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. Last Updated: 07/27/2016

China Considers Easing Price Controls to Cut Down Waste

BEIJING -- China is considering easing controls on the price of oil, power and other resources, and letting market forces push them up in an effort to cut widespread waste, a Chinese state newspaper said Monday.

The government is "determined to make prices more dependent on market forces," the China Daily said, citing Bi Jingquan, a deputy minister of the Cabinet's National Development and Reform Commission, China's top planning agency.

Bi's comments mark "the first time the government has firmly expressed its determination for price reform," the newspaper said. It did not give a timetable for price changes, nor say how much prices might rise. Economic planners have long complained that China's low, government-set prices for energy and raw materials encourage waste by factories, mines and other businesses.

Despite opening up other parts of the economy to market forces, however, the communist government is reluctant to end price controls for raw materials for fear of hurting struggling state industries and possibly fueling social unrest.

The proposed changes come amid government efforts to rein in rapid growth in some parts of the economy, which expanded by 11.3 percent in the second quarter.

Chinese leaders worry that excessive investment in factories, luxury apartments and other assets could fuel inflation and leave companies and banks with dangerously high debt.

The price changes being considered could affect coal, electricity, oil, natural gas and water, with subsidies for the poorest families to offset higher costs, the China Daily said.

The government increased prices for gasoline and diesel in May, but they remain below world levels. Oil companies and refiners have been expected to absorb changes in supply costs in order to prevent shocks to the economy.