China warns of 'vicious cycle'

Urges US, Israel to stop military action in Middle East

BEIJING:

China has urged all parties involved in the Middle East conflict, particularly the United States and Israel, to cease military operations, warning of a "vicious cycle" in a war that analysts say if prolonged, could undermine global growth and weaken demand for Chinese exports.

"The one who tied the bell must be the one to untie it," said Chinese special envoy to the Middle East, Zhai Jun, at a briefing after his shuttle-diplomacy trip that included stops in Saudi Arabia, the United Arab Emirates and Kuwait.

China will maintain close communication with all parties concerned and make unremitting efforts to ease tensions and promote regional peace and stability, he said.

In a separate briefing, foreign ministry spokesperson Lin Jian cautioned that the use of force would only lead to a "vicious cycle" and that the war should not have been started. "Should the hostilities continue to spread and intensify, the entire region will be plunged into chaos," he said.

"Weakening growth in China's emerging market trading partners will likely weigh on Chinese exports to these countries in the coming quarters," Goldman Sachs's Hui Shan said in a report about the current near-term risks to China's economy.

China is relatively better positioned to absorb higher oil prices with coal accounting for about 60% of its energy mix, ample oil stockpiles and imports via the Strait of Hormuz, representing only around 5% of total energy consumption.

Still, rising oil and gas prices could lift inflation and end producer price deflation, according to the chief China economist.