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Crude oil plunge good for China economy: Analysts

(Xinhua)
Updated: 2008-09-03 17:53

The "price fall of crude oil will help China to tame inflation, which is one of the country's biggest pressures currently," said Tang Min, the China Development Research Foundation deputy secretary general.

Because of booming economic development and severe natural disasters this year, the country's consumer price index (CPI), a main gauge of inflation, rose 7.9 percent in the first half over the same period last year.

This nearly doubled the country's target figure. Earlier this year, China set a target of limiting CPI to 4.8 percent for all of 2008.

"Prices of world goods and commodities have risen sharply this year amid surging oil prices, because oil is one of the most important raw materials and components of industry.

"Now, with the price drop, this means China, the world's second biggest oil importer and consumer, will pay less money to purchase from overseas markets," Tang said.

China's oil imports increased sharply amid a booming economy and surging demand. Last year, the nation imported 163 million tonnes of crude, up 12.4 percent over the previous year. This accounted for nearly 50 percent of the oil consumed nationwide, according to China Customs figures.

"Meanwhile, falling oil price pass on to other domestic industrials, and it will pull down prices of the whole industrial chain," Tang said.

According to National Bureau of Statistics figures, the producer price index (PPI) for the country's industrial products jumped 8 percent in the first seven months over the same period last year.

"China is expected to face less inflation pressure if the oil price continue to fall," Tang said.

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