Manufacturing News

Market welcomes new round of price reform

Shanghai-listed stocks in the transportation sector surged on Monday following the top economic planner's announcement to remove price controls on 24 commodities and services.

Shares of Air China, Daqin Railway Co and Guangshen Railway Co rose above 5 percent on Monday, beating the 3.58 percent rise of the benchmark Shanghai Composite Index on Monday.

The shares surge came after the National Development and Reform Commission's (NDRC) statement issued late Sunday saying that the country will remove price controls on 24 commodities and services.

The commodities and services include railway bulk cargo transport, passenger transport for some airlines and port service fees, the statement said.

Companies will also be allowed to decide the price of tobacco leaves, the last agricultural product whose price is set by the government, the NDRC said.

According to a rule issued by the State Tobacco Monopoly Administration on December 17, authorities would lift price controls on tobacco leaves in 2015 but it did not mention the specific time.

The removal of price controls on the 24 commodities and services is the first batch of a new round of price reform and the second and third batches will be launched in the future, news portal reported Monday, quoting Xu Kunlin, head of the price supervision and anti-monopoly bureau of the NDRC.

According to a statement released by the State Council on November 15, China will launch a new round of price reform to stimulate economic growth.

Price reforms in the energy, electric and natural gas sectors will also be launched in the future even it is not easy, Xu said, according to the report.

"It is a very good time to promote price reform as inflation in China remains at a low level," said Zhou Shaopeng, a professor at the Chinese Academy of Governance in Beijing.

China's inflation rate, measured by the consumer price index (CPI), slid to a five-year low of 1.4 percent in November, according to data from the National Bureau of Statistics.

The NDRC's move is aimed at encouraging private capital investment in key State-controlled sectors to stimulate economic growth, Zhou said.

Xinhua News Agency reported on Sunday that in April, rail freight prices were freed from fixed levels and allowed to fluctuate in accordance with the market on the Zhunchi Railway, a short railway in North China that received private investment, as a pilot. This showed that private investors could participate in railway operation and set an example in price reform.

As China's local governments lack sufficient funds to meet the huge demand for infrastructure projects, they are hoping to introduce more private capital but it is not easy due to the small profit margins it could offer to private capital, Zhao Jian, a professor at Beijing Jiaotong University, told the Global Times on Monday.

There should be more reform to break up monopolies in the State-controlled sectors accompanied by price reform to attract private capital, Zhao said.

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