As pricing liberalization speeds up Chinese businesses will have
to cope with continuous rises in the cost of
resources.?? ?
Despite concerns, the nation's top policy-making body, the
National Development and Reform Commission, has vowed to push ahead
with its liberalization campaign.
"We'll allow the scarcity of resources to determine their
price," Bi Jingquan, the commission's vice minister in charge of
price reform, said at a national forum last week. "That's the basic
principle of the price reforms."
His words were echoed by a think-tank report released over the
weekend, which called for price reforms to encourage more efficient
economic growth.
Bi said liberalizing the pricing of raw materials and energy
will definitely increase costs in the long run but the government
was determined to make prices more dependent on market forces.
Industry insiders said his speech was the first time the
government has formally expressed its determination for pricing
reform.
The major concerns over liberalization were possible consumer
price hikes that could cause financial difficulty for farmers and
groups of?vulnerable people.
Bi said the government was considering further measures to
liberalize the price of coal, electricity, oil, natural gas and
water. "And related social policies, such as offering subsidies,
are being considered to lessen the impact on?vulnerable
groups," he said.
Over the weekend, the government's top think-tank, the
Development Research Center (DRC) under the State Council, also
called for reforms on resource prices to promote more efficient
economic growth.
"The price reforms should increase the costs of resource
products for businesses with low efficiency," said the DRC report,
cited by Xinhua News Agency yesterday.
The DRC attributed China's current high energy-consuming growth
rate to a price system that failed to reflect the scarcity of
resources.
Statistics from the DRC show that water is China's most precious
resource yet the price for it is only one-third of the
international average. The low cost has led to over consumption and
water being wasted, said the report. The same problems have
affected rural land and other resources.
Government statistics show that China's energy consumption per
unit of gross domestic product (GDP) rose slightly by 0.8 percent
in the first half of this year. The rise represents a major
challenge for economic planners who have envisaged a 4-percent cut
in the country's energy consumption per unit of GDP in 2006.
Possible measures to deregulate prices include levying a
resource tax, a windfall-profit tax or higher land utilization fees
to encourage companies to reduce their projects' environmental
impact and solve the difficulties posed for people on low
incomes.
The government should also increase resource utilization fees,
said Huang Shengchu, president of the China Coal Information
Institute. For example, mine owners were charged only 1,000 yuan
(US$125) annually per square kilometer of coalmine. "The government
should raise that by a big margin," said Huang. "Low fees have
caused a lot of waste."
The reckless exploitation of resources has led to shocking
waste. As an example the DRC report cited northwestern Shaanxi Province, where mines on average
extract only 30 percent of the coal in a seam, leaving the
remainder underground. ?
Amid recent requests from government departments to speed up the
liberation of the pricing regime the Ministry of Commerce ruled out
the possibility of rapid price hikes for major resources and energy
during the second half of this year.
But they forecast further price increases for oil-related
products because of a shortage in supply. For other production
materials the prices may remain "stable" or be "lowered" due to the
balance of supply and demand.
The ministry released the survey results after questioning
companies in China and abroad on the price trends of nearly 300
production materials.
(China Daily August 14, 2006)