Cheaper oil could lead to commodity price reform
9/9/2008 17:37
Cheaper international crude oil would be a good opportunity for China to
reform its commodity prices, said an expert with the National Development and
Reform Commission (NDRC).
Chen Dongqi, vice president of the NDRC's Academy
of Macroeconomic Research estimated crude oil to fall to under US$70 a barrel in
coming months. Currently, oil is more than US$100 a barrel.
"It would be a
rare chance for China to accelerate its price reform of oil, electricity, gas,
water and grain products," he said. "This chance only appeared once, shortly
after the Asian Financial Crisis. We should make good use of it this time," said
Chen.
China had been suppressing the prices of commodities since last year in
order to keep consumer prices down. For example, the NDRC had interfered with
coal prices and the country's domestic oil prices.
Most power and refinery
plants are reporting losses and are pressing for a market-oriented energy
pricing system.
The recent plunge in crude prices, together with a weakening
greenback, would ease pressure from imported inflation on overall prices in
China. The upward pressure of the consumer price index is also expected to ease
in the latter half supported by a bumper summer grain harvest, all facilitating
a reform on resource prices.
Chen said price reform should be done in a
gradual way. "In implementing reform, we should avoid too much immediate shock
to prevent triggering a second wave of inflation."
Xinhua
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