China to ask public about fuel pricing, tax reform

China's cabinet, the State Council, plans to publish details of proposed fuel pricing and tax reforms to solicit public opinion, the government said in a statement on its Web site (www.gov.cn) on Wednesday.

The cabinet, chaired by Premier Wen Jiabao, discussed oil pricing and taxation on Wednesday and decided to publish details of reform proposals, the statement said.

"Perfecting the refined oil price formation mechanism and launching a reform of fuel taxation are extremely important for China to boost domestic consumption, promote economic restructuring and standardise fair tax burdens," it said.

"They can also help encourage energy saving, environment protection and ensure sound and fairly fast economic growth."

China's faltering economic growth prompted the government to slash interest rates on Wednesday and launch a 4 trillion yuan ($586 billion) stimulus package, simultaneously loosening the reins of the economy and stoking domestic demand.

The government statement also said the cabinet had decided to step up purchases of important materials and resources for state and commercial reserves, without specifying or giving details.

China is already buying up millions of tonnes of domestic corn and soybean stocks to support farmers, according to agricultural commodity traders, and oil statistics show China has boosted imports of crude oil, sparking talk that it may be filling its tanks while prices are low.

Chinese officials have long spoken of one day liberalising fuel prices and introducing a fuel tax, and analysts say the current market conditions are a perfect opportunity, since domestic pump prices are above the international market, giving a buffer within which the government could introduce changes.

But China has yet to say whether it will opt for a new fuel tax or simply hike the existing refined oil consumption tax.

Market participants are not expecting full liberalisation of fuel prices, but more likely a step that will aim to appease motorists, alleviate the pressure on refiners and leave ultimate control with the government.

China's top economic planner, Zhang Ping, will discuss measures to boost domestic demand at a press conference on Thursday, making a rare public appearance that could reveal more about the reform plans.

Zhang chairs the National Development and Reform Commission, which last week said it was studying ways of changing the way oil prices are set, as well as lowering pump prices and scrapping road tolls.