Yicai.com:

I have two questions. First, how can we evaluate the progress and effectiveness of price mechanism reform over the past 10 years? What areas can be further improved in the future? Secondly, as we have noticed, prices in Europe and the United States have skyrocketed. What should we do to guard against imported inflation risks? How can we keep the supply and prices of bulk commodities and other commodities essential for people's livelihood stable in the future? Thank you.

Yang Yinkai:

Thank you for your questions. Since the 18th CPC National Congress, China's reform of price mechanism has been further advanced and scored a series of noticeable achievements in accordance with the deployments and arrangements of the CPC Central Committee and the State Council. That progress has been mainly manifested in the following four aspects. 

First, we have substantially narrowed the scope of government-set pricing. A mechanism whereby the market largely determines prices has basically taken shape. We have further promoted market-orientated pricing reform in key areas such as agricultural products, energy and resources, and transportation. Currently, the market decides the prices of all agricultural products, 80% of electricity, 50% of natural gas, and 90% of air passenger transport. By the end of 2021, the marketization of goods and services prices in China had reached 97.5%. The price reform targets set at the third plenary session of the 18th CPC Central Committee have been basically achieved.

Second, we have constantly improved price control mechanisms to ensure the long-term basic stability of the overall price level. We have comprehensively taken measures, including monitoring and early warning, reserve adjustment, guidance on expectations, and market regulation to ensure supply and price stability. We have established price range regulatory mechanisms, including setting a floor, ceiling, and upper- and lower-limit prices for key varieties such as rice, wheat, hogs, refined oil products, and coal to effectively cope with abnormal price fluctuations. From 2012 to 2021, the average annual rate of China's consumer price index (CPI) stood at around 2%, which was essential for promoting long-term and sound economic and social development.

Third, we have strengthened price and cost supervision and established a scientific and reasonable government pricing mechanism for those areas where government pricing is still needed. First, we have listed all relevant prices, included all items for which the central government sets the prices in the pricing catalog and made it public. Second, we have promoted the standardization process of pricing, revised the rules of government pricing, procedures for hearings and methods for monitoring and reviewing costs, and constantly improved the procedures of government pricing. Third, we have accelerated the science-based supervision process, introduced measures for price management and cost supervision and examination in areas such as power transmission and distribution and gas pipeline networks, and established a price supervision system combining constraints and incentives for monopoly industries.

Fourth, we have continuously improved the price mechanism for promoting green development in line with the "polluter pays" principle while benefiting conservationists. First, focusing on the economic and intensive use of resources, we have comprehensively established a tiered price system for residential use of electricity, water and gas, and a progressive pricing system for non-residential use of water exceeding quotas, and implemented a tiered electricity price policy based on energy consumption for the electrolytic aluminum, cement, and steel industries. Second, regarding green and low-carbon energy transformation, we have constantly improved the on-grid pricing policies for wind power and photovoltaic power generation to support the leapfrog development of the industry. Third, focusing on reducing the discharge of pollutants, we have improved the charging mechanism for sewage and garbage treatment and made reasonable adjustments to charging standards.

I will briefly answer your question about preventing imported inflation and ensuring supply and price stability.

Since this year, global inflation continues to rise from an already high level, and the year-on-year increase in CPI in many European and American countries has hit a 40-year high. Relatively speaking, prices in China have been kept within the appropriate range. In May, China's CPI rose by 2.1% year on year, which was significantly lower than those of other major economies. This has fully demonstrated China's resilience in economic growth, effectiveness in macro regulation and precision in price regulation.

For some time to come, geopolitical conflicts and other factors may bring to China relatively large imported inflation pressure. However, with generally sufficient market supply and policy tools, China has all the necessary conditions, capability and confidence to keep prices stable. General Secretary Xi Jinping has repeatedly emphasized that it is essential to ensure the supply and price stability of important livelihood commodities and bulk commodities and to keep the overall price level basically stable. Next, following the important instructions of General Secretary Xi Jinping, we will focus on three respects in our work. First, we will do our best to ensure the supply and price stability of livelihood-related commodities, stabilize production and supply, strengthen the coordination between production and sales, and leverage the buffering role of reserves and adjusting role of imports and exports. We will keep the supply and prices stable of livelihood-related commodities such as grain, oil, meat, eggs, milk, fruits and vegetables, and especially better regulate hog production to prevent price fluctuations. Second, we will continue to redouble efforts to ensure bulk commodities' supply and price stability. We will improve the production, supply, storage and marketing systems for coal, accelerate the release of high-quality production capacity, improve the coal market price-setting mechanism, and guide coal prices to be kept within the appropriate range. We will make more efforts to explore and develop domestic mineral resources, strengthen the adjustment of imports and exports, and enhance the ability to guarantee supply. Third, we will continue to strengthen market supervision, closely track market changes, maintain a high level of supervision, severely crack down on activities violating laws and regulations, such as hoarding and profiteering, as well as price gouging, and resolutely curb excessive capital speculation.