China’s National Development and Reform Commission, the nation’s top economic planner, said on its website that gasoline prices will be reduced by 530 yuan ($84) a metric ton and diesel by 510 yuan ($81) starting June 9, 2012.
At gas stations across Beijing, 93# gasoline price is now at 7.64 yuan per liter, more than 5% lower than the previous day. This price is equivalent to $4.61 per gallon, which is still higher than the average gas prices of $3.41 per gallon in New Jersey.
A drop in fuel prices will help lower transport and storage costs for many industries, which may translate into lower costs of many household products, thus freeing up cash for consumers and boosting domestic consumption.
In recent months, the Chinese government has introduced a series of measures to stimulate economic growth, including cutting bank lending rates and investing in major infrastructure projects. In the first four months of 2012, the National Development and Reform Commission approved 868 new investment projects, such as steel plants and road constructions.
The prolonged economic slump in much of Europe and the United States has materially affected the export-oriented Chinese economy. In trying to stimulate domestic spending and maintain adequate growth, the Chinese government has launched many programs aimed at consumers, including subsidies for purchasing energy-saving products and a “cash for clunkers” program.
Some in the government and academia have advocated for structural changes in the Chinese economy. Suggestions include lessening its dependence on exports, allowing better allocation of capital to encourage domestic consumption, and welcoming private investment in key industries such as energy and banking.
But for now, the government is more focused on dealing with the immediate tasks at hand: keeping economic growth at a reasonable rate, maintaining social stability, and ensuring a smooth leadership transition in October, when a new generation of leaders, headed by Xi Jinping, takes over.