China to Lift Controls on Refined Oil Prices at an Appropriate Time
The CPC Central Committee and the State Council recently issued the "Several Opinions on Advancing the Reform of the Price Mechanism." The opinions set out the direction of price reform in 6 key areas, including improving the price formation mechanism for agricultural products, accelerating the marketization of energy prices, improving environmental service pricing policies, straightening out medical service prices, improving the transportation pricing mechanism, and innovating the price management of public utilities and public welfare services. The opinions specify that by 2017, prices in competitive sectors and links will be basically liberalized, and the scope of government pricing will mainly be limited to important public utilities, public welfare services, and network-type natural monopoly links. By 2020, the market-determined price mechanism will be basically perfected, a scientific, standardized and transparent price supervision system and anti-monopoly enforcement system will be basically established, and the price regulation mechanism will be basically sound.
Establish a mechanism in which energy prices are mainly determined by the market
Before 2009, China's refined oil prices were mainly controlled by the state. As international oil prices “advanced triumphantly” all the way, domestic refined oil prices and international crude oil prices were seriously “inverted”, producers had no incentive, middlemen hoarded oil waiting for prices to rise, “oil shortages” occurred one after another, and consumers complained continuously. In recent years, China has twice improved the refined oil price formation mechanism. Oil product pricing has become increasingly transparent, market signals have become more accurate, and supply and demand have also tended toward stability.
Accelerate the marketization of energy prices. Following the overall approach of “controlling the middle and liberalizing both ends”, advance the reform of energy prices such as electricity and natural gas, promote diversified competition among market entities, steadily handle and gradually reduce cross-subsidies, and restore the commodity attributes of energy. Lift controls on refined oil prices at an appropriate time, straighten out natural gas prices comprehensively as soon as possible, accelerate the liberalization of natural gas source and sales prices, orderly liberalize on-grid electricity prices and sales electricity prices other than those for public welfare, and establish a mechanism in which energy prices are mainly determined by the market.
Separate transmission and distribution electricity prices from generation and sales electricity prices in terms of formation mechanism, approve transmission and distribution electricity prices separately, and realize step by step that generation and sales electricity prices other than those for public welfare are formed by the market. In accordance with the principle of “permitted cost plus reasonable return”, reasonably set the transmission and distribution prices of power grids and natural gas pipeline networks.
Basically straighten out the price ratio relationships of medical services by 2020
On one hand, ordinary people constantly complain that drug prices are “artificially high”; on the other hand, there are complaints that doctors' massage and physiotherapy prices cannot even match the massage services of “foot bath parlors”. “The main reason for this phenomenon is that the medical and pharmaceutical price mechanism has not been straightened out, and the price of medical service fees in public hospitals is too low, which in turn breeds ‘using drugs to support medicine’.” said Wang Yongzhi, president of the China Price Association.
The opinions specify that medical service price reform should be actively and steadily advanced, medical service prices should be reasonably adjusted, and the linkage of related policies such as prices and medical insurance should be strengthened simultaneously to ensure that the development of medical institutions is sustainable, medical insurance funds remain affordable, and the burden on the public does not increase. Establish a dynamic price adjustment mechanism based on changes in costs and revenue structure, and basically straighten out the price ratio relationships of medical services by 2020.
The opinions require implementing the market-regulated price policy for medical services of non-public medical institutions. Prices of medical service items of public medical institutions shall be subject to classified management. For medical service items with relatively sufficient market competition and relatively strong individualized demand, market-regulated prices shall apply, and for service items paid by medical insurance funds, the medical insurance handling agencies shall negotiate with medical institutions to reasonably determine the payment standard. Further improve the drug procurement mechanism, give play to the role of medical insurance in controlling costs, and let the actual transaction prices of drugs be mainly formed through market competition.
Advance pilot programs for paid use of emission rights
China began advancing pilot programs for the paid use and trading of emission rights in 2007. At present, more than ten provinces have become national-level pilot units, and some provinces have also selected some cities (counties) on their own to carry out pilots. China's paid use and trading system for emission rights is still in its initial stage. Letting enterprises reduce the pressure of energy conservation and emission reduction through market-based channels, enabling enterprises that buy emission rights to expand reproduction, and enabling enterprises that sell emission rights to obtain financial support can make energy conservation and emission reduction an initiative of enterprises.
The opinions propose coordinating the use of environmental protection taxes, fees and related service price policies, increasing the intensity of economic leverage, and gradually making the expenditures borne by enterprises for discharging various pollutants higher than the cost of proactive treatment, so as to increase enterprises' enthusiasm for proactively controlling pollution and reducing emissions.
The opinions specify that, in accordance with the principles of “polluters pay, fair burden, cost recovery, reasonable profit”, sewage treatment charging standards should be reasonably raised. Urban sewage treatment charging standards should not be lower than the costs of sewage treatment and sludge treatment and disposal. Explore and establish an adjustment mechanism linking the treatment service fees allocated by the government to sewage treatment enterprises with sewage treatment results, and implement encouraging price policies for the resource utilization of sewage treatment.
Broadband network speed increases and fees decrease
As early as March 5 this year, Premier Li Keqiang of the State Council said while attending a joint group discussion of the 12th National Committee of the Chinese People's Political Consultative Conference that when he visited some countries, he found that “the internet speed in some developing countries is faster than in Beijing”. On April 14, at a symposium on the economic situation chaired by Li Keqiang, in response to participants' feedback that “data fees are too high”, he asked the heads of relevant departments to study how to bring data fees down and “earn small profits but achieve quick turnover”.
The opinions require regulating telecommunications tariff behavior, advancing broadband network speed increases and fee reductions, and providing strong support for the development of “Internet Plus”. Guide and push telecommunications enterprises to simplify tariff structures, effectively improve the cost-effectiveness of services such as broadband internet access, and provide more preferential tariff plans for urban and rural low-income groups.
The opinions propose that improper pricing behavior shall be strictly prohibited from hindering competition in telecommunications services and disrupting market order. The opinions also emphasize strengthening the supervision of tariff behavior, cleaning up unreasonable fees in broadband network construction such as entry fees, coordination fees, and apportionment fees, and severely cracking down on price violations.
According to Xinhua News Agency
⟧ The government's liberalization of prices does not mean letting go entirely
Some people worry whether liberalizing prices will enter the strange cycle of “chaos as soon as they are liberalized, tightening as soon as there is chaos, and death as soon as there is tightening”?
“Government pricing is like ‘one man guarding the pass, and ten thousand men cannot force it open’. Now after prices are liberalized, the force of a mighty army is needed to maintain market order. This places higher demands on the government's regulatory and governance capacity.” said Li Ling, a professor at the National School of Development at Peking University.
“Supervision itself is also reform, and it is a more difficult reform. It is not that the government is no longer responsible to the people, but that it is better responsible to the people.” said Wang Yongzhi, president of the China Price Association. Liberalizing government pricing is only the first step. After prices are liberalized, whether the formulation of market rules, technical and quality standards can keep up, whether the government can effectively supervise and enforce the law against unfair competition and monopolistic behavior, and whether social forces can play an effective supervisory role are all issues that urgently need to be solved. According to Xinhua News Agency