Goldman Sachs: China's Economy More Resilient Than U.S. and Emerging Asia Against Oil Shock

As the Iran war enters its fifth week, the unresolved navigation crisis in the Strait of Hormuz continues to disrupt global oil supply, pushing international crude prices near $110 per barrel. Despite three Asian countries reaching passage agreements with Iran, traffic through the strategically critical waterway remains far below normal levels, exerting heavy pressure on global economic growth, particularly for small and open economies.

Goldman Sachs analysis reveals that China's economy is significantly better insulated from elevated oil prices compared to the United States and other emerging Asian economies. The firm cut its China GDP growth forecast by 20 basis points in response to the crisis, compared with 40 basis points for the U.S. and 70 basis points for other emerging Asian economies. A Fitch Ratings study corroborates this assessment, identifying China as the least affected economy in a worst-case scenario, unlike South Korea, the United States, and Turkey.

China's resilience stems from multiple structural advantages. Its energy mix contains crude oil and liquefied natural gas at only 28 percent of primary energy consumption—among the lowest globally—while renewables including nuclear, wind, solar, and hydroelectric power generate 40 percent of electricity, up from 26 percent a decade ago. Additionally, China maintains strategic and commercial oil reserves sufficient for over 110 days of consumption even if crude imports ceased entirely, and can source energy from diverse suppliers including Russia, Australia, and Malaysia, reducing Middle Eastern dependency.

The elevated oil prices are expected to end China's 41-month streak of producer-price deflation as early as March, advancing prior forecasts by six to nine months. Goldman Sachs raised its China nominal GDP growth forecast by 0.8 percentage points following the Iran war outbreak, anticipating positive effects on corporate revenues, upstream profitability, and capital expenditure. Historical patterns from 2011, 2017–2018, and 2021 demonstrate that rising producer prices typically correlate with strong corporate profits and share buybacks amid cost-push inflation, potentially countering deflationary mindset and lowering real interest rates.

The geopolitical tensions are reinforcing energy independence and resilience as strategic priorities for China, supporting government policies favoring alternative energy expansion. As the world's leading oil and LNG importer, China continues to lead global alternative energy investment across generation, infrastructure projects such as crude carriers and transmission systems, and petrochemical development. Early signs suggest potential capital inflows from Middle Eastern investors to Hong Kong, with Hibor at seven-month lows and robust stock market activity indicating international fund entries, though sustained regional capital deployment remains uncertain amid prolonged Middle Eastern economic challenges.