Brent crude prices have tumbled 35 percent over the last six months driven by an oversupply from the North Sea and Atlantic Basin amid increased production in North America.
Lower energy prices help to contain inflation, which will give the People's Bank of China (PBoC) more leeway to carry out targeted easing measures, Lu said.
"China should benefit from better terms of trade and lower inflationary pressure as a result of weaker commodity prices. The higher trade surplus will reduce the need for large-scale easing, while lower inflation will allow the easing to be more targeted," he said.
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In addition, cheap fuel costs will translate into better profit margins for corporates and more spending power for consumers due to lower energy bills, Lu said.
"Falling oil prices, if sustained, could even make China cleaner as China can cut its dependence on burning coal," he added.
China has been taking advantage of recent weakness in oil prices, say oil analysts.
Crude imports amounted to 24.1 million tonnes in October, up 18 percent on year, according to Bernstein Research.
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"Although oil demand remains modest, crude imports continue to be very strong," said Neil Beveridge, senior analyst at Bernstein Research. "Continued strong import growth coupled with more muted apparent demand growth suggests to us that China is storing oil."
Not all positive
While the plunge in oil prices is largely positive for the world's second largest economy, there are downsides.
Revenues at state-owned oil companies including PetroChina, CNOOC and Sinopec are expected to come under pressure, for example. Concerns around margin pressure are reflected in the performance of their Hong Kong-listed shares, which have fallen between 20-30 percent over the past three months.
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"With oil making up 85 percent of E&P (exploration & production) revenue, lower oil prices hurt PetroChina," said Somshankar Sinha, analyst at Barclays.
On the flip side, PetroChina may emerge stronger from the oil price downturn as it could increase the company's efficiency, Sinha added.