Middle East Turmoil Tests Asian Supply Chains, Yet Global Firms Double Down on China

Escalating conflict in the Middle East has driven energy price volatility, heightened shipping risks, and increased supply chain costs globally. Yet China's supply chain resilience continues to attract foreign investment, with many multinationals choosing to expand rather than retreat. German specialty chemicals company Lanxess reported that its plant in Ningbo, Zhejiang province, has maintained normal operations despite the turmoil.

CEO Matthias Zachert noted that China's ample oil and gas reserves, supported by strategic energy planning, have shielded its operations from the worst impacts. While many Asian manufacturers have faced supply disruptions, Lanxess has benefited from stable production in China and Europe, gaining a competitive edge as clients seek reliable suppliers. Lanxess posted first-quarter sales of €1.378 billion, down 13.9% year-on-year, with EBITDA falling 29.3% to €94 million.

However, Zachert said a moderate recovery began in March, and the company expects significantly higher revenue and profit in the second quarter. The firm has raised prices on several products to pass on higher raw material, energy, and logistics costs. At the 2026 Chinaplas trade fair, Kingfa Science and Technology reported order growth exceeding expectations, driven by surging demand for secure supply.

Covestro's engineering plastics division president Wang Li noted that industry-wide efforts to strengthen supply chains have led to increased inventory levels, a trend expected to continue into the second quarter. In early June, Lanxess inaugurated a new office in Shanghai, its latest step in deepening local operations since establishing its Asia-Pacific headquarters there in 2018.

Michael Rockel, Lanxess Greater China president, said the company will continue to align with customer needs and strengthen collaboration with local partners. Swedish bearing maker SKF has also intensified its China investments. President and CEO Rickard Gustafson said the company relocated its global deep groove ball bearing R&D center to China, the only such center for its largest product line, and established global technology and testing centers.

SKF now has a fully localized value chain in China, from R&D and procurement to production and sales. Gustafson cited China's strong industrial base, vast market, and improving business environment as key factors. He said the company will increase investment in AI capabilities and bearing technology innovation, while working with supply chain partners to create a zero-carbon ecosystem for bearing products. China's policy support has also encouraged foreign reinvestment.

In July 2025, the National Development and Reform Commission issued 12 measures to encourage foreign-invested enterprises to reinvest domestically. According to Ministry of Commerce data, in the first four months of 2026, over 3,000 foreign enterprises made additional investments. In 2025, more than 8,000 foreign firms increased their China investments, up over 10% year-on-year.

China's stock of foreign investment now exceeds $3.6 trillion, maintaining its position as the world's second-largest recipient of foreign capital. High-tech industries attracted 116.33 billion yuan in actual foreign investment in the first four months, up 20.3% year-on-year, accounting for 40.4% of total foreign investment, a record high. R&D and design services, computer and office equipment manufacturing, and electronic and communication equipment manufacturing all saw rapid growth.

Investment from Switzerland, France, and the United States also grew strongly.