A Complex Issue
Fuel prices are still controlled by the government, so the end-user prices still don't fully reflect market conditions. Premier Wen Jiabao has said that the government may allow the CPI to rise by as much as 4%, where its current rate is about 2% now.
Ever wary of inflation for consumers, Beijing will likely offer subsidies, according to the official news agency Xinhua, if global crude oil prices continue to rise. The increases will help refiners some, but will not completely take away the pressure, as the Chinese majors are expected to continue to lose money in their refining segments.
So China has maintained its preferential option toward being more consumer-sensitive than oil company-sensitive on the fuel-price issue. But it is making some strides toward letting more of a market force dynamic trickle into its economy.
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