China Decode: Is China Quietly Taking Control of the Iran Conflict?

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2:19Alice Han:I don't think that either the US or Israel is going to be keen to allow China to take a leading role in a peace process in this Iran war or the war in the Gulf. It's just too important for the US and Israel. They don't want China to be playing a leading role in this regard. Yet, I do think that this peace plan by China, with Pakistan sort of taking the lead, but China pulling the strings behind it, is important. And I think the reason for that is that it allows China yet again to claim the diplomatic high ground from the US.

3:02James Kynge:Welcome to China Decode. I'm Alice Hen.

3:05Alice Han:And I'm

3:05James Kynge:In today's episode of China Decode, we're discussing Trump threatening Iran as China and Pakistan propose a peace plan. China launching trade investigations into the U.S. ahead of the Trump-Xi summit. And how the adoption of open-claw AI in China is surging, reshaping the token economy and cloud adoption. All right, let's get into it. tensions in West Asia are escalating as US President Donald Trump threatens to hit Iran quote back to the Stone Ages while China and Pakistan unveil a five-point peace plan aimed at halting the conflict. The initiative calls for an immediate ceasefire reopening the Strait of Hormuz and launching diplomatic talks posing a potential geopolitical pivot in a war that the U.S.

3:51James Kynge:hoped would cripple Tehran. But there's another layer here. As Beijing publicly pushes for de-escalation, a new report reveals that Chinese firms are simultaneously marketing AI-powered intelligence tools that can track and expose U.S. military movements in the region. Using satellite imagery, flight data, and open source intelligence, these companies, some with ties to the Chinese military, are mapping American bases, naval deployments and strike activity in real time. All right, James, we're in week five of this conflict in the Middle East. It seems that the strait hasn't been opened as of yet, although some ships are coming through destined for China.

4:31James Kynge:China is getting hit in terms of oil imports. But what's been interesting is that they have come in support of the Pakistanis to deliver this peace plan. Now, Trump is not taking it seriously. But what was your thinking behind this peace plan? and do you think it actually has legs?

4:46Alice Han:Well, I think, you know, the first question is, is it a credible peace plan? My short answer to that is that it's only as credible as the other key players, i.e. the U.S. and Israel, allow it to be. And as you've just hinted, Alice, I don't think that either the U.S. or Israel is going to be keen to allow China to take a leading role in a peace process in this Iran war or the war in the Gulf. It's just too important for the US and Israel. They don't want China to be playing a leading role in this regard. Yet, I do think that this peace plan by China, with Pakistan sort of taking the lead, but China pulling the strings behind it, is important.

5:34Alice Han:And I think the reason for that is that it allows China yet again to claim the diplomatic high ground from the US, presenting itself as a peacemaker while leaving people to draw their own conclusions that the US is a warmonger. And I also think it's important because at the margin, it could have an influence on how events in the war in the Gulf unfold. Just a couple of factual references on the plan itself. This does, I think, amount to an initiative that is more than just posturing. The reason I say that is because significant work has clearly been done behind the scenes. There has been several hours of talks between Pakistan and Beijing, talks between the respective foreign ministers of Pakistan and Beijing.

6:28Alice Han:And because there are five points in the peace plan that have been mentioned, immediate cessation of hostilities is number one. The start of peace talks as soon as possible is another. The end of attacks on civilian and non-military infrastructure is another. The fourth is restore safe passage through the Strait of Hormuz. And the last is a comprehensive peace framework. The other interesting aspect is that there are credible reports of a four-way meeting between Pakistan, Turkey, Saudi Arabia, and Egypt. These are all Muslim countries that may be seen as more palatable by Iran as negotiating partners.

7:13Alice Han:So there has clearly been work behind the scenes. between China and Pakistan and between the four countries that I've just mentioned. That means that this is more than mere posturing by China to paint the US in a bad light and claim some of the moral high ground for China. But does this really have legs in terms of something that is going to bring peace to the region and is going to start unrestricted shipping through the Strait of Hormuz? I think we're far away from that so far, Alice. But what's your take on it? How are you seeing this?

7:48James Kynge:I completely agree with you, James. This is a diplomatic move for the Chinese and the Pakistanis to show that they have skin in the game and they're stakeholders in the peace process. I think Trump's speech the other day makes it abundantly clear that he reserves the option to escalate militarily. They've got deployed thousands of troops to the region. and he is willing, I think, to commit boots on the ground, starting in Kargisland and other aspects of the strait, to really take over control of the Strait of Hormuz that obviously will have major military and political ramifications for the administration.

