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Tue, Aug 15, 2006 - Page 10 News List

PRC ponders easing price controls on various resources


China is considering easing controls on the price of oil, power and other resources, letting market forces push them up in an effort to cut widespread waste, a state newspaper said yesterday.

The government is "determined to make prices more dependent on market forces," the China Daily said, citing Bi Jingquan (畢井泉), a deputy minister of the Cabinet's National Development and Reform Commission, the country's top planning agency.

Bi's comments, made in a speech last week, are "the first time the government has firmly expressed its determination for price reform," the newspaper said. It didn't give a timetable for price changes or say how much costs might rise.

Economic planners have long complained that China's low government-set prices for energy and raw materials encourages waste by factories, mines and other businesses.

But despite opening up other parts of the economy to market forces, the communist government is reluctant to end price controls for raw materials for fear of hurting struggling state industries and possibly fueling social unrest.

Rapid growth

The proposed changes come amid government efforts to rein in rapid growth in some parts of the economy, which expanded by 11.3 percent in the second quarter.

Chinese leaders worry that excessive investment in factories, luxury apartments and other assets could fuel inflation and leave companies and banks with dangerously high debt.

The price changes being considered could affect coal, electricity, oil, natural gas and water, with subsidies for the poorest families to offset higher costs, the China Daily said.

Chinese leaders want the country to reduce the amount of energy consumed for each unit of economic output. But the government reported last month that figure crept up by 0.8 percent in the first half of this year.

The government raised retail prices for gasoline and diesel in May, but they are still below world levels.

Chinese oil companies and refiners have been expected to absorb changes in supply costs in order to prevent shocks to the economy.

Pricing reforms

A report released over the weekend by a Cabinet think tank, the Development Research Center, called for pricing reforms to promote more efficient economic growth, the China Daily said.

"The price reforms should increase the costs of resource products for businesses with low efficiency," the report was quoted as saying.

The newspaper cited the example of coal mines, which it said are not charged enough for land rights, thereby encouraging waste.

The Cabinet report said that mines in Shaanxi Province, China's main coal-producing region, remove on average only 30 percent of the coal in a seam, leaving the other 70 percent behind, according to the China Daily.

"Low fees have caused a lot of waste," Huang Shengchu (黃盛初), president of the China Coal Information Institute, was quoted as saying.

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