International crude oil price rise will exert seven impacts on Chinese economy including GDP slash, rising pressure of inflation and other aspects, according to a report released by Forecasting Research Center of Chinese Academy of Sciences on February 16.

The report made the seven projections based on a comprehensive analysis on the impact of international crude oil price surge on Chinese economy.

World oil price hike would slash China's gross domestic product (GDP). 50% of oil price surge would result in the increase in foreign exchange payment by 1.468%, and decrease in export, investment and consumption by 0.106% and 0.026%, respectively, thus cutting the GDP by 0.137%.

Higher oil price would also break trade balance. If oil price grew 50%, RMB exchange rate would slump by 0.636%. RMB depreciation would push the price of imported commodities high and exports down, which would shrink China's actual net income, thus further deteriorating balance of payments.

Oil price hike would raise the costs of enterprises with petroleum as material or fuel, escalating China's inflation pressure. As China's demands for imported crude oil continue to surge, soaring oil price would directly raise China's costs on oil purchase. The consequence brought about by the situation would finally be faced by on different industries and enterprises, resulting in declining industry profit decline and sluggish domestic investment.

Oil price rise would pose potential risks on exports. On one hand, products with oil as major materials would have their competitiveness hurt by high costs. On the other hand, oil importers would have to trim import capacity due to balance of payment problem arising from higher oil price. If world oil price ascended by 50%, China's export volume would reduce by 1.468%.

World oil price rise also imposes adverse impacts on rural and urban average Chinese. Generally speaking, oil price rise would simultaneously affect the welfares of the two groups. But rural residents' welfare would be damaged faster and more seriously and than that of their urban peers.

Despite of those disadvantages, oil price hike also brings something beneficial. It will be conducive to the development of China's petroleum industry and help channel labor and capital flow to oil exploitation sectors. In addition, higher oil price would also raise Chinese awareness in energy conservation and increase energy utilization rate, which will alleviate China's oil contradiction between supply and demand.

Finally, oil price hike will push various countries to make more efforts in technology. Technology plays a significant role in responding to oil risks, especially in the sectors of petroleum or transportation. Low and mid level technology of petroleum and transportation sectors could completely shun the negative impacts of oil on GDP in the case of 20% or 50% price hike, while the high level technology could immunize GDP from any impact even if oil price jumps 100%.

By People's Daily Online