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Premier: Price reform gives consumers more choice

Updated: Nov 15,2014 10:04 PM

The government pledged to speed up price reform to allow the market to play a bigger role and will lower administrative charges generally to relieve burdens on small- and micro-sized businesses.

The decisions were made at the executive meeting of the State Council on Nov 15.

Premier Li Keqiang, who had returned from a visit to Myanmar a day earlier, chaired the meeting.

Pricing is the key for market reform

Premier Li said that while “it’s not easy” discussing the acceleration of price reforms, the benefits, over the long-term, will be clear.

“The process could be very difficult, but it is a good thing in the long run. It is a barrier we have to pass in order to establish the market mechanism,” he said.

“We will not tackle the key issue of carrying out market reform without reform on pricing. It will be a tough fight.”

He said some pricing issues exist that the government should not intervene in and is incapable of intervening in.

The reform -- a key component of market reform as well as transforming the government’s role -- is institutionally important for the economy, Li said.

As it concerns the vital interests of all the people, the government must carry it forward steadily with full consideration of past experience and social affordability, he added.

Reasonable price mechanism

The Premier noted at the meeting that price reform doesn’t automatically mean a rise in prices. Instead, it aims to set up a reasonable price mechanism that is based on market demand, and prices may rise or fall.

“Government pricing may seem to protect consumers, but in fact, it is not consumers’ interests that are being protected in most areas,” Li said.

“The market price offers more options for the consumers, which is a good thing in the long run.”

He said China is now faced with a window period for reform as the Consumer Price Index and the Producer Price Index continue to decline and import costs have fallen.

The Premier asked related departments to draw up plans and launch price reforms step by step, and quickly establish a fair and transparent market-price mechanism.

But in the meanwhile, he said, price fluctuations resulting from the reform must be acceptable to the public.

Li cited that oil prices have dropped eight times recently and said that the market price doesn’t necessarily lead to rising prices.

“The market -- the most sensitive signal that guides pricing -- plays a role in this case,” he said.

Benefit medical workers and patients

During an inspection tour, a doctor complained to the Premier that some entertainment venues charge more than 100 yuan ($16) for massage services per hour, while the same service only costs a few dozen yuan in hospitals.

“The doctor told me that this cannot reflect the value and respect his work deserves,” Li said.

During the meeting, participants had a broad-ranging discussion on healthcare price reforms.

Li said while drug prices are still unreasonably high, medical service charges are too low in public hospitals. This unreasonable pricing mechanism should be gradually changed through reform.

“The reforms must be carried out in a coordinated manner, and make sure that benefits are brought to medical workers as well as patients,” he said.

Easing burdens

“Many departments’ interests were involved in today’s meeting,’’ but the decisions taken will be implemented, Li said, after soliciting the last round of opinions.

The executive meeting also decided to lower administrative charges generally and continue efforts to relieve burdens on companies, especially small- and micro-sized businesses.

Li said that China’s overall macro tax burden is not very high, but fees are costly and burden the public and businesses.

The general reduction of administrative charges will be large scale and covers a wide range of areas.

This will help to encourage business startups, allow the newly-registered market players to grow, and curb arbitrary charges, the Premier said.

He also noted the phenomenon that officials collude with businessmen to pursue improper gains once administrative charges are cancelled.

“I noticed one thing during the inspection tours, that is, even if charges are cancelled, people still have to visit the consultation agency opposite the government affairs hall to get approval from official-like workers. This simply makes the charges more secret, doesn’t it?” the Premier said.

He said the key of lowering the administrative charges generally is to put the policies in place, and make sure that real benefits are brought to thousands of companies, especially the small- and micro-sized businesses.