The disruptive consequences of the attacks on Red Sea shipping by Yemen’s Houthi rebels were underscored recently by Jan Hoffmann, the logistics chief at Unctad, the UN trade body. These incidents, he noted, were exacerbating the vulnerabilities of global trade and supply chains, adding to the challenges arising from the Ukraine conflict and from reduced shipping in the Panama Canal, where water levels have been dropping due to climate change.
The armed Houthi rebel group, which has taken up the cause of the Palestinians, has said it is only targeting merchant ships in the Red Sea with an Israeli connection, promising safe passage for vessels from China, Russia and other nations. In a significant attack last month, however, Houthi militants fired missiles at a tanker carrying Russian oil near the coast of Yemen.

It underscored the group’s inability to precisely identify its targets, and suggests it may be a matter of time before Chinese vessels come under attack. China’s approach to the situation reveals its challenges, both economic and geopolitical.

With ships avoiding the Red Sea, the volume of trade going through the Suez Canal had fallen by 42 per cent over the past two months, said Unctad on January 26. China is primarily concerned about the increased time and costs associated with shipping through alternative routes. The freight rate for the Shanghai-Northern Europe route has surged, from US$581 per 20-foot equivalent unit (TEU) in mid-October to US$2,694 at the end of December – triple what it was at the start of December – surpassing US$3,000 in January.

Beyond shipping costs, the transport of energy commodities has been affected. Major liquefied natural gas exporter QatarEnergy had to pause its LNG shipments via the Red Sea briefly last month and ship movements in the area remain fraught and disrupted. Additionally, shipping through the alternative route of the Panama Canal has been restricted, as a severe drought lowered water levels, forcing major shipping companies to scramble for other strategies. Consumer goods may continue to encounter notable disruptions even during the slow shipping season.
Chinese ships may be navigating the Red Sea without being attacked but China still has to contend with elevated energy prices, increased shipping and insurance costs, and extended shipping times to Europe. Reductions in passages through the Suez Canal could result in more price divergences and heightened volatility in commodities, including oil.

Beyond economic costs, however, China also has to consider the Red Sea situation against its broader role in global affairs.

China has long been critical of the Houthis. In 2015, during the Yemen civil war, after Houthis captured the capital Sanaa, China supported the UN Security Council resolution demanding that “the Houthis immediately and unconditionally” withdraw. In 2022, China supported a resolution condemning the Iranian-backed Houthis in Yemen. Yet China has a warming relationship with Iran and in 2021, both countries agreed to a Comprehensive Strategic Partnership. Reports suggest Chinese officials have urged their Iranian counterparts to rein in the Houthis and their Red Sea attacks.
Despite maintaining a naval base in nearby Djibouti, China has so far declined to join the US-led mission to safely escort ships in the Red Sea. There are signs, however, that Beijing is no longer entirely passive, having reportedly started to deploy naval vessels to escort Chinese cargo ships in the Red Sea.

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US-led coalition strikes Iran-backed Houthi fighters in Yemen

US-led coalition strikes Iran-backed Houthi fighters in Yemen

Pressure is growing for China to pursue more decisive action. When Chinese Foreign Minister Wang Yi and US National Security Adviser Jake Sullivan met in Bangkok recently, the Houthi attacks were expected to be discussed, despite no official mention. There was hope that Beijing would present concrete proposals or strategies to contribute to the collective effort of safeguarding the Red Sea.

Analysts have pointed to the delicate situation: it is too crucial to overlook but too sensitive to explicitly mention. Taking decisive action in response presents challenges for China, particularly when it comes to pressuring Iran.

Since 2021, China has reportedly invested US$185 million in Iran while also agreeing to multibillion-dollar investment and construction contracts with Saudi Arabia – which only recently normalised relations with Iran – the United Arab Emirates, Kuwait, Qatar and Oman. This has deepened frustrations in Iran with China’s reluctance to do more to alleviate its economic pressures.

Importantly, China sees the Red Sea tensions as a spillover from the Gaza conflict. Its concern is with protecting its interests against a broader regional conflict strategy. And there are concerns in the region that additional measures taken by China, such as deploying its warships, might be seen as a threat to regional security.

China and US working together can better resolve Red Sea crisis

The Red Sea region is significant to the strategic interests of both the US and China; they want to see stable trade, energy and resource flows, counterterrorism efforts and the promotion of good governance and stability. But US-China tensions in recent years have reduced the opportunities for both countries to cooperate in the Red Sea.

This crisis is an opportunity for a breakthrough. Despite US military action, commercial shipping in the Red Sea remains under pressure. China should consider contributing more proactively, drawing on its experience in escorting commercial vessels during previous escalations in piracy in the Gulf of Aden and the Red Sea.

The potential for US-China coordination arises not out of affection but the critical importance of issues such as supply chains and energy supply to both Beijing and Washington. Negotiations would be crucial to establish frameworks and mechanisms, and to plan for how the respective US and Chinese militaries should respond when they come into contact in the local area.

Nong Hong, PhD, is executive director and senior fellow at the Institute for China-America Studies in Washington, US, and a research fellow at the China Institute, University of Alberta, Canada