Market observers believed the new round of review would likely focus on adjusting the means and scope of official price-fixing. They, however, thought that the number of items placed under control would not undergo significant changes, unlike the previous review.

The 13 broad types of commodities with government-set prices at present mainly concerned crucial goods under official reserves' list. The Catalog included exclusive tobacco, salt and civil explosive equipment, certain fertilizer, certain medicine, teaching material, natural gas, water supply for hydraulic projects under the direct administration of the central government or inter-provincial hydraulic projects, military supplies, major transportation and postal services, telecommunication business and some specialized services.

In the last review, some of the items on the Catalog had their scope of price-control adjusted, for instance, pricing for domestic aviation services had changed from government-set to government-guided. Meanwhile, some sectors experienced price liberalization, such as the harbor charges and certain harbor services.

Some scholars specializing in pricing researches projected that controls over certain fertilizer and on-grid electricity would be loosened, however, they believed retail electricity prices would remain in government's grip.

The scholars also pointed out that since China had in recent years implemented the free nine-year compulsory education,  the pricing of school fees that come under the jurisdiction of provincial government should also be revised.

Relaxing price controls would only be one side of the coin. Sources said during the revision process, some areas might see tightening of controls instead. For instance,services at non-profit healthcare institutions had long been based on a benchmark or reference pricing range that set by respective provincial governments. However, the latest revision might look into placing health care pricing controls into the central government's catalog, a source told the EO.

In China, each province has its own local government price-fixing catalog. The commodities listed in the catalog differed from place to place depending on local interests, for example, the coal-rich Shanxi province's catalog placed more emphasis on coal-related items.

The EO learned that several provinces like Guangdong and Anhui had submitted local catalogs to the Central government for scrutiny, while provinces like Shanxi and Hebei were still in the process of compiling the data.

Acoording to procedure, if the NDRC decided to review the Central Catalog, it must first gathered feedbacks from various parties, then a draft would be sent to the State Council for approval. An official from the pricing athorities said final words on how and what to adjust had yet to be decided.

Tread with Caution
A scholar said the government was treading the issue carefully, for fear of its implications. He gave the example that the government had been contemplating to liberalize prices of certain fertilizers since two years ago.

At present, fertilizer businesses with a synthetic ammonia production capacity above three million tons per year would come under the central government's price control; while those below that capacity would come under price-fixing by the local authorities.

If price controls on fertilizer were lifted, farmers would be the first hit, leading to higher cost of production in the farming sector. "However, the government may consider providing subsidy to the farmers." suggested the scholar.

For fertilizer businesses, lifting of price controls would grant them more autonomy. However, such liberalization could also mean the removal of preferential policies long enjoyed by the industry.

In order to ensure the supply of fertilizer, the government had charged such businesses lower fees for electricity and natural gas consumption, as well as providing tax incentives. 

Without such preferential policies, the cost of production for each ton of urea would increase by at least 232 yuan, and businesses might transfer the added costs to consumers by hiking prices. These were among the problems NDRC would have to consider before revising the pricing catalog.

China Price Association chairman Wang Yongzhi had been observing the pricing system in China for over 30 years. Once worked for the National Pricing Bureau, Wang said China adopted a gradual process for commodities' pricing to be determined by market forces.

Take prices of capital goods for instance, prior to 1978, all prices were fixed by the government. By 2006, prices set through market mechanism had covered over 90% of these goods. However, prices for resources and monopolized industries remained closely controlled.

In the future, Wang suggested that price controls through government-set ceiling price or reference benchmark should be targeted at promoting the use of innovative technology, environment conservation and resource-saving.

Zhang Xiangdong and Xi Si also contributed to the article