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How China can survive without the Strait of Hormuz

The Strait of Hormuz is a vital passage for global oil transportation, and China is the largest oil importer through this strait. Paradoxically, China is also one of the countries best equipped to calmly handle the risk of this waterway’s closure.

China imports a huge volume of oil from the Gulf region, roughly equal to the total imports of India, Japan, and South Korea. When the Strait of Hormuz is threatened with closure, many Asian governments call on their citizens to shorten shower times or work from home to save energy, but in China, leading media editorials convey a different message: China has secured its own “energy rice bowl.”

China’s electric vehicle ownership has nearly matched the combined total of other regions worldwide, with vast and growing oil reserves, diversified sources of oil and natural gas supplies, and its power grid is almost unaffected by imports due to domestic fuels and renewable energy.

Thanks to policies aimed at reducing vulnerability to energy shocks over the years, China has stronger “insulation” capabilities than many neighboring countries.

Lauri Myllyvirta, co-founder of the Center for Research on Energy and Clean Air (CREA), said: “The current situation is very close to the scenario China has planned for decades.” — “This confirms efforts to reduce dependence on maritime fossil fuel transportation.”

Development of the Electric Vehicle Industry

By the end of 2020, China set a goal for electric vehicle sales to account for 20% of new car sales by 2025. By last year, this proportion had risen to half of new car sales.

This boom in electric vehicle development means China has significantly reduced its dependence on oil imports after decades of rapid growth. Compared to market expectations from a few years ago, China’s current oil consumption and import volumes have both decreased.

According to estimates from the Center for Research on Energy and Clean Air, the amount of oil replaced by electric vehicles last year was roughly equivalent to the total oil China imported from Saudi Arabia.

Sources: International Energy Agency; Center for Research on Energy and Clean Air

Independent Power Grid

China’s power grid is almost entirely powered by coal and rapidly expanding renewable energy. The booming growth of clean energy has exceeded government targets, with nearly all additional electricity needed annually supplied by new solar or wind power. This reduces coal imports and also decreases liquefied natural gas imports from a few coastal provinces where it is part of the power structure.

Increasing Share of Renewable Energy

This includes all other uses such as transportation, electricity, industry, and energy. Renewable energy sources include hydropower, solar, wind, biofuels, biomass, and waste energy:

Sources: Energy Research Institute “World Energy Statistical Yearbook” (2025) | Energy Institute

Diversification of Oil Supply Sources

China imports large quantities of oil, but unlike other major Asian importers. For example, Tokyo typically sources nearly 80% of its oil from Saudi Arabia and the UAE, while China sources an equal share from eight different countries.

China cautiously maintains independence from reliance on any single supplier. It also injects part of its imported oil into its secret strategic petroleum reserves. The exact size of these reserves remains unknown.

China maintains diversification of its oil import sources

Major importers by source: crude oil imports account for less than 20% from a single source.

Data sources: UN Comtrade database, China Customs, India’s Department of Commerce and Statistics, Korea Customs Service Trade Development Research Institute, Japan Ministry of Finance statistics

Domestic Production Is Growing

China produced about 4.3 million barrels of oil per day last year, a new record, accounting for about 40% of total oil imports, but China has not followed the U.S. shale oil development path. Natural gas production is quite different; domestic output is growing rapidly, and with pipeline imports, China’s actual liquefied natural gas imports have fallen below 2020 levels.

China’s natural gas production keeps pace with its increasing consumption

Changes in natural gas sources relative to consumption since 2015

Data sources: National Bureau of Statistics of China; China Customs; Rystad Energy

China’s pipeline network enables it to break free from reliance on maritime imports, diversifying energy sources from Russia, Central Asia, and South Asia. Ambitious new pipeline projects between China and Russia, such as the Siberia Force 2 pipeline, have been proposed, but they still require several years to complete.

For decades, China’s energy structure has focused on importing fossil fuels, especially crude oil. China’s crude oil demand is likely to peak this year and then decline. Although import volumes will remain high, the booming electric vehicle industry is helping China decouple its growth engine from foreign crude oil.

| First published on Tencent News

Published by: Reuters

Translation: 24-hour Observatory