The central government is carrying out institutional reform to
allow market forces to decide prices within the power, aviation and
rail sectors, a senior official in Beijing said Wednesday.
"Inadequate institutional reform is the main reason for the
existence of pricing monopolies," said Zhao Xiaoping,
director-general of the Pricing Department of the State Development
Planning Commission.
He
said the solution should not rely solely on the easing of
government price control and strengthening of price supervision.
"Without cutting the source of the problem -- that is, the
institutional obstacles -- the problem of price monopoly will not
be thoroughly solved,'' Zhao said Wednesday.
He
said government and administrative links must be severed from
enterprises.
The reform of state-owned enterprises should be accelerated to make
them real market entities, meaning they can have their own say
according to market conditions instead of government
departments.
"All the reforms are closely related to breaking pricing
monopolies,'' Zhao said, who refused to elaborate.
Sources close to the State Council predicted that smashing
monopolies, the reform of State-owned enterprises and government
institutional and administrative reform will be heated topics
during the annual session of National People's Congress in early
March.
Zhao suggested that the price decision-making process should be
standardized in terms of products and services in monopolized
sectors.
Presently, the government negotiates with state-monopolized
enterprises to set prices.
"The two-party negotiation should be changed into a multiparty
negotiation, with the participation of other social forces,'' Zhao
said.
And the decision-making process that involves a small circle of
people should be reformed into a collective mechanism to make the
process more transparent and reasonable.
Despite the government making much progress in breaking monopolized
industries, the public still criticizes pricing monopolies.
"The source of the problem lies with inadequate institutional
reform and is not incurred by natural competition,'' Zhao said.
Pricing monopolies are created in various ways.
Some operators of State-monopolized industries take advantage of
their position to pressure the government into setting a high
prices. They even adjust price levels or create new charges
themselves.
Some controlling enterprises illegally expand their scope of
business or attach unreasonable trading conditions to rake in
improper profits, which hits consumers.
Some local governments erect barriers to block the entry of outside
competitors to monopolize prices in local markets.
They sometimes encourage local enterprises to carry out low price
policies to grab a market share.
Some government departments designate business opportunities to
intermediaries that are formerly affiliated with them, so both
benefit.
"I'm confident the situation will be changed for the better in the
coming years,'' Zhao said.
Zhao is proud of the reform in the telecom sector, which has led to
four integrated operators and greatly lowered service prices.
The national telecom operators -- which were all under the banner
of China Telecom before 1999 -- provide fixed-line, mobile, data
and other basic telecom services.
"With four integrated service providers, the market will become
fully competitive and customers will be able to enjoy high quality
services at reasonable prices,'' Zhao said.
(China Daily February 20, 2003)