The Chinese government should raise oil product prices by 50 percent to keep the gross profit of domestic oil refining in line with international levels, the China International Capital Corporation Limited (CICC) suggested recently, according to Tuesday's Oriental Morning Post.
The price increase will help China to raise energy efficiency and to curb long-term inflationary expectations, CICC chief economist Ha Jiming said in a report, which was released in Hong Kong yesterday.
It’s possible that the Chinese government will continue to control domestic energy prices in the short-term, as the cost is still bearable, Ha added.
The report said that the government is concerned that an energy price reform could induce short-term inflation, which could cause social instability before the Beijing Olympics.
Although delaying the reform of energy prices would add to China's economic risks, it will not be the worst-hit country, according to the report.
"Many other countries will have much more serious inflation and much higher fiscal deficit by then," it said.
For more details, please read the full story in Chinese (http://www.dfdaily.com/node2/node27/node260/userobject1ai93319.shtml).
(China.org.cn by Yan Pei, June 17, 2008)
