Oil slump likely to benefit Chinese economy

A gas station in Fuyang, Anhui province. [Photo/China Daily]

The recent oil price plunge may increase Chinese GDP growth by 0.1 to 0.3 percentage points and keep inflation down, said economists.

Dragged by a supply glut and US dollar appreciation, oil price will likely fluctuate between $40 and $60 a barrel this year and benefit Chinese economy with an increasing trade surplus, said Xie Yaxuan, chief researcher for China Merchants Securities.

Oil price plummeted 50 percent in the past year, as Organization of Petroleum Exporting Countries (OPEC) refused to cut production and US output reached a three-decade high according to Bloomberg.

"We estimate that if oil prices stay at current low level through this year, Chinese CPI could be 0.3 to 0.4 percentage points lower and GDP growth 0.2 to 0.3 percentage points higher," said UBS chief China economist Wang Tao in a note in January.

UBS projects the country's GDP to grow at 6.8 percent in 2015, with the oil slump likely offsetting downward uncertainty.

Ma Jun, chief economist of the central bank's research bureau, estimates that China's real GDP growth will edge up 0.12 percentage points if the average oil price drops by 10 percent year on year.

The country imported 308.4 million tons of crude oil in 2014 worth $228.3 billion, reported Xinhua news quoting official data, which account for about 58 percent of its oil consumption.

"The oil slump is also expected to have a stabilizing effect on renminbi exchange rate," said Xie Yaxuan, adding that currency values have diverged as the US dollar became stronger.