China's Oil Imports Down 40% Amid Iran War

The Iran war has revealed China's enormous power over global oil prices, thanks to its position as the world's largest buyer. China's reaction to the oil shock — by substantially withdrawing from buying on world markets — helped prevent the worst of the price spikes that experts thought would follow from the effective closure of the Strait of Hormuz.

After the U.S. and Israel launched the war on Feb. 28, Chinese crude oil imports dove as prices spiked. At first, the decline in imports didn't surprise analysts, as China has long been known as a price-sensitive buyer. However, few expected that China could maintain this low level of oil buying without deeply damaging its domestic economy.

Through June, Chinese oil imports remain down over 40% from the previous year. Chinese policymakers have pulled several levers to mitigate the impact of the decline in oil imports, including tapping into domestic reserves of coal, oil, and natural gas for supplies, and boosting usage of coal and renewables.

The benefits of those decisions — basically lower global oil prices — have been broadly shared. Analysts say that China has taken such steps almost exclusively for the benefit of its domestic economy, but the benefits have been felt globally. China has been a key player in helping the global economy navigate this crisis, and its ability to keep global prices in check could be a valuable asset.