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Impact of higher oil prices on the Chinese economy

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  • Sana Zaouali

Abstract

The demand for oil in China has dramatically increased in the last years. Today, China is the second largest consumer of oil in the world behind the United States. This growing demand in oil comes in a context of steep international price hikes for oil. With its increasing oil consumption, China today plays a major role on the international oil markets, and a change in its consumption could seriously destabilise these markets. Moreover, today China occupies a preponderant place on the international scene, and a large drop in its economic activity could significantly affect world growth. It, therefore, is important for us to ask what the impact of the current increase in oil prices on the Chinese economy might be. The aim of this article is to conduct a quantitative analysis on the potential impact of the rise in oil prices on the Chinese economy. The macroeconomic and sectoral effects are evaluated with the help of a computable general equilibrium (CGE) model. Two scenarios were formulated: the first assuming a US $10 increase in international oil prices; the second, a $25 increase. Copyright 2007 Organization of the Petroleum Exporting Countries.

Suggested Citation

  • Sana Zaouali, 2007. "Impact of higher oil prices on the Chinese economy," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 31(3), pages 191-214, September.
  • Handle: RePEc:bla:opecrv:v:31:y:2007:i:3:p:191-214
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    Cited by:

    1. Zhang, Chuanguo & Chen, Xiaoqing, 2011. "The impact of global oil price shocks on China’s stock returns: Evidence from the ARJI(-ht)-EGARCH model," Energy, Elsevier, vol. 36(11), pages 6627-6633.
    2. repec:eee:eneeco:v:63:y:2017:i:c:p:261-271 is not listed on IDEAS
    3. Nuray Terzi & Sadullah Celik, 2016. "Oil Prices And Trade In Turkey: A Wavelet Continuous Transform Analysis," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 4(4), pages 29-41.
    4. Hassan, Syeda Anam & Zaman, Khalid, 2012. "Effect of oil prices on trade balance: New insights into the cointegration relationship from Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2125-2143.
    5. Vaqar Ahmed & Cathal O'Donoghue, 2010. "External Shocks in a Small Open Economy: A CGE - Microsimulation Analysis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(1), pages 45-90, Jan-Jun.
    6. Tuzova, Yelena & Qayum, Faryal, 2016. "Global oil glut and sanctions: The impact on Putin’s Russia," Energy Policy, Elsevier, vol. 90(C), pages 140-151.
    7. Farhad Farhad Taghizadeh-Hesary, 2015. "Macroeconomic effects of oil price fluctuations on emerging and developed economies in a model incorporating monetary variables," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2015(2), pages 51-75.
    8. Özlale, Ümit & Pekkurnaz, Didem, 2010. "Oil prices and current account: A structural analysis for the Turkish economy," Energy Policy, Elsevier, vol. 38(8), pages 4489-4496, August.
    9. Gnansounou, Edgard & Dong, Jun, 2010. "Vulnerability of the economy to the potential disturbances of energy supply: A logic-based model with application to the case of China," Energy Policy, Elsevier, vol. 38(6), pages 2846-2857, June.

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