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)