China mulls deregulating energy prices
By Fu Jing (China Daily)
Updated: 2005-11-14 05:10

Industry experts said the deregulation is likely to increase prices which are lower than abroad of resources, and expressed concern that it could have a cascading effect on other goods and services and cause difficulties for low-income earners and vulnerable social groups.

For the energy industry, said Lou Jiwei, vice-minister of finance, the government's new measures include resource tax, windfall-profit tax and higher land-utilization fees.

"We will collect windfall-profit taxes in some monopolized sectors within two years," said Lou.

In the oil sector, Lou said, any amount higher than, say, US$40, could be considered a windfall profit and taxed accordingly.

The government will also increase resource utilization fees.

For example, mine owners are charged only 1,000 yuan (US$120) annually for 1 square kilometre. "The government should raise that by a big margin," said Lou but did not reveal by how much.

Measures will be taken to discourage exports of products which use too much energy, said Yang Weimin, another NDRC official.

Ma Kai, NDRC minister, said conserving energy and resources by raising their prices is vital to sustain China's growing economy.

The country's top leaders have set two goals for the next five years: one is to double per capita gross domestic product (GDP) in 2000 by 2010 and the other is to reduce energy costs per unit of GDP by 20 per cent.

Some experts described the deregulation as "another milestone" in China's market-oriented reform.

Since the reform and opening-up policies began in the late 1970s, the prices of most commodities and services have been deregulated; and now, market forces play a role in setting the prices of about 90 per cent.

(China Daily 11/14/2005 page1)