CICC: Oil prices may boost export share

Ask AI · Comparing the Russia-Ukraine conflict, what new characteristics does the Middle East crisis have on China’s export impact?

Everyday Economic News AI Express, CICC research report points out that, from a total volume perspective, the rise in oil prices caused by the Middle East conflict is a negative supply-side shock to China’s exports. From a structural perspective, there is a certain positive demand impact, which may lead to an increase in China’s export share. Whether the total volume or structural factors dominate depends on how the situation develops. Under the baseline scenario, it may be more important to focus on the demand effect of structure. First, the demand transfer effect, meaning demand shifts from China’s export competitors, and China’s export share of some high-energy-consuming products may increase. For example, under the influence of the Russia-Ukraine conflict in 2022, production in energy-intensive industries in Europe was restricted, and China was less affected, leading to an increase in the export share of high-energy-consuming products such as steel, aluminum, chemicals, and building materials. Under the current Middle East conflict, major Asian economies’ manufacturing industries are more dependent on Middle Eastern energy than China, so China’s export share of high-energy-consuming products like steel, chemicals, and glass may rise. Second, the demand creation effect, meaning some economies heavily impacted by oil prices may accelerate reducing reliance on traditional energy and import more new energy products, benefiting China’s exports of new energy and electrical equipment. Under the influence of the Russia-Ukraine conflict in 2022, Europe’s energy transition accelerated, effectively boosting China’s exports of related new energy products. Under the current Middle East conflict, China’s export growth of new energy-related products to some Asian economies may further increase. Of course, in extreme cases, the risk of global economic adjustment rises, and China’s exports will also face negative demand shocks from the overall global economic downturn.