The war between the United States, Israel, and Iran is pushing several Chinese financial institutions to reduce their exposure to the debt of Middle Eastern countries, a region that in recent years has become a key market for Chinese banks. Meanwhile, Beijing’s regulatory authorities are strengthening controls on loans and investments.
THE WITHDRAWAL OF CHINESE BANKS FROM ABU DHABI
Bloomberg reported that a large Chinese bank has limited the drawdown on a bilateral loan granted to a financial entity of the Abu Dhabi government, an unusual measure. Not only that: another Chinese institution, but medium-sized, is looking for buyers to whom it can sell shares of syndicated loans in favor of Middle Eastern borrowers, including a $4 billion transaction closed last year by the Abu Dhabi sovereign wealth fund, Adq.
CHINESE INSURANCE COMPANIES DUMP GOVERNMENT SECURITIES AND BONDS
The insurance sector is also involved in this operation to downsize China’s credit presence in the Middle East. In fact – according to Bloomberg – the asset management division of a Chinese insurance company is reducing its holdings in government securities and state-linked bonds, including those issued by the Saudi oil company Saudi Aramco.
Another source told the agency that traders at a Chinese entity were ordered to suspend trading in Middle Eastern securities starting last Monday.
MEANWHILE, THE REGULATORY AUTHORITIES…
There are also movements on the regulatory front. The Hong Kong monetary authority has contacted at least two local banks to examine their exposure to Middle Eastern loans and bonds. And the National Financial Regulatory Administration, a government-controlled regulatory body, has ordered banks to review their financing activities in the Middle East, including their credits to state entities, and to report the results promptly.
CHINA’S FINANCIAL PRESENCE IN THE GULF
Chinese banks are among the main financiers in the Gulf region: in 2025 loans granted in this area reached a record $15.7 billion, nearly triple compared to previous years; most were allocated to Saudi Arabia and the United Arab Emirates. However, the Iranian crisis could drastically redefine the lending strategies of Chinese institutions in the Middle East, as well as increase uncertainty about their expansion plans in the region.
ADNOC SUSPENDS THE PLACEMENT OF ITS FIRST YUAN-DENOMINATED BOND
For the moment – writes Bloomberg – most Asian banks are waiting to see how the war develops, “although early signs indicate that some are considering suspending agreements with Gulf borrowers.” Significant in this regard was the decision of the Emirati state oil company Abu Dhabi National Oil Company (Adnoc) to suspend the placement of its first bond denominated in yuan, the Chinese currency: according to estimates, it could have raised up to 14 billion yuan.
FINANCIAL EXPOSURE AND ENERGY DEPENDENCE
China’s financial exposure to the Middle East is also intertwined with its energy dependence on this region. Beijing, in fact, is the main buyer of Iranian crude and relies on Qatar and the United Arab Emirates for 30 percent of its liquefied natural gas imports.
