China will raise the gasoline price
by 3.8% and raise diesel by 4% beginning Wednesday in the face of rising crude
oil prices, despite persistent worries about inflation.
The increase--announced late Tuesday by China's National Development and Reform
Commission, the nation's economic planning body--marks the second increase in
nearly two months. It also comes after China posted a 5.1% rise in consumer
prices in November, the biggest rise since July 2008.
(This story and related background material will be available on The Wall
Street Journal website, WSJ.com.)
China has taken steps in recent weeks to curb inflation, including price
controls, lending limits and increased bank reserve requirements. Officials
hope to bring the economy in for a soft landing after spending billions on
stimulus measures to spur growth during the global economic slows. China's fuel
price increase will add to 0.07% of a sequential increase in consumer price
index in December, the commission said.
Beijing controls fuel prices using a basket of international crude types but
has veered from the formula when it might have meant major price increases.
China will raise gasoline and diesel prices by 310 yuan ($46.53) and 300 yuan
($45.02) per metric ton, the commission said. That represents a gasoline price
increase of 0.23 yuan per liter, or about 13.1 U.S. cents per gallon. Diesel
will rise by 0.26 yuan per liter, or 14.8 cents per gallon. The price applies
to what's known as ex-factory production--actual retail prices at the pump vary
by region and market.
The commission postponed the increase until now and has also controlled the
magnitude of the price increase due to inflation and fuel supply issues, it
said without elaboration. It said it expects China's reliance on petroleum
imports to be at nearly 55% in 2010.
China will continue to subsidize farmers, the fishery, forestry and public
transportation, the commission said. The country won't raise prices of urban
and rural public transportation including buses, train and air transport after
the price increase, it said.
When China last adjusted fuel prices, on Oct. 26, benchmark New York Mercantile
Exchange light, sweet crude futures were around $83 a barrel, compared with
just under $90 Tuesday.
As part of it inflation-busting drive, China took a series of measures in
November to rein in the prices of agricultural commodities, including price
controls and releasing state reserves of some goods.
China's central bank has raised the reserve requirement ratio for banks six
times so far this year, with the last three increases coming in the past month.
This indicates the government is increasingly concerned about inflation and
excess liquidity.