Iran war could still alter Beijing’s policy calculus: economist

The ongoing war between the United States and Israel against Iran has entered its sixth month, prompting renewed scrutiny of how this prolonged conflict might influence China's strategic priorities. A prominent economist, Mao Zhenhua, has suggested that even as the war continues, it could still reshape Beijing’s approach to managing its economy and addressing domestic challenges. Mao, who serves as co-director of Renmin University’s Institute of Economic Research and professor at the University of Hong Kong’s Business School, emphasized that while the direct impact on China might remain relatively small, the broader implications of the conflict could force adjustments to previously established policies. Mao outlined two key concerns currently preoccupying Chinese policymakers: the duration of the war and whether it would require modifications to existing strategies. He noted that although the war’s effects on China are likely to be less severe compared to other major economies, the uncertainty surrounding its outcome could complicate efforts to maintain stability within the country. “With the war dragging on, there is spillover on everyone, but China will still probably be facing the smallest impact,” Mao stated during a recent discussion in Hong Kong. This assessment reflects a cautious yet measured outlook, acknowledging both the potential risks and the relative resilience of China’s economic framework. Despite the slowing pace of economic growth in the second quarter of the year, Mao expressed confidence in China’s ability to withstand further disruptions. He pointed to the nation’s improved handling of the war’s initial shocks as evidence of its capacity to manage future uncertainties. “China possesses the resilience and capacity to blunt more challenges,” he said, highlighting the country’s preparedness to navigate evolving geopolitical conditions. This perspective underscores a broader narrative that China is actively working to safeguard its interests amid escalating global tensions. Beijing’s focus appears to be shifting toward mitigating external pressures and maintaining internal stability. According to Mao, the government is increasingly prioritizing measures to counteract disruptions caused by the war. “For the remainder of the year, Beijing will give more weight to countering uphevals and stopping external factors from complicating the situation at home,” he explained. This strategy aligns with China’s long-standing emphasis on self-reliance and economic sovereignty, reinforcing the notion that the war, while disruptive, does not necessarily pose an existential threat to the country’s core objectives. The war’s continued escalation has also raised questions about its broader implications for international relations and trade dynamics. While China has maintained a neutral stance in public statements, its economic policies suggest a growing awareness of the need to adapt to changing circumstances. The country’s extensive trade networks and strategic investments in regions such as Southeast Asia and Africa position it to weather the storm, albeit with some degree of caution. As the conflict unfolds, the extent to which Beijing modifies its approach will depend on the evolving nature of the crisis and its potential ripple effects on global markets. Looking ahead, analysts expect China to continue monitoring developments closely while maintaining its commitment to economic stability. The coming months will likely see increased attention to domestic policy reforms aimed at bolstering resilience and reducing vulnerability to external shocks. Whether these adjustments will significantly alter Beijing’s long-term strategy remains to be seen, but one thing is clear: the war’s impact, while indirect, is far from negligible in shaping the trajectory of China’s economic and political landscape.