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Why OPEC's pain is China's gain

A Chinese vessel involved in the oil exploration industry.
Rob Ellis | E+ | Getty Images

The collapse in oil prices couldn't be better timed for China's slackening economy, providing additional room for monetary easing and a boost to domestic consumption, say economists.

China is the world's biggest and fastest growing oil importer, relying on imports for around 60 percent of its domestic oil consumption. Last year, the country imported over 280 million tonnes of crude oil, worth almost $220 billion, according to state-run news agency Xinhua.

"[The] slumping oil price is the oil-guzzling dragon's windfall gain," Ting Lu, chief China economist at Bank of America Merrill Lynch (BofaML), wrote in a note.

BofaML estimates that China would save $72 billion on its oil imports in 2015 if Brent remains at the current price of $70 per barrel.

Japan, China & India: Top winners of cheap oil

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.

Read MoreOPEC won't stop US oil production growth

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.

Opportunistic buying

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.

Read MoreChina's economy is slowing faster than you think: CFO

"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.

Read MoreOil stocks and oil-related currencies slammed by OPEC move

"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.