CHINA / National
Businesses to confront resources price hikes
By Fu Jing (China Daily)
Updated: 2006-08-14 05:27
Chinese businesses will have to cope with continuously rising resources
costs as pricing liberalization is sped up.
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 will allow the scarcity of resources to determine their price," said
Bi Jingquan, the commission's vice-minister in charge of price reform, 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 is
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 concern over the liberalization was possible consumer price
hikes, which may cause financial difficulty for farmers and other
disadvantaged people.
Bi said the government is 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 disadvantaged groups."
Over the weekend, the government's top think-tank, the Development
Research Centre (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 mode to a
price system that fails to reflect the scarcity of resources.
Statistics from the centre show that water is China's most precious
resource, yet the water price is only one third the international average.
The low price 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 per cent in the first
half of this year.
The rise represents a major challenge for economic planners, who
envisaged a 4-per-cent 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 with low incomes.
The government should also increase resource utilization fees, said Huang
Shengchu, president of the China Coal Information Institute.
For example, mine owners are charged only 1,000 yuan (US$125) annually
per square kilometre 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 per cent of the coal in a seam, leaving the
other 70 per cent underground forever.
Amid recent requests from cabinet 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 this year.
But the commerce ministry forecasted further price increases for
oil-related products because of a shortage in supply. For other
production materials, the prices may remain "stable" or "lowering" 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 08/14/2006 page1)
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