With the conflict in the Strait of Hormuz disrupting the flow of oil from the Middle East, China’s export engine is expected to slow in the near term as demand from trading partners softens amid rising energy prices, according to Goldman Sachs Research.

Yet looking further down the road, China is well positioned to take advantage of a shift toward green technologies as its trading partners try to insulate their economies from the volatility of access to hydrocarbons.

“While the near-term outlook for China’s exports may be weighed down by energy-driven demand headwinds, the same shock could accelerate the global push for energy security, creating a more supportive backdrop in the medium term,” writes Chelsea Song, a Hong Kong-based economist at Goldman Sachs Research, in a recent report.

How is the energy crisis affecting China’s exports?

In the coming months, ongoing trade disruptions in the Middle East, lower demand from low-income, oil-importing trading partners, and reduced real household income will likely be drags on economic activity, writes Hui Shan, the chief China economist at Goldman Sachs Research, in a separate report. China’s real GDP growth is expected to decline to 4% in the second quarter (quarter over quarter, annualized) from 5.3% in the prior quarter.

The disparity between China’s surging export sector and domestic consumption has only widened this year, Shan says. While export value jumped 14.7% year-over-year in the first quarter, property and auto sales recorded double-digit declines.

Which countries are most exposed to the energy shock?

Now the bottleneck in global energy supply is raising fears of stagflation across some key trading partners, according to Goldman Sachs Research. Emerging market economies with relatively lower income levels, such as those in South and Southeast Asia, Latin America, and parts of Central and Eastern Europe, accounted for more than half of China's nominal exports in 2025.

“Some of these economies, particularly in Asia, are disproportionately vulnerable to energy shocks due to their high exposure to oil and gas supply disruptions,” Song writes. Lower income economies (with GDP per capita below the sample median of $14,000) contributed 2 percentage points of China's 5.4% nominal export growth, up from 1.8 percentage points during the 2019–2024 period.

In the current squeeze, with real exports accounting for about 15% of China’s economy (in value-added terms), the implication is that there is a roughly 0.3 percentage point downside risk to China’s real GDP growth this year.

Over the medium term, China’s leading edge in green energy technologies could provide a tailwind for the country’s exports. China’s trading partners are likely to ramp up spending on more localized and renewable energy sources, including solar power, alongside greater investment in electrification and alternative energy systems. 

In 2024, China accounted for roughly 86% of global solar module production, 80% of lithium-ion batteries, and 68% of electric vehicles, according to Goldman Sachs Research. Dubbed the “new three,” these sectors made up about 4% of Chinese nominal exports and contributed around 1 percentage point to the 5.4% nominal export growth in 2025.

While Europe has been the top destination for these goods thanks to strong decarbonization policies across the region, there is potential for a rise in broader demand. Economies dependent on energy imports, especially in Asia, may see stronger incentives to accelerate the adoption of renewable energy and electrification, Song writes.

 “The new three have become an increasingly important driver of export performance,” she says.

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