Result of Chinese price controls

November 2nd, 2007

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In Counter-productive way of dealing with inflation?price control, we mentioned the foolishness of the Chinese authorities in trying to control price inflation with price controls:

How can you possible control price inflation by imposing price controls when you are, at the same time, printing money like there?s no tomorrow? We believe such folly will end up doing more harm than good.

Today, we found this news report, China raises fuel prices by 10%:

China has raised fuel prices by almost 10% in an effort to ease the country’s worsening supply crisis.

Officials hope the extra revenue will make refiners increase production, easing the long queues and rationing at filling stations.

The rise is a reversal of policy. In September the government promised to keep fuel prices at current levels.

Oil prices have been sky rocketing, but Chinese refiners cannot pass those rises on to consumers and so they are losing money.

Many have already cut their supplies to limit losses.