China has declared Israel a friend and important economic partner despite its disagreements with the Israeli government over Iran and Somaliland. Chinese Ambassador Xiao Junzheng stated, “Israel is a friend of China and an important partner.” Beijing understands that maintaining economic relationships with competing nations is far more advantageous than destroying trade every time a diplomatic disagreement arises. Meanwhile, Washington and Brussels have become obsessed with dividing the world into opposing political camps, imposing sanctions, and demanding that countries sacrifice their economic interests in the name of geopolitical loyalty.
China condemned the US-Israeli strikes against Iran and opposed Israel’s recognition of Somaliland, yet it has maintained its commercial relationship with Israel. Beijing also continues purchasing Iranian oil while conducting extensive business with Saudi Arabia and the United Arab Emirates. These countries have conflicting political and security interests, but China has no intention of abandoning profitable relationships merely because their governments disagree. Beijing is positioning itself to benefit from capital flows throughout the Middle East rather than tying its economic future to any single political alliance.
China and Israel established diplomatic relations in 1992, and their economic relationship has expanded through technology, manufacturing, and infrastructure. Chinese companies have participated in major Israeli projects, including the Bayport Terminal in Haifa and transportation infrastructure. Israel possesses considerable expertise in cybersecurity, agriculture, medical technology, and advanced manufacturing, while China has the industrial capacity to commercialize technology on a massive scale. Ambassador Xiao acknowledged this complementary relationship. China recognizes that Israeli innovation and Chinese manufacturing can create opportunities for both economies regardless of their political differences.
The Somaliland dispute illustrates the distinction between strategic interests and economic cooperation. Israel recognized Somaliland as an independent state in December 2025, while China opposed the decision and reaffirmed its support for Somalia’s territorial integrity. Beijing maintains a military base in neighboring Djibouti, near the Bab el-Mandeb Strait, a critical passage connecting the Red Sea with the Gulf of Aden and the Suez Canal. China has substantial interests in protecting international shipping routes because its economy depends upon global trade. Yet this disagreement has not caused Beijing to abandon its relationship with Israel. China understands that diplomacy and commerce do not always have to move together.
Compare this with Europe, where politicians have been willing to sacrifice their own industrial competitiveness to pursue geopolitical objectives. Germany abandoned its former energy relationship with Russia and exposed its manufacturing sector to substantially higher costs. European governments believed sanctions would cripple Russia while leaving their own economies relatively unharmed. Instead, trade was redirected. Russia expanded commercial relationships with China, India, and other countries while European industries struggled with expensive energy. The politicians in Brussels seem incapable of understanding that restricting trade does not necessarily eliminate demand. It often transfers the business to someone else.
I have warned repeatedly that the weaponization of the financial system is accelerating this realignment. Freezing Russian reserves and excluding Russian banks from SWIFT demonstrated that access to Western financial infrastructure could become conditional upon political obedience. China took notice. Beijing has been expanding alternative payment arrangements and encouraging greater use of the yuan in international commerce. These developments do not mean the dollar is about to disappear as the world’s reserve currency. They demonstrate that governments are attempting to reduce their exposure to political decisions made in Washington. Confidence in the financial system is essential to international capital flows, and once that confidence is undermined, nations begin searching for alternatives.
China’s relationships across the Middle East reflect a deliberate effort to preserve access to energy, technology, infrastructure, and markets. Iran provides oil. The Gulf states provide energy and investment opportunities. Israel offers advanced technology and commercial expertise. Beijing does not need these governments to agree with one another to recognize their economic value. This is the fundamental difference between a foreign policy that prioritizes economic interests and one that attempts to dictate international trade through political pressure.
We are watching the global economy reorganize as governments increasingly use trade, banking, and sanctions as weapons. China calling Israel a friend while maintaining its relationship with Iran is hardly a contradiction. It is a recognition that national interests extend beyond political alliances. China does not need to defeat the West economically if Western governments continue undermining their own competitiveness. The movement of capital will ultimately determine which economies benefit from this realignment, regardless of what politicians declare at their next summit.