Uncertainty faces China Inc's projects in Iran after US–Israeli strikes

By Eduardo Baptista

BEIJING, March 4 (Reuters) - Weeks before U.S.–Israeli strikes in Iran, wide swathes of state-backed Chinese companies were eyeing projects in areas from energy and heavy industry to trade promotion, data showed, spotlighting the risks the war presents for business in China.

One of Iran's closest allies and the biggest buyer of its oil, China has so far kept silent about the business and trade impact of the attacks, though it condemned the U.S.-led operation as "unacceptable" and called for restraint.

Chinese government procurement and tender records on Iran show contracts issued in recent months, pointing to the vibrant commercial engagement of the two nations, though the total size of China's investment in the projects was not immediately clear.

But the inclusion of many state-backed firms suggests efforts by the world's second largest economy to boost ties with Iran could transmit the business impact of the deepening Middle East crisis beyond just the private sector.

Beijing has long backed U.S.-sanctioned Tehran in efforts to deepen its strategic and economic heft in the Middle East, signing a 25-year cooperation deal in 2021, though full details were never disclosed.

China and Iran have drawn closer politically through participation in regional blocs, but economic cooperation has stagnated in recent years in the absence of big benefits to China in non-oil trade, an adviser to the foreign ministry said.

"China viewed the Iran protests as a cautionary tale, due to Tehran's domestic economic mismanagement, governance failures and corruption," added the expert, who spoke on condition of anonymity.

None of the entities identified in the documents responded to requests for comment on the status of projects and whether recent events had affected operations.

FROM STEEL TO POWER INFRASTRUCTURE

The Chinese records show contracts, some issued or active in January and February, in areas such as steel fabrication, transmission-level grid equipment, hydropower commissioning, overland freight corridors and Tehran trade exhibitions.

Shanghai Baoye, a major engineering and construction contractor within state-owned China Metallurgical Group Corp, issued a tender last month for structural steel supplies for a project based in Iran, they showed.

It also awarded a subcontract worth 7.7 million yuan ($1.1 million) to a local firm for project-related equipment.

Pinggao Electric, widely associated with China's State Grid network, published a procurement result last month that referred to an Iran project involving a mobile substation, according to documents reviewed by Reuters.

Iran is also embedded in China's Belt and Road Initiative, a multi-trillion-dollar infrastructure scheme intended to stretch from East Asia to Europe.

In December, China Railway Container Transport, a state-owned subsidiary of China State Railway Group, published a shortlist of overseas service providers for westbound Central Asia routes, including Iran.

Filings reviewed by Reuters showed a two-way flow of Chinese equipment and engineering services into Iran, while Iranian raw materials and petrochemicals run back to Chinese industry.

Steelmaker Henan Fengbao Special Steel published notices in August 2025 for the purchase of iron ore pellets labelled as being of Iranian origin.

In petrochemicals, Jiangsu Sopo Group issued procurement notices last year for polyethylene specified as "Iran Petrochemical LFI 2119," with delivery to its plant in Zhenjiang.

The same resin appeared in multiple inquiries, suggesting repeat sourcing.

TRADE PROMOTION AND PROVINCIAL ROLE

Chinese provincial authorities were also actively organising market access to Iran.

Procurement records from the commerce department of the eastern province of Zhejiang show contracts for organisational services tied to Tehran trade exhibitions across pharmaceuticals, electronic components and automotive parts.

Zhejiang is one of China's most export-oriented provinces, home to thousands of private manufacturers in machinery, electronics and automotive supply chains.

A February open tender sought contractors for an international exhibition of auto parts to be held in Iran later this year, with a bid deadline of March 2.

In northwestern Shaanxi and northeastern Heilongjiang, provincial commerce departments and state-linked oilfield equipment firms similarly announced participation in Iran's international oil and gas exhibitions.

Still there may yet be a silver lining for China.

"The crisis will certainly damage all foreign direct investment into Iran, not just China's," said Michael Feller, chief strategist at consultancy Geopolitical Strategy.

"The advantage for China, however, is that should the war end, its firms will have the pick of reconstruction contracts or a better risk appetite than Western firms if there is a US-backed regime put in charge."

(Reporting by Eduardo Baptista; Additional reporting by Laurie Chen; Editing by Miyoung Kim and Clarence Fernandez)