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China set to freeze electricity, fuel prices

Public's inflation fears prompt action

Email|Print| Text size + By Jim Yardley
New York Times News Service / January 10, 2008

BEIJING - Prime Minister Wen Jiabao responded yesterday to growing public anxiety about inflation by saying China would freeze energy prices in the near term, even as international crude oil futures have continued to surge.

The new effort to fight rising prices comes with inflation hitting an 11-year high in China. A recent nationwide public opinion survey found that "rising prices of consumer goods" ranked as the top public concern, followed by income inequality, and corruption.

The latest freezes, made public on the government's main website, came after Wen presided over a meeting of the State Council yesterday to revise policies on price controls.

Prices of oil products, natural gas, and electricity will be frozen in the near term. Rates for public water bills will also be frozen, as will the price of public transportation tickets.

The edict also called for stabilizing prices on medical services and for certain agricultural fertilizers. It ordered local governments to monitor prices closely and warned that punishments would be strengthened for those who violate government price-control policies.

Ben Simpfendorfer, a Royal Bank of Scotland economist in Hong Kong, said the announcement underscored how seriously the State Council regards public attitudes toward inflation.

"The State Council is worried about public sentiment," he said. "They are worried that rising prices will have a negative impact on sentiment."

Last November, China raised gasoline and diesel prices by almost 10 percent, partly to appease officials at state-owned refineries. Refiners had complained that price controls were forcing them to swallow the difference between higher prices for crude oil on the world market and regulated consumer prices at home for refined products. So refineries cut back production of gasoline and particularly diesel, causing long lines at fuel stations around the country.

But the November price increase drove inflation. Consumer prices were 6.9 percent higher then than a year ago - representing an 11-year high.

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