| The war in the Middle East makes things clear about the risk profile of the three most important players in the region: Iran, China and the USA with its military fleet. In this first part of a second mini-series, I outline aspects of China’s risk profile – their risk appetite and risk tolerance. | In this text I give my own opinion, not that of any organization. |
Author: Manu Steens
Content
A. Risk tolerance in pursuit of objectives
Since Xi Jinping has come to power, China has been increasingly willing to take risks. This is related to the growth of the Chinese army and the economy. According to the Council on Foreign Relations, this rapid growth has made Beijing dare to take more risks in its foreign policy. For example, China has militarized the South China Sea, fought in border disputes with India, and used economic pressure against neighboring countries.
China’s 2025 National Security White Paper (published in May 2025) says Beijing is ready to use the current uncertain world situation to strengthen its own interests. According to research firm MERICS , China is less likely to compromise and will try to expand its influence beyond its own borders, especially if it feels that its national security is threatened.
Analysts call Xi a “risk-taker, but not reckless”. That means he’s willing to make bold decisions, but also pragmatic enough to change course when necessary. If he has to correct a mistake, he usually does so in a way that does not lose his authority.
B. Comfort with uncertainty
In the long term, China can handle uncertainty well. But in the short term, this will be more difficult due to economic pressure and concerns about political support for the government. Xi Jinping’s approach is also called “strategic patience”. Especially with regard to Taiwan, this means that he is willing to wait, as long as this reduces the risk of a direct military confrontation. According to The Diplomat , China is pursuing a strategy of “winning Taiwan without fighting”: it is using military pressure as a deterrent, while the real effort is focused on economic and technological domination.
However, the Foreign Policy Research Institute warns of a “closing window”: Chinese leaders see that waiting itself also entails risks, for example due to an aging population, debts and internal disagreements. In the 2025 white paper, economic growth is subordinated to security, and the seizure of Taiwan is seen as necessary for the survival of the Communist Party. This time pressure can make China less comfortable with prolonged uncertainty.
On the economic front, research institute Brookings notes that Xi has adjusted his approach to risk. He now focuses more on his own domestic economy. In doing so, he takes the calculated risk of investing in high-tech, instead of saving the real estate sector. In the long run, this should make the Chinese economy stronger.
C. Tolerance for possible negative consequences
China has shown that it is willing to endure economic pain, for example during the trade war with the United States. For example, it introduced restrictions on the export of gallium and germanium, and imposed sanctions against American companies. Beijing is thus demonstrating its willingness to bear significant economic costs if it is willing to defend its most important interests.
In terms of military risks, Taiwan, the South China Sea and Tibet/Xinjiang remain the main “red lines” for China. Foreign Policy notes that Xi sometimes deliberately stirs up crises to distract, divide and exhaust Western countries. This indicates that China consciously accepts certain indirect risks. Still, China is unlikely to accept losing a direct, full-scale military war; That limits how far the country is willing to go in an armed conflict.
MERICS notes that despite the economic downturn, Beijing continues to consciously invest in industrial policy. It thus accepts short-term economic pain in exchange for long-term strategic advantage. This shows that China has a high tolerance for negative economic consequences in the short term.