy Studies, presents the divergent Chinese views on how to best manage the country’s dependence. While long-term solutions converge toward strategic reserves or further diversification, each short-term easing solution presents Chinese decision-makers with a dilemma: diversification implies new dependencies, resilience comes at a high economic cost, and reducing vulnerability through electrification deepens other strains within China’s industrial system. Although the Hormuz crisis has not severely impacted the country’s economy, many downstream private firms are left more vulnerable to a future oil shock than in earlier crises, underscoring the need for new measures to address similar disruptions in the future. 
 

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By Rosalie Klein

Natural gas is now a key component of Beijing’s energy strategy. The Sino-Russian relationship is central to this approach. Yet while Russia perceives gas as the partnership’s “locomotive”, China adopts a more pragmatic approach. Rosalie Klein, Project Officer at Institut Montaigne’s Asia Program, analyzes the evolving dynamics between the two neighbors. Beijing is carefully trying to avoid dependence on any single supplier by diversifying away from Russia. Therefore, what seems to be a “win-win” cooperation resembles more of a one-way relationship. While some Chinese voices have concerns about potential Russian leverage over China, others consider this to be a limited risk, thanks to Beijing’s diversification efforts. The Power of Siberia 2 pipeline illustrates the commercial and strategic disagreements that continue to divide the two countries. The future of Sino-Russian gas relations will eventually depend on the trajectory of China’s gas demand-which remains highly uncertain. 
 

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By Manon Anderson Pierre Pinhas

China has cemented its position as the global leader in electricity generation, with nuclear power playing an increasingly important role. But what about its uranium supplies? Manon Anderson and Pierre Pinhas explore China’s strategic combination of foreign uranium sources and domestic production. Despite its “three one-third strategy” to develop its domestic industry and media claims of imminent self-sufficiency, the reality of Chinese uranium production is more nuanced. Although Beijing has made significant efforts to expand domestic output, these fall short of its objectives, leaving China reliant on imported raw uranium. This dependency is concentrated among a limited number of suppliers, with Kazakhstan playing a notable role over the past two decades. To reduce this vulnerability, Beijing has increasingly invested abroad through institutional cooperation and commercial partnerships with countries like Namibia or Russia. As China’s demand for uranium continues to grow, its prospect  to achieve resource self-sufficiency in the short term seems unlikely.

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