Local governments have been told not to intervene directly in
market prices unless it is "necessary".
The National Development and Reform Commission yesterday said on
its website that any price intervention would need the approval of
provincial governments or central authorities.
Some prices, such as those of resource products, power,
education, medical services and pharmaceuticals, are subject to
government controls, but those of most other commodities are set by
the market.
The NDRC said the role of the market should be respected unless
"there is remarkable price growth due to emergencies or natural
disasters".
Last month, the government of Lanzhou in northwest China's Gansu Province capped the price of beef
noodles, the most popular local dish, following public complaints
about the price rise.
"The government should respect the role of the market, even if
it wants to help the poor," said Xia Yeliang, economist with the
School of Economics at Peking University.
"The capping would lead to decreased supply or dented quality of
products or services, which in turn damages consumer interests," he
said.
In Lanzhou, many people have reportedly found less beef or
noodles after the price cap, although the price remained
unchanged.
Lanzhou is not alone in suffering from rising prices as
inflation sweeps the country. China set the benchmark consumer
price index at 3 percent for this year, but it rose to 3.2 percent
in the first six months and 4.4 percent in June, a 33-month
high.
The NDRC notice said if the local inflation level is
significantly higher than the official preset target, local
governments should keep prices stable and should not increase
regulated prices.
Price moves that are conducive to environmental protection and
energy saving are exempt from the restraint.
The commission also said market players are forbidden from such
manipulative activities as forming price cartels or cornering the
market.
"This is obviously aimed to curb rising prices," said Zuo
Xiaolei, chief economist of China Galaxy Securities.
But she said such moves may lead to a delayed pace of reform in
China's pricing mechanism of resource products.
China has brewed such a reform this year to better reflect the
market value of resource products and improve consumption
efficiency.
"The NDRC move shows that in the interest of price stability,
such reforms may have to be slowed down," she said.
(China Daily July 31, 2007)