China imported 506 million tonnes (3.7 billion barrels) of oil in 2019, an increase of 9.5 per cent from 2018, marking the 17th consecutive year of increased imports.

Saudi Arabia and Russia topped a list, also including Angola, Iraq and Oman, that accounted for about 55 per cent of China’s total crude imports in 2018, according to China’s customs data.

Profits for China’s industrial firms could increase by 2 per cent this year as a result of lower oil prices, according to Julian Evans-Pritchard, senior China economist at Capital Economics.

“Lower oil prices should raise output by 0.3 per cent above what it would have been with higher oil prices. This will provide some relief, but is a small offset to the many other drags facing the economy, including the slump in global demand that has contributed to the fall in oil prices,” he said.

On the other hand, a crash in international oil prices could potentially lead to an increasingly monopolised supply structure as small suppliers could be priced out in the market. This would fly in the face of Beijing’s long-term strategy of securing multiple sources of supply, Wang Yongzhong, who leads the global energy research at the Chinese Academy of Social Sciences, a government think tank, said.

Beijing “is concerned more about the energy security, or how to find multiple sources of stable supply [than a gain from lowers prices],” according to Wang.

The price of Brent crude, the international benchmark, fell back to US$36 a barrel on Wednesday, reversing gains made earlier in the day, after plunging more than 30 per cent on Friday after Saudi Arabia moved to boost output capacity in the opening of a price war with Russia. In 2019, according to customs data, China’s average import price per barrel was around US$65.

But the drop is oil prices is not an unmitigated positive for the Chinese economy, as it will adversely impact domestic oil producers and overseas oilfield investments.

“China is also a big oil producer with 190 million tonnes (1.4 billion barrels) of output last year and the average cost is higher than US$40 per barrel – a fall in oil prices can push them into losses,” added Bai from the China Petroleum Society.

“The coming days for them will be very hard,” Dong said. “State-owned players need to consider production targets and social stability. Workers can’t lose their jobs.”

China National Offshore Oil (CNOOC), one of China’s three state-owned oil companies, has seen its share price in Hong Kong plummet over 20 per cent this week, closing down almost 6 per cent on Wednesday alone.

Zhu Kunfeng, a Beijing-based expert with consultancy firm IHS Markit, said the plunge in international crude prices could dampen China’s domestic output and force it to rely more on overseas supplies.

The collapse in oil prices could also question the financial viability of many Chinese-invested oil projects overseas.

“Chinese companies had been aggressive in buying overseas oil assets in the early 2010s … in the name of improving China’s energy security”, Zhu said.

“As oil prices are falling, these projects could translate into big burden for Chinese investors as there’s now a big question mark over whether these projects can make any money.”