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Inflation fears block fuel price rise (2)
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10:01, July 26, 2007

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But Cao expressed fears that raising prices of oil products will increase the prices of other industrial products, fueling the present inflationary spiral. "That is not good for the health and stable development of China''s economy."

Oil refiners in China say rising international crude oil prices have already squeezed their profits. The nation''s largest oil refiner, Sinopec, which imports 70 percent of its crude oil, has reportedly seen a loss in its second-quarter refining figures because of high crude prices.

Cao said the government will subsidize the refiners but didn''t reveal the details.

China has already started reforms to gradually deregulate refined oil prices. The reform has gathered momentum since last year, with prices being raised twice. But the momentum has slowed down this year even as global oil prices skyrocketed in March and June.

<b>Electricity charges </b>

Cao also said the government needs to further weigh the possibility of allowing price hikes for electricity, both for industrial and household purposes.

Pushed by growing coal prices, China''s five major electricity generation groups, the mainstay of the country''s power industry, are reported to have appealed to the central government for a further price increase.

According to Beijing Times, this is the third time this year that China''s main power producers have jointly appealed to the NDRC for a price rise.

China''s coal prices are already market-determined but the government still regulates prices of electricity, about 80 percent of which comes from coal. But coal prices have been pushed up by growing electricity demand in keeping with the blistering growth.

The five State-owned power groups'' call for electricity price rise follows the government''s demand for nationwide reduction in pollution and power consumptions.

Beijing Times said the reason the government has not given the green light to power producers to raise prices is the fear of further inflation.

Source:China Daily
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