Wed, Aug 02, 2006 - Page 11 News List

China to increase energy prices to reflect scarcity

BLOOMBERG

China, the world's largest oil user after the US, plans to increase energy prices in the next five years to reflect a scarcity of resources and boost efficiency.

China may revise energy pricing policy to ensure consumption costs are high enough to encourage conservation and deter waste, the China Electricity Council said on its Web site today, citing Liao Xiaojun (廖曉軍), vice minister of finance.

The nation aims to cut the amount of fuel used to produce each unit of gross domestic product by 20 percent in five years, and 4 percent this year, Premier Wen Jiabao (溫家寶) said in March. The government wants to reduce the nation's reliance on oil imports by promoting nuclear, solar and hydro power.

"The pricing of energy products in China has been on the low side and doesn't reflect scarcity," Liao said. "To boost conservation, the policy must become one that will restrain the use of ebergy resources."

China will monitor "closely" changes in international fuel prices and study possible revisions to the structure of its oil taxation policies, Liao said.

The government wants to introduce a new retail oil tax as soon as possible, he said, without giving a specific timeframe.

China will also speed up changes of its mining licensing system to make spending on safety compulsory, Liao said. Mining companies must invest part of their returns on environmental conservation and on helping old mining sites recover, he said.

China used 0.8 percent more energy to produce each unit of GDP in the first half, compared with the same period a year ago, the National Bureau of Statistics said on its Web site today. The consumption of coal for each unit of GDP rose 5.5 percent, oil and chemicals use gained 8.7 percent and power use increased 0.8 percent, it said.

China faces "difficulties" in meeting this year's energy efficiency targets, Zhu Hongren (朱宏任), deputy director of the commission's economic operations bureau, said on July 25. Fuel consumption required to boost economic growth in some regions is still high and wastage is prevalent, he said.

"Still, heavy industries in some areas of the country are using out-dated technology and consume too much fuel in the production process," Zhu said.

Changing the structure of the local economies and companies to focus on energy-saving technology will take time, he said.

China has introduced a series of measures to restrict industrial expansion and property development to stem a surge in demand for raw materials.

The nation's economy grew 11.3 percent in the three months to June 30, the fastest pace since 1994. Spending on factories and real estate accelerated in June, according to the statistics bureau.

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