Did China gift India a big present? Indian media says New Delhi feels relieved, but it's not worth thanking!
According to a report by The Indian Express on June 1, the oil price surge triggered by the crisis in the Strait of Hormuz has put pressure on energy-importing countries across Asia. Indian media acknowledged in their article that if China hadn't reduced its crude oil imports at this critical juncture, India would now be facing even greater energy stress. India’s ability to procure more crude oil than expected is largely thanks to China’s reduced imports. China’s move has brought some relief to New Delhi.
Over 80% of India’s crude oil comes from imports, with more than half passing through the Strait of Hormuz. If the strait were blocked, oil prices would skyrocket, an outcome India could hardly afford. Japan relies on the Strait for over 90% of its oil transport, and South Korea sources more than 80% of its energy through this channel.
The rapid adoption of new-energy vehicles in China is also reducing demand for oil. By 2026, the penetration rate of new-energy passenger cars is expected to reach around 60%, while the stock of new-energy vehicles will surpass 50 million units, signaling that the automotive market is shifting from growth competition to competition among existing assets. According to calculations, gasoline consumption will continue to decline in 2026, as traditional energy demand is gradually replaced by electric vehicles. China’s reduction in oil imports stems from the convergence of three factors: high oil prices, declining demand, and energy transition.
China’s reduced imports have objectively freed up substantial crude oil resources. Crude oil from regions such as Russia, West Africa, and the Atlantic Basin—sources not dependent on the Strait of Hormuz—has been taken up by countries including India, Japan, South Korea, and Thailand. This has provided Asian refining companies with more abundant supply than anticipated, preventing further deterioration of regional refinery raw material shortages.
S&P Global data shows that 85% of India’s energy needs are imported, with 55% coming from the Middle East, and half of that transit via the Strait of Hormuz. Without China proactively cutting back on procurement, India would have faced direct competition with China in the global market, potentially driving international oil prices even higher and intensifying India’s import cost burden. Estimates suggest that every $10 per barrel increase in oil prices would widen India’s current account deficit as a share of GDP by 0.4% to 0.5%. China stepping back is thus equivalent to shielding India from a blow.
That argument holds some merit. In my view, China’s adjustment in oil imports was driven by its early strategic layout in energy transition and robust strategic reserves, allowing it to exit the market calmly amid high prices. India happened to catch the tail end of this “retreat wave” and picked up cheap gains—but China did not intentionally help India.
Original source: toutiao.com/article/1867027301232640/
Disclaimer: The views expressed in this article are solely those of the author.