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The impact of rising international crude oil price on China's economy: an empirical analysis with CGE model

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  • Ying Fan
  • Jian-Ling Jiao
  • Qiao-Mei Liang
  • Zhi-Yong Han
  • Yi-Ming Wei

Abstract

Many studies, as well as historical events, indicate that oil price shocks affect the macro economy of a country. In this paper we build a Chinese Computable General Equilibrium (CGE) model, with which we simulate the impact on the Chinese economy of international crude oil price when it rises by 5%, 10%, 20%, 40%, 50% and 100%. Simulation also identifies the effects of low/medium/high technological advances in the crude oil mining, petroleum and chemical and transportation sectors on fighting the risk of oil price shocks. The results indicate that international crude oil price has negative effects on Chinese real GDP, investment, consumption, import and export, amongst a range of economic indices. Technological advances have positive effects on fighting back the risk of oil price shocks, especially the technological advances in petroleum and chemicals, whilst the transportation sector has a greater effect on resisting oil price risk. An international oil price hike holds more disadvantages for rural residents' welfare. These results would be valuable reference information for policy makers.

Suggested Citation

  • Ying Fan & Jian-Ling Jiao & Qiao-Mei Liang & Zhi-Yong Han & Yi-Ming Wei, 2007. "The impact of rising international crude oil price on China's economy: an empirical analysis with CGE model," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 27(4), pages 404-424.
    • Handle: RePEc:ids:ijgeni:v:27:y:2007:i:4:p:404-424
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    References listed on IDEAS

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    Cited by:

    1. Cong, Rong-Gang & Shen, Shaochuan, 2013. "Relationships among Energy Price Shocks, Stock Market, and the Macroeconomy: Evidence from China," MPRA Paper 112211, University Library of Munich, Germany.
    2. Zhang, Jiaming & Guo, Songlin & Dou, Bin & Xie, Bingyuan, 2023. "Evidence of the internationalization of China's crude oil futures: Asymmetric linkages to global financial risks," Energy Economics, Elsevier, vol. 127(PA).
    3. Broadstock, David C. & Cao, Hong & Zhang, Dayong, 2012. "Oil shocks and their impact on energy related stocks in China," Energy Economics, Elsevier, vol. 34(6), pages 1888-1895.
    4. Ju, Keyi & Zhou, Dequn & Zhou, P. & Wu, Junmin, 2014. "Macroeconomic effects of oil price shocks in China: An empirical study based on Hilbert–Huang transform and event study," Applied Energy, Elsevier, vol. 136(C), pages 1053-1066.
    5. Cong, Rong-Gang & Wei, Yi-Ming & Jiao, Jian-Lin & Fan, Ying, 2008. "Relationships between oil price shocks and stock market: An empirical analysis from China," Energy Policy, Elsevier, vol. 36(9), pages 3544-3553, September.
    6. Wensheng Kang & Ronald A. Ratti, 2015. "Oil shocks, policy uncertainty and stock returns in China," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 23(4), pages 657-676, October.
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    8. Jean-Pierre Allegret & Cécile Couharde & Cyriac Guillaumin, 2012. "The Impact of External Shocks in East Asia: Lessons from a Structural VAR Model with Block Exogeneity," International Economics, CEPII research center, issue 132, pages 35-89.
    9. Qin, Meng & Su, Chi-Wei & Hao, Lin-Na & Tao, Ran, 2020. "The stability of U.S. economic policy: Does it really matter for oil price?," Energy, Elsevier, vol. 198(C).
    10. Wensheng Kang & Ronald A. Ratti, 2014. "Policy Uncertainty in China, Oil Shocks and Stock Returns," CAMA Working Papers 2014-32, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    11. Amrita Ganguly & Koushik Das, 2016. "Impacts of Falling Crude Oil Prices and Reduction of Energy Subsidies on the Indian Economy: A CGE Modelling Approach," Vision, , vol. 20(4), pages 345-360, December.
    12. Zhang, Dayong & Broadstock, David C. & Cao, Hong, 2014. "International oil shocks and household consumption in China," Energy Policy, Elsevier, vol. 75(C), pages 146-156.
    13. Sun, Ting-Ting & Su, Chi-Wei & Mirza, Nawazish & Umar, Muhammad, 2021. "How does trade policy uncertainty affect agriculture commodity prices?," Pacific-Basin Finance Journal, Elsevier, vol. 66(C).
    14. Ju, Keyi & Su, Bin & Zhou, Dequn & Zhang, Yuqiang, 2016. "An incentive-oriented early warning system for predicting the co-movements between oil price shocks and macroeconomy," Applied Energy, Elsevier, vol. 163(C), pages 452-463.
    15. Qiao-Mei Liang & Yun-Fei Yao & Lu-Tao Zhao & Ce Wang & Rui-Guang Yang & Yi-Ming Wei, 2013. "Platform for China Energy & Environmental Policy Analysis: A general design and its application," CEEP-BIT Working Papers 43, Center for Energy and Environmental Policy Research (CEEP), Beijing Institute of Technology.
    16. Bhattacharyya, Ranajoy & Ganguly, Amrita, 2017. "Cross subsidy removal in electricity pricing in India," Energy Policy, Elsevier, vol. 100(C), pages 181-190.
    17. Li, Zepei & Huang, Haizhen, 2023. "Challenges for volatility forecasts of US fossil energy spot markets during the COVID-19 crisis," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 31-45.

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