In strategic terms, the 2026 disruption of the Strait of Hormuz is more than an acute oil shock. It is a live-fire referendum on two competing energy-security models.
The United States remains the world’s premier molecule empire: a continental-scale hydrocarbon producer, refiner, exporter, financier, and military guarantor of global maritime energy flows. Although blessed with abundant and resilient domestic production, it remains vulnerable to price volatility, diplomatic strains, and political exposure — because molecules are globally traded, rapidly repriced, and deeply embedded in transport, agriculture, chemicals, and military logistics.
China is taking a different path and attempting to become the world’s first industrial electrostate. This means a country that electrifies its energy system as much as possible, then supplies the grid using a broad portfolio of resources, with a particular focus on those within its own borders. Coal provides the sovereign foundation. Renewables, hydropower and nuclear power, battery storage, and an emerging closed-loop nuclear fuel cycle add layers of resilience. Meanwhile electric vehicles, heat pumps, data centers, railways, industrial equipment, and grid infrastructure are the demand-side machines converting those electrons into economic productivity and strategic optionality.
The American molecule empire’s production is built on abundant U.S. (and Canadian) energy resources. This capacity adds resilience to global gas, crude oil, and product markets during geopolitical shocks — as seen in 2022 when U.S. exporters backfilled European gas demand after Russian supply cuts.
China’s growing optionality introduces a thus far underappreciated strategic risk. As the country relies less on global energy markets, its insulation may provide wider latitude for revisionist actions. To date, development of China’s energy fortress has been primarily a protective shield. Yet in a future conflict — such as a potential military action involving Taiwan — it could also be a strategic enabler. Domestic energy resilience does not singlehandedly confer blockade immunity, but it is a major factor in the endurance equation.
China’s Energy Strategy Faces Its First Big Pressure Test
Although popular attention on the Iran war focuses on day-to-day events, China’s ongoing response has been decades in the making. Not since 1973 has the world suffered an oil and energy shock like that triggered by the Strait of Hormuz closure. At that time, China’s President Xi Jinping was 20 years old and working in rural Shaanxi province, where he had been sent during the Cultural Revolution. Even then, the Chinese Communist Party propaganda extolled the virtues of energy self-reliance, saying that “Guided by Chairman Mao’s revolutionary line, the Chinese people have carried out the principle of maintaining independence and keeping the initiative in their own hands and relying on their own efforts.”
Half a century later, China’s modern energy ecosystem has fulfilled that ideological mandate, thus far withstanding the 2026 shock. The system has clearly borne strain but is meeting core energy security objectives by providing what appears to be sufficient insulation for citizens and key economic interests to give national leaders time to formulate policy. Measures taken by China thus far include:
- Export: Shutting down exports of gasoline and diesel fuel to the rest of Asia, protecting itself and increasing supply shortfalls in the Philippines and elsewhere.
- Stockpile: Tapping into its 100-plus days’ stockpile of crude oil.
- Demand: Cutting petrochemical feedstock demand by about 1.5 million barrels per day, according to Joint Organizations Data Initiative (JODI) data, on par with France or Spain’s entire daily oil consumption.
- Production: Spooling up coal-to-chemicals production, including methanol for motor fuel.
Despite war-driven energy pressures, China’s demand figures reflect a resilient baseline:
- Road freight: Volumes rose slightly year on year from March to July, according to Ministry of Transport data, signaling sustained diesel demand.
- Passenger travel: Daily AMap congestion data across the conflict period show a slight drop in passenger vehicle use, a proxy for gasoline demand, although summer holiday travel may affect recent readings.
- Industrial power: Electricity generation has also continued rising during the war period — up by 2.6% year-on-year in April, 4.2% in May, and 2.0% in June.
In the face of global energy disruptions, China appears to have weathered the effects relatively well thus far. However, drawing on reserves while trying to preserve other normalcy is a finite strategy; China must still import oil and gas to make ends meet in its energy system. It also requires helium and other key high-tech inputs, some of which has to be sourced internationally. These supply chains and materials issues will be a focus of Center for Energy Studies research going forward.
China’s fortress strategy remains incomplete, but the walls are already high enough to mitigate key external vulnerabilities. The system’s logic is coming into clear view. Imported fuels are treated as a liability to be managed and displaced wherever possible by energy produced within the country’s borders: coal, gas, hydropower, nuclear power, oil, wind, and solar.
