The penalty for price manipulation increased to five million yuan (HK$5.82 million) yesterday in the latest move by the central government to counter rising prices.
Inspectors will be able to impose the penalty on business owners who collude to push up prices excessively, according to an amended regulation on illegal pricing.
The new fine is a fivefold increase on the previous maximum penalty of one million yuan.
The amendment follows a number of directives from the State Council to crack down on price rises that the authorities mainly blame on speculation. Prices of some non-staple farm produce, such as garlic, surged earlier this year and the trend has spread in recent months.
'In some areas and for certain products, there have been serious problems such as malicious hoarding, collusion in price rises, spreading price rise rumours and so on,' said a joint statement by the National Development and Reform Committee, the mainland's price supervisor, and the State Council's Legislative Affairs Office that was posted on the central government's website.
'There is a necessity to revise the regulations in order to punish such illegal pricing deeds and maintain normal market order,' it said.
The new rules state all illegal income earned by price manipulation will be seized and the business's owner will pay a penalty of no more than five times that amount.
Those who make no profit will pay a penalty of no more than five million yuan.
The amendment also raises the maximum penalty for hoarders from 500,000 yuan to three million yuan. But many observers doubt the effectiveness of the newest measures.
'As China heads for a market economy, such administrative measures don't work as effectively as before,' said Han Meng , a researcher at the macroeconomic department of the Chinese Academy of Social Sciences.
Jian Chang, an economist at Barclays Capital, said China had already put in place measures to stabilise prices, but their effectiveness appeared to have been limited.
'Or else there would be no need to revise the regulations,' she said.
Jian said that because of a lack of investment channels, with harsh government policies being introduced to rein in property prices and reduce risks in the stock market, speculation elsewhere, such as in farm produce, was inevitable.
'It might have some effect in the coming month but not in the long term,' she said.
Eight oil companies were punished by the authorities for selling diesel fuel for more than the government-regulated price during an acute shortage that struck the mainland in October and November.
Before that, 109 mung bean companies were found to have held a meeting where they decided unanimously to raise prices.
The organiser of the meeting was hit with a one million yuan penalty while the companies who sponsored the meeting were fined 500,000 yuan each.
A garlic trader in Shandong and a garlic business association in Henan were also penalised for hoarding.
New central government rules seek to maintain normal market order
The previous level of fines that could be imposed on businesses that collude on prices, in yuan: 1m yuan