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Low oil little benefit to China

Added 11th February 2015

Falling oil prices will not have a significant impact on China, according to Andy Rothman, investment strategist at Matthews Asia.

Low oil little benefit to China
The oil price plunge is likely to give domestic consumption a big boost in many emerging economies. In some, such as India, which subsidises oil, cheap prices are helping the government shore up its balance sheet.
But not in China, which is reliant on coal.
“Coal is still king in China, and accounts for two-thirds of the country’s energy,” Rothman wrote in a research note. “In fact, even though China is the world’s largest net oil importer, net oil imports equal less than 3% of China’s GDP.”
Oil accounts for only 18% of China’s primary energy consumption. That compares to Japan (44%), Korea (40%) and the US (37%). 
In China, lower oil prices have contributed to lower fuel prices, delivering a modest contribution to lower headline consumer price index, he added.
“But lower food prices due to unusually mild weather and unusually low levels of hog disease have had a much bigger impact. Moreover, households account for a relatively small share of China’s total oil consumption.
“China certainly contributed to weaker global demand for oil last year, with its oil consumption rising by about 1.4% year-over-year, down from 3.2% growth in 2013. But most analysts agree that a big increase in oil supplies was the main factor behind lower prices.”

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