Local gov'ts told to curb price hikes
By Wu Gang (China Daily)
Updated: 2004-05-26 22:52

The State development planner Wednesday asked local governments to control consumption prices in order to reduce pressures on citizens, especially low-income groups in cities.

Based on a price-control circular issued in April, the National Development and Reform Commission reiterated that local governments should "strictly control" the launch of new price hikes in order to avoid excessively increasing the expenditures of urban residents.

The notice stipulated that provincial governments should stop launching any new price hikes in the next three months if the region's consumption prices grow by more than 1 per cent month-on-month or 4 per cent in three consecutive months.

The policy is a response to continuous growth in consumption prices over the past few months.

In the first quarter of this year, consumption prices have grown by 3 per cent when compared to the same period last year.

The prices of grain and relative products saw the biggest surge, up 24 per cent year-on-year.

The price hikes brought up the prices of meat, eggs and other related food products, which have affected the quality of life for urban dwellers, according to the commission.

"The control on new price hikes is mainly based on the consideration of how much residents can afford, especially the lower-income groups," said a commission official in charge of price regulation who declined to be identified.

He stressed that the price control does not mean the government will step into the market pricing system. The targetted items are only a few commodities and services directly concerning public interests, such as water, power or telecom services.

According to 2002 statistics, only 3.9 per cent of the commodities in the country were priced or supervised by the central government, while the rest were set by the market.

The country has introduced a public hearing system in recent years over vital public utilities or services in order to seek a balance between consumers and service providers.

Beijing, for example, is going to hold a public hearing next week over price hikes of water for residential use.

The cost of water, which reportedly might be raised up to 6 yuan (72 US cents) from the current 2.9 yuan (35 US cents) per cubic metre under a progressive system, will affect some 6 million urban residents.

Many residents have predicted that the government will also raise the cost of power to regulate electricity use in the wake of shortages that affected 21 of China's provinces last summer. Industries that are heavy users of electricity are expected to be targetted.

In Wednesday's statement, the commission said that preferential pricing will continue to apply to fertilizer production power use.

All fertilizer producers are free from paying for so-called agricultural power grid loan-payback fund, the notice said.

Amid the government's repeated warnings of over-investment since last summer, regions and industries are still rushing investments and indulging in copycat construction, leading to price increases for raw materials, energy and transport.

Investment in steel, electrolytic aluminium and cement soared earlier this year.

The expected power increase is expected to cushion the rising demand for power during the coming summer.

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