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Oil slump likely to benefit Chinese economy

Updated: 2015-02-03 11:03
By Dai Tian (chinadaily.com.cn)

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.

Cut in spending

The Mexican government announced on Friday that it will cut 2015 spending by 0.7 percent of GDP in response to lowered oil prices which are likely to persist for years.

Mexico's state-owned oil and electricity companies will also cut their own outlays, and all the reductions will have a marginal effect on this year's growth, according to Bloomberg.

Russia, another world's energy exporter, decided to decrease spending by at least 5 percent annually in real terms for three years and seek a more balanced budget by 2017, reported the agency.

Related story: Airline industry relieved as oil prices down to 5-year low, by Xinhua

DUBAI - After years of pressure on profits driven by high oil prices, airliners and aerospace maintenance and repair service providers express relief as oil prices dropped to a five-year low.

"Global airline industry faces huge demand for the coming years, " Bin Teng, senior sales director Ameco Beijing, one of China's leading MRO (maintenance, repair and operations) firm.

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