8:22James Kynge:But certainly his speech made it clear that within two to three weeks, this could escalate with a US military response in the region with boots on the ground in Iran. And I'm not sure how the Chinese would respond in that scenario. I was going to throw that question back at you. But I think as this conflict draws out, we're now in week five, we reach a point at which the Chinese country as a whole is going to suffer the energy implications. We've talked at length about how China is, in some respect, insulated, buffered for three to four months because of its strategic reserves and the way in which it's diversified oil flows from other parts of the world like Russia.

9:01James Kynge:But the fact of the matter is, if you look at some of the strain that's being put on the system, you look at teapot refineries, capacities, for instance, there's going to come a point in the next two months where, you know, something needs to change or else this is going to have massive energy. And then, you know, cost push inflation implications for China. So I would assume that the Chinese will try to make some kind of a deal whereby they get, you know, early access, so-called, to the Strait of Hormuz. Now we've seen, you know, some Chinese flagships have passed the region along with Pakistani and Indian, more recently South Korean as well.

9:38James Kynge:So I could see more pressure being put on by the Chinese vis-a-vis Iran to get more access to oil in the region because, you know, as we've noted in the past, more than 50 % of oil bound to China comes from the Strait of Hormuz, comes from that region. Although not as high as Trump is saying in the Financial Times, which is 90%, about 6 % of its total energy consumption, and close to 50 % of seaborne oil comes from that region through the Strait of Hormuz. So I could see China coming in at least bilaterally to try to get access to more oil from this region. But the fact of the matter is everyone is sitting in their seats, including the Iranians, to see if Trump is actually going to deliver on that threat to actually escalate militarily.

10:21James Kynge:But do you think, you know, if you were to put your thinking cap on from the Washington's perspective, do you think that's plausible?

10:26Alice Han:Yeah, I mean, I think it's plausible. But where I think China's credibility as a real peacemaker in this situation falls down is that China is highly unlikely, I think, to act as a security guarantor of a peace plan in this region. I think China has said that it supports mediation by Pakistan and other countries to end this war and to move to a peace process. But if mediation doesn't work, or if mediation starts to work and then falls apart because people start fighting again, then there has to be a question of who steps in to secure the security of the region. And I don't see that being China.

11:09Alice Han:I don't think that China would in any sense be willing to use its military to try to keep peace on behalf of Iran. It certainly wouldn't want to get into some kind of a conflict with the US and Israel. So the idea of China as a genuine security guarantor, I think, is a non-starter. And that, to me, puts a big hole in this idea of China's five-point peace plan for the region. It's just far too complicated. Mediation can only go so far. At the end of the day, you have to have somebody who will stand in to guarantee the security. And I don't think that that is China.

11:49James Kynge:Yeah, and just very quickly, this sort of segues nicely with future discussions about AI. But it's interesting if you've seen this, James, that the Shanghai company called Mitzavision has posted real-time satellite imagery of American military movements in the run-up, actually, to Operation Epic Fury that started in February 28. So they posted some of this in X, and it wouldn't be at all a stretch of the imagination to say that the Iranians could have gotten access to this data. Now, you know, we have to ask to what extent are the Chinese sharing this surveillance imagery with the American— Sorry.

12:24James Kynge:And now we have to ask to what extent the Chinese are sharing this surveillance imagery to the Iranian military. But the fact of the matter is that this data, they're publicly accessible. And so it brings into question how safe the U.S. military is in the region if a lot of the data are being leaked by these Chinese AI companies that I thought was quite interesting and may expose the U.S.-China relationship to some friction, I think.

12:52Alice Han:Absolutely agree with you there. I mean, we've seen one F-15 US aircraft get shot down. That's another fast-moving situation. It could create tensions that we can't yet judge between the US and China. But I think you're absolutely right to point to this surveillance ability that China seems to have. This is a big setback for the US's war ambitions in Iran.

13:17James Kynge:Okay, we'll be back with more after a quick break. Stay with us.