A New Industrial Revolution
Sustaining China’s current energy architecture for at least the next five years will be a considerable undertaking. Using the 2026 Energy Institute Statistical Review of World Energy as a benchmark, that would mean annually:
- Fossil fuels: Mining nearly 5 billion metric tons of coal and producing as much oil as Iraq and as much gas as Iran.
- Nuclear power: Producing more than twice as much nuclear energy as Russia.
- Renewables and hydropower: Generating twice as much hydropower as North America, more than twice as much solar power as Europe, and more than twice as much wind power as North America.
It also means building some of the world’s largest dams, undertaking the biggest civilian nuclear expansion since the Cold War, and deploying large-scale transport electrification. One electric vehicle (EV) plant that BYD is expanding in Henan could soon produce enough cars to displace 1% of China’s gasoline use, assuming that each million EVs added to the fleet displaces 15,000 to 20,000 barrels per day of gasoline use.
China’s energy evolution is, at its core, a new industrial revolution. Building infrastructure to produce power from domestic coal, nuclear reactors with two-year refueling cycles that can recycle reprocessed spent fuel, and wind, solar, and hydropower can help untether the nation from global oil and gas shocks. Although the industrial path appears firmly set, the ecosystem remains a work in progress and considerable resources continue to be directed into alternative, electricity-focused energy sourcing.
Consider capital investment, a key signal of future intentions. In 2025, China’s leading de-oiling companies, including electrified transportation and coal-to-chemicals firms, invested almost as much capital in their businesses as China’s large state-owned oil and gas firms.[1]
The comparison is not like-for-like, however, as the business models are different. Oil and gas are inherently subject to depletion — constant drilling is required to maintain production — whereas electrification is additive; a vehicle sold today may drive for 20 years. But the comparison is nonetheless directionally useful because each electric vehicle, large or small, sold in today’s stalled Chinese domestic market reduces future oil demand. In a flat car and freight truck market, EV sales directly displace oil use, and China appears close to that point.
From Defensive Fortress to Strategic Advantage
China’s push to develop an electrostate fortress marks a fundamental shift from energy security driven by global markets to a more securitized system. Trade is still substantial, but as Xi told workers at China’s second-largest oilfield in late 2021, the country must “ensure that its ‘energy rice bowl’ remains in its own hands.” The ongoing withdrawal from the global energy marketplace aligns with the Chinese leadership’s vision of a dual circulation system — one in which the world relies heavily on China’s industrial output, as China minimizes its dependence on foreign-sourced raw materials.
The electrostate also shifts foreign policy. Whereas Washington policymakers are focused foremost on petrostates such as Iran and Venezuela, Beijing’s diplomatic and financial resources have for decades been focused both on oil and on securing critical materials — cobalt, nickel, and other key metals and minerals — and building the processing value chain required to turn raw materials into finished batteries, electric motors, and solar panels.
China’s multi-decade project to become the world’s leading mineral power facilitates domestic industry and creates geoeconomic leverage against the U.S. Diversification efforts are underway, but just as China will still need imported oil for another decade or more, so too U.S. industrial ambitions will continue to intersect with China-dominated materials supply chains and chokepoints. This geoeconomic competition is only in its opening phase.
Energy Resilience and Strategic Power
China has thus far approached the recent energy disruption with restraint, while quietly building resilience through further de-oiling its energy system and diversifying supply paths. Its proactive approach also seeks to further solidify China’s strategic position in Asia as the U.S. remains concerned with the Middle East.
Today, China’s energy fortress is primarily defensive, but its performance thus far in the Iran war could encourage Chinese leaders to view a future expanded iteration as an enabler of offensive action. This would stem from its ability to blunt the impacts of a potential U.S. maritime oil blockade in the event of conflict over Taiwan or other regional triggers. Just as U.S. hydrocarbon dominance enabled it to wage economic and physical warfare against Iran, so too may a more insulated energy system grant China a new degree of strategic freedom in potential future conflicts.
Note
[1] Private model available by request from the author.
Suggested Citation: Gabriel Collins, “China’s Electrostate Could Erode Deterrence in Asia,” commentary, Rice University’s Baker Institute for Public Policy, accessed September 16, 2026, https://www.bakerinstitute.org/research/chinas-electrostate-could-erode-deterrence-asia.
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