Move to limit impact of fuel price increases
The government yesterday signalled its determination to limit the impact on inflation of its decision last week to sharply increase fuel and energy prices.
The National Development and Reform Commission urged local governments to ensure the prices of liquefied and natural gas, and the charges households and farmers pay for electricity, do not change.
It also said bus, train and taxi fares should not rise, and reiterated that it would offer transport and taxi firms short-term fuel subsidies.
'It is extremely important to prevent any price spiral and deliver price stability,' read a statement on the website of the commission, the top economic planning body. 'Any failure to closely monitor or implement the relevant measures will be punished.'
The commission announced on Thursday that it would allow retail petrol and diesel prices to rise by up to 18 per cent.
Inflation has been rising fast on the mainland, though last month it eased to 7.7 per cent, from 8.5 per cent in April.
Yi Xianrong , a senior finance researcher at the Chinese Academy of Social Sciences, said Beijing had to act because it could not afford galloping inflation. He said the increases in fuel prices were very broad-based, and the government was unsure of their consequences.
Professor Yi said energy prices should not be allowed to rise too fast, but added that he had seen no signs of a price spiral developing.
The price rises announced on Thursday were the first in eight months but the biggest in five years.
Mainland citizens were already feeling the pinch from rising fuel prices. Motorists queued at service stations yesterday, fearing another rise.
Economists said the adjusted fuel prices were still considerably lower than the world average and Beijing might have to increase prices again sooner rather than later if oil prices continued to soar on world markets.
Zhou Xiaochuan , governor of the People's Bank of China, said on Friday it might formulate 'stronger policies' against inflationary pressures, raising the prospect of higher interest rates.
Another Chinese Academy of Social Sciences researcher, Zhang Shuguang, told a forum in Beijing yesterday that 'China is now facing five major price issues - food price, oil price, housing price, stock price and foreign exchange rate'.
He forecast that full-year inflation would be above 7 per cent this year. In January, the commission forecast it would be 4.5 per cent.
