China’s economy slowdown may bring the oil prices to the level of the beginning of 2016

Almaty. May 18. Silkroadnews – According to representatives of the Russian Ministry of Finance, the problems in China’s economy can return the oil prices to the level of the beginning of the year, RBC informs.

Deputy Finance Minister of the Russian Federation Maxim Oreshkin warned the slowdown in China’s economy can bring the oil prices to the level they stood at the beginning of 2016. Brent oil price on Wednesday is about $49 per barrel, whereas in January 2016 it fluctuated between $30 and $40 and in the middle of the month even dropped below $28.

“Serious problems in the Chinese economy could once again lead to the collapse in oil prices we have seen earlier at the beginning of the year. These risks shall be taken into account when forming the economic policy and not to be dismissed. All the policies shall be built taking into account the risk of a recession in China,” M. Oreshkin is quoted speaking at the Credit Suisse forum on Wednesday.  

Summarizing the results of 1st quarter of 2016, China’s GDP grew by 6.7% (to $2.44 trillion) on a year-on-year basis, which became the worst result for the last 7 years (in the first quarter of 2009 GDP growth amounted to 6.2%). To compare: in the first quarter of 2015 China’s GDP grew by 7%, in the fourth quarter – by 6.8%, and as a whole for 2015 – by 6.9%.

In early May 2016, the international rating agency Standard&Poor’s warned in case of a sharp drop in investments the average growth of China’s economy for 2017-2020 may get reduced to 3.4%, which would lead to a sharp drop in oil prices (to $20-30 per barrel).