China plans to abolish price controls on almost all goods and services in certain key sectors. This will be done progressively by 2017 and for this purpose the State Council has released a guideline and also a timetable. The reform on the pricing mechanism will be favorable for private foreign investments in China.
The removal of price controls
China aims to have a better pricing mechanism, one that will put more emphasis on the market itself. This change starts with the removal of price controls on virtually all goods and services in certain competitive sectors. Authorities wish to accomplish this by 2017 and by 2020 the country should have rational and transparent pricing regulations. Also, the goal is to implement an anti-monopoly law which will be very well enforced throughout the country.
The Chinese pricing reform is already under way, with important changes already in areas like medicine, telecommunications and transportation. In these three areas, price controls have been relaxed.
How the measure influences investments and the economy
The State Council has decided to reduce the areas where the government sets the prices. Now, the total number of controlled areas is reduced from nearly 100 to just 20. Some of the most important areas include energy, environment, agriculture production, health care, transportation and public services.
Oil prices controls will also be removed, although the authorities have yet to provide a timeframe for this change. It is also planned to remove controls on natural gas.
Operators in rails, highways, airline and harbors will be able to have more independent pricing. Railway ticket prices will be established according to speed and services quality of the train. Parking fees and cab fares will also be charged more efficiently.
With these changes, more private investment is expected in public services. This sector will have clearly defined charges, especially in schools.