China relies on the Suez Canal as a critical maritime route, free passage through which is ensured by the United States' strategic military presence in the region.

Completed in 1869, the Suez Canal runs across an isthmus of Egypt to connect the Mediterranean and Red seas as well as Africa and Asia.

The canal receives about 30% of global maritime shipping cargo. More than 1 million barrels of crude oil pass through it each day.

The US Navy regularly conducts freedom of navigation operations through the Suez Canal and the Red Sea to assert international rights to navigate through those waterways.

For China, the canal provides the shortest path to Europe and a key avenue for Russian oil imports.

Approximately 60% of Chinese trade with Europe typically transits through the Suez Canal, the investment firm Fitch Ratings said in March.

The importance of the canal and the region has been underscored by recent attacks by Yemen's Iran-backed Houthis on commercial vessels in the Red Sea.

The attacks, which began in November 2023, have disrupted commerce and endangered civilian sailors, forcing some vessels to detour via Africa's Cape of Good Hope.

The detour extends travel by 10 to 15 days and has led to increased operational costs for Chinese and other exporters, including for fuel and labor, straining profit margins and complicating supply chains.

China has also invested significant resources in the Suez Canal Economic Zone (SCEZ), which spans more than 460 square km on the canal's eastern and western banks.

China's total investment in the SCEZ surpassed $3 billion, the Egyptian cabinet said in a December 8 statement.

Restricting access

If crisis breaks out in the Taiwan Strait, the United States and other Group of Seven (G7) nations could impose sanctions on China.

Taiwan lives under the constant threat of invasion by China, which has not ruled out violently bringing the island under its control and has in recent years ramped up the deployment of fighter jets and warships around the island.

The G7 nations had a rapid and coordinated economic response to Russia's invasion of Ukraine, indicating the ability to do likewise if China escalated against Taiwan.

The economic countermeasures could include restrictions on trade in major industrial sectors or more narrow limits on subsectors with high dependencies on G7 countries.

Sanctions could be applied to China's use of the Suez Canal. In this scenario, the G7 nations would likely compensate Egypt for the loss of revenue incurred by restricting Chinese access.

Over 100 million jobs in China depend on foreign final demand, and nearly 45 million of these jobs depend on final demand from G7 countries, according to an analysis by the Atlantic Council published in April.