China has long portrayed itself as a rising superpower ready to challenge American leadership. But recent events – from Beijing’s quiet support for Iran to mounting economic stress inside China’s own industrial sectors – suggest that the Chinese Communist Party’s (CCP) economic model is showing serious cracks.
While the United States and Israel recently took decisive action against Iran’s nuclear and missile programs, Beijing conspicuously remained on the sidelines. China, despite its close strategic ties with Tehran, avoided direct involvement while publicly calling for “restraint.”
Chinese foreign minister Wang Yi attempted to lecture Washington about the dangers of military force, repeating the CCP’s supposed “principles” of responsible great-power conduct. Yet Beijing’s criticism rang hollow. The CCP routinely violates those same principles by flying military aircraft near Taiwan and deploying so-called “fishing vessels” – often operated by People’s Liberation Army veterans – to harass neighboring countries in the South China Sea.
More troubling, evidence suggests that China continues to quietly support Iran’s military ambitions even as it publicly urges diplomacy.
On March 7, The Washington Post reported that two Iranian cargo ships departed China’s Gaolan chemical port bound for Iran. The vessels may have been transporting sodium perchlorate, a critical ingredient used in missile fuel. The ships are operated by the Islamic Republic of Iran Shipping Lines, an entity sanctioned by the United States, the European Union, and the United Kingdom.
Isaac Kardon, a senior fellow at the Carnegie Endowment for International Peace, described Beijing’s decision to allow the shipments as a deliberate political signal – particularly at a moment when the United States and Israel were working to destroy Iran’s missile capabilities.
China’s willingness to assist regimes hostile to the United States is not new. According to a former senior People’s Liberation Army officer who defected to the West in the late 1990s, the CCP has supported Iran’s missile ambitions for decades.
“The party has maintained a supportive posture toward the ayatollahs, as Lenin once did with Islamic fighters in his conflicts with the West,” the officer said. “In 1991, the Party opted to assist the Iranian missile program.”
Evidence of this relationship dates back more than thirty years. In January 1994, the German magazine Focus reported that China had aided Iran in developing medium-range missiles, marking an early phase of the partnership.
That relationship remains a major concern in Washington today. In January, Rep. Tom Suozzi (D-NY), chair of the House Select Committee on the Chinese Communist Party, introduced the Restoring Trade Fairness Act, legislation that would revoke China’s Permanent Normal Trade Relations status and strip Beijing of its special trade privileges with the United States.
The proposal reflects growing bipartisan recognition that China has leveraged access to Western markets while simultaneously supporting regimes hostile to Western security interests.
President Donald Trump has made confronting that imbalance a central component of his economic strategy. During his first term, Trump imposed sweeping tariffs on Chinese goods to counter what he described as decades of unfair trade practices, including the dumping of heavily subsidized products in U.S. markets.
Those policies intensified during his second term. The result, according to former German diplomat Professor Uwe Schatschneider, has been a significant challenge to the CCP’s economic model.
“Trump’s actions dealt a serious blow to the CCP’s prestige, which matters there more than GDP,” Schatschneider said.
Beneath Beijing’s confident rhetoric, the Chinese economy is showing signs of strain. At the most recent National People’s Congress, the CCP announced an official economic growth target of around five percent – a figure many outside analysts believe will be difficult to achieve amid declining exports and structural problems within China’s industrial sectors.
One of the clearest examples of those problems is China’s solar panel industry.
Over the past decade, the Chinese government poured massive subsidies into solar panel manufacturing in an attempt to dominate the global market. By 2018, China produced roughly 95 percent of the world’s polysilicon, a critical component used in solar panels. As a result, Chinese firms eventually captured more than 80 percent of global solar panel production.
But that success also created massive overcapacity.
Prices have since collapsed under the weight of excessive production. Polysilicon prices have fallen sharply from their peak in 2022, forcing companies across the sector to slash production and cut jobs. Total losses in the solar panel industry in China reached $60 billion in 2024.
“Facing mounting losses, companies slashed production, provoking a broad wave of layoffs,” Junko Okazaki of RTS in Tokyo told this author. “Almost every Chinese manufacturer is feeling the impact.”
The solar downturn highlights a deeper problem in China’s economic model. As Professor Pierre-Luc Villot notes, Beijing often pours enormous subsidies into industries it believes will dominate the future – only to create destructive price wars when too many companies enter the market at once.
That same dynamic is now unfolding in China’s electric vehicle industry.
For more than two years, Chinese EV manufacturers have been locked in a brutal price war as dozens of heavily subsidized companies compete for market share. According to the China Association of Automobile Manufacturers, EV inventories surged to a five-year high of 3.45 million vehicles by last year.
Beijing has attempted to push smaller companies to merge with larger firms, but many manufacturers have resisted consolidation. The result has been falling prices, shrinking profits, and growing anxiety within the CCP about potential layoffs and instability.
To offset the pressure, Chinese officials are now aggressively pushing EV exports. Cui Dongshu, secretary general of the China Passenger Car Association, predicted that exports could drive 10–15 percent growth in the sector this year.
But Villot believes those projections may prove unrealistic. “After President Trump scrapped the executive order mandating America’s shift to EVs, the outlook for Chinese EV makers darkened,” he said.
Taken together, these developments reveal the growing vulnerability of China’s heavily subsidized export model. Industries once promoted as symbols of Chinese economic dominance – from solar panels to electric vehicles – are now struggling under the weight of overproduction and global trade restrictions.
For Beijing, maintaining access to Western markets has become increasingly important.
That reality may explain why China has responded cautiously to recent geopolitical crises despite its close ties to regimes like Iran. Even as it quietly supports partners hostile to the United States, Beijing appears reluctant to risk a broader confrontation that could further damage its fragile economic position.
Meanwhile, Washington is leveraging tariffs, trade restrictions, and industrial policy to strengthen domestic manufacturing and reduce reliance on Chinese supply chains.
The outcome of that competition will shape the global economy for decades. But for now, China’s economic challenges suggest that the United States retains a significant – and potentially widening – industrial advantage.
Ben Solis is the pen name of an international affairs journalist, historian, and researcher.
