This paper examines the volatility spillover between OPEC oil price and the Chinese sectoral stock returns from December 31, 2004 through October 17, 2014. In order to achieve this task, we used the VAR-GARCH model for the daily closing prices of six sectoral stock indices including: Construction, Machinery, Automobile, Military, Agriculture, and Financial indices. In addition, we analyzed the optimal weights and hedge ratios for oil-stock portfolio holdings. The findings show significant volatility spillover between OPEC oil prices and the Chinese sectoral stock returns. The volatility spillover is unidirectional from oil to stock returns. The spillover effects mainly come from past shocks. The past oil shocks have negative and significant impact on the conditional volatility of Construction, Machinery, Automobile, Military and Agriculture stock indices. On the contrary, with the exception of the Military stock index, there is no significant impact of the past stock return shocks on the volatility of oil returns. Moreover, our findings for optimal weights and hedge ratios suggest that oil can improve the risk-adjusted performance of a well-diversified portfolio of stocks.