China extends freeze on gas prices

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BEIJING (AP) — China will extend a price freeze on gasoline and closely watch food supplies in a new effort to slow galloping inflation ahead of the Lunar New Year holiday in early February, the government said yesterday.

The freeze also applies to natural gas, school fees and mass-transit fares, Prime Minister Wen Jiabao said in a statement on the central government's main Web site.

The inflation spike is blamed on shortages of pork and grain, and the sharpest rises have been confined to food. But those rises have been hard on China's poor majority, who spend a large share of their income on food. And the government frets that pressure for prices to rise could spread to other parts of the economy.

Beijing froze prices of gasoline and basic food items in September in an effort to rein in inflation, which has reached decade-high levels. The government raised gasoline and diesel prices by nearly 10 percent in November to curb consumption amid shortages but has held prices of other controlled goods steady.

"In the near future, prices of refined oil, natural gas and electric power will not be adjusted," Mr. Wen said.

Prices of piped-in gas, water and heat, municipal mass transit and school fees "cannot be raised," Mr. Wen said.

Analysts expect Beijing to raise state-set retail prices for gasoline and diesel later in 2008. China has kept retail prices low until now to shield the poor, prompting complaints from state-owned oil companies, which are prohibited from passing along higher crude costs to motorists.

Beijing has released pork from government stocks, raised subsidies to pig farmers and imposed export quotas on grain to encourage producers to sell more at home.

Despite that, prices rose in November by 6.9 percent — the highest rate since 1996 — propelled by an 18.2 percent jump in food costs.

"International market prices for oil, grain and other goods are still rising, and pressure for domestic prices to increase is great," Mr. Wen said.

The jump in food costs will hit hard at the Lunar New Year, the most important family holiday and a time when households stock up on groceries for banquets and to feed visitors.

Local authorities were ordered to watch prices of grain, oil and meat ahead of the holiday and "ensure market supplies," Mr. Wen said.

Last week, the government ordered sellers of grain, edible oil, meat, eggs and other food to report to local regulators for price rises of more than 5 percent or increases that total more than 8 percent over 10 days.