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16:39James Kynge:Welcome back. China has launched two trade investigations into U.S. practices, retaliating against similar probes by the Trump administration just weeks before a planned summit between Presidents Trump and Xi Jinping. The investigations target U.S. policies that Beijing says disrupt global supply chains and block Chinese green tech exports, signaling political tensions as the world's two largest economies prepare for high-stakes talks. Adding another layer of complexity, the U.S. FBI recently declared a suspected China-linked hack of a U.S. surveillance system a quote-unquote major cyber incident, suggesting sensitive data on agency networks may have been compromised.

17:20James Kynge:James, just really quickly looking into this, the timing couldn't be worse for Trump and Xi in a way, right? Because they haven't met in Beijing. They may meet, you know, mid-May, although that hasn't been confirmed from the Chinese side. The Chinese, it appears, are retaliating against the Section 301 probes that the U.S. put on after IEPA was struck down by SCOTUS. Does this at all put a spanner in the works for a Trump-Xi summit? Should we read deeply into this as being a portender for doom?

17:52Alice Han:I think it's bigger than just the Trump-Xi summit that we now think is supposed to take place in May, I think it shows just how deep the tensions and the problems between the US and China really are. You've just been referencing in the previous segment that China is able to hack into US operations in Iran. And now we're talking about a different form of security breach that China has has been able to affect inside the US. I think this shows just how little the security state or the deep state, as we sometimes call it, in both countries trust each other. And I think that goes much deeper than a summit between President Trump and Xi Jinping of China, because that summit is really, even if it takes place on time in May, is really all about mood music.

18:49Alice Han:It's about trying to sort of put a bottom under the relationship which has been deeply damaged in recent years. But I think this just shows that behind the attempts to put a brave face on relations and to sort of contain this slide in US-China ties, particularly over trade, you have the security states kind of grinding away. And there is no trust or very little trust between the security states of both countries. And so every time you try to get some kind of diplomatic progress between the US and China, you get it removed or taken away, eroded by something that happens behind the cloak of secrecy, as it were, in the real deep state relationship between the US and China.

19:39James Kynge:Well, it reminds me of the Obama years when we had that previous hack into federal data, federal agency data, I believe is the OPM hack. And it's interesting how these things end up being quite political or they're used to score political points. The fact of the matter is I'm pretty sure that some level of cyber theft, cybersecurity violations happen throughout the relationship, but oftentimes they get deployed politically to drive home a And so my deeper underlying concern is that the timing of this at a time where, you know, you've also got some trade investigations on both sides, where you haven't really seen real meat on the bones in the lead up by the seconds and thirds of Trump and Xi before a meeting.

20:31James Kynge:Again, you know, even if everything points towards positive mood music, I still think that the underlying currents are quite difficult. and you add to that some of the recent stories that we just mentioned, you know, Chinese satellite imagery being potentially being used to help the Iranians, although maybe not deliberately so, that could really easily turn into Trump potentially going sour on China. Although another read of that is that maybe if he escalates or he doesn't escalate and Iran becomes a real quagmire nightmare, he'll need to use a positive China relationship to spin his foreign policy.

21:07James Kynge:Both, I think, are equally feasible. But what's interesting to me, to frame it more generally, is that the U.S. hasn't really shifted the trade relationship that much. As much as Jamison Greer talks about the Board of Trade and trying to reduce the deficit with the Chinese, the fact of the matter is that even although the bilateral deficit has been reduced quite significantly because a lot of Chinese exports aren't going directly to the U.S. They're being rerouted. So the bilateral number doesn't reflect the final destination of goods going to the U.S., maybe through third-party countries like Southeast Asia, like Mexico.

21:48James Kynge:And Jamison Gray at USTR and Besson at State, even though they threatened last year, haven't really gone through with the rules of origin to really line by line figure out where all these goods are coming from and in that way control the trade relationship. So right now it feels very hollow, all this discussion about trade investigations, reducing the deficit. You add to that the fact that actually U.S. exports to China, which is something that the administration would like to see grow, have actually fallen. They fell in nominal terms 26 % in 2025. And by some estimates, trade in terms of U.S.

22:27James Kynge:exports to China should have been$90 billion higher last year, but due to the trade wars, that did not happen. So when I add it all together, it seems like all of these are politically motivated, and maybe they're motivated, these stories, the FBI story, the trade probes, to try to get the Chinese to make concessions ahead of a Trump summit. But right now, it looks like the U.S. is in a weaker position, mainly because of what's happening in Iran. So let's take one last quick break and stay with us.

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