National Development and Reform Commission Claimed Further Price Increases for Part of Production Materials   Possible Intervention in Coal Price

NDRC claimed yesterday (28^th Jan) that in 2008,  the prices of some production materials would keep increasing, which would further push up prices of related downstream product prices.

    Driving Production Costs

The burden from rising prices will become more evident in 2008. Under this background, NDRC considers the operating environment for production and operations not optimistic.

Influenced by factors such as the high level of domestic demand and soaring prices of energy and raw materials in the international markets, material costs of production have been observably escalated.

“With the progress of reform and work on energy saving and emission reduction, resource, environmental costs, land and labor costs will grow, which will levy burden on production costs”

As new production facilities will be launched in 2008, expanded production level is expected to intensify the competition level. If an enterprise is not able to adjust its development strategy, focusing on innovation, energy saving and emission reduction, increasing the added value of their products and improving management quality, the burden of production costs in 2008 will be amplified.

    Possible Government Intervention in Coal Price

NDRC has established a system that monitors the supply of and the demand for agricultural products and primary products and alarms their abnormal price movements.

NDRC closely monitors price, food, real estate, capital markets as well as the world economy and oil price changes, in order to identify problems at an early stage and build executable resolutions. If the supply shortage of coal causes abnormal price movement, the possibility of price intervention will not be excluded.    

With regard to the price intervention currently implemented, NDRC spokesman presented that such temporary price intervention will not alter the operating independency of enterprises and their pricing determining ability. Such intervention will be suspended when the price increase is stabilized.

   Macroeconomic Environment is “Uncertain”

With the burden of rising price in 2008, NDRC emphasized the “complexity” and “Uncertainty” of the macroeconomic environment.

NDRC categorizes the potential risk factors into the international factors and the domestic factors.

NDRC believes that although the world economy will continue its growth in 2008, the likelihood of fluctuations and economic slow-down rises. The effects of US sub-prime crisis on the main economy are unpredictable and the variability of the world capital markets has escalated. US dollar depreciates continuously and the prices of the oil, iron, copper and food in the world markets are likely to remain at high levels and even increase further. Our national trading protectionism will be gone against further.

The main domestic problems are

the risks from the economy’s shifting from fast growth to overheating remains; the high inflation; energy saving and emission reduction needs; higher difficulty for the stable development of agriculture and sustainable income growth for farmers; and problems in people’s welfare.

The article was translated from here.

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