US-Israel’s Iran War blitz: Has China decided to hide its strength and bide its time?

For all its ties with Iran and outreach to West Asia, heralded by a patch-up it brokered across the Gulf in 2023, China’s role in the war that rages today is either negligible or invisible. A pre-emptive air campaign by the US and Israel to disarm Iran has not just trumped America’s ‘Shock and Awe’ of 2003 against Iraq in ferocity, it threatens to leave Chinese diplomacy under the region’s rubble as Tehran hits out at US-allied Gulf states.

Back home, Beijing seems at a loss over how to revive its economy. On Thursday, it notched down its GDP growth target to a range of 4.5%-5%, its lowest goal since 1991. True, Xi talks about ‘common prosperity’ as a priority.

Also, like any economy, China’s gets harder to expand as it matures. Given how it derives its heft from economic success and fought to fend off trade adversity, however, China’s air of resignation over its slowdown seems odd.

Its pace of output growth, at an average of just above 5% over the past three calendar years, has lagged India’s average of 7.3% from fiscal 2023-24 to 2025-26. The ‘fastest growing major economy’ race has been a no-contest since covid.

Granted, the People’s Republic’s real rivalry is with the US, not us. Yet, to project power some day beyond its borders, or even across the Taiwan Strait, it needs all the dynamism it can muster.

As the outline of China’s 15th five-year plan (2026–2030) indicates, its key aim is to achieve “productive forces” of “new quality,” code for AI and deeptech, with an energy transition and common prosperity as themes. Structurally, “internal circulation” remains a major goal—the hope that its economy can rely more on local commerce than global trade as it emerges above the $20 trillion level (about two-thirds America’s).

While China’s state-aided export thrust remains the stuff of legend, domestic drivers are proving hard to fire up. It has been unable to counter the ill effects of its long property slump, let alone reverse deflationary pressures, even as it faces trade turmoil and a potential war-led energy crunch.

Internally, softening prices have been taking a toll. As of now, it has too much capacity in too many sectors. Its consumer price index was flat in 2025 and went negative in January, like its producer index has long been.

Deflation does not just deprive businesses of pricing power, it nudges people to sit on their cash and put off discretionary spending for later. It also increases debt burdens in real terms and hits credit offtake.

As for policy, stimulus efforts have only shown mild results so far. Last year, China cheapened credit, widened its fiscal deficit to 4%, doubled its ‘trade-in’ subsidy for retail purchases and issued extra bonds. But its GDP growth path refuses to look up, even as trade partners accuse it of exporting deflation.

On the global stage, could China be going back to Deng Xiaoping’s dictum of “Hide your strength, bide your time”? Analysts who see it playing a long game suspect a tactical retreat on Beijing’s part while it watches its archrival inflame West Asia, assesses America’s tech edge and awaits a chance to ‘re-unite’ Taiwan. Even if this is so, China’s future role depends critically on how its economy performs.

As the plot of this century’s geo-rivalry thickens, we in India must keep events and strengths under close watch.