SHANGHAI: China raised gasoline and diesel prices Wednesday for the first time in five months in a move reflecting Beijing's confidence it can control inflation and keep growth strong.
The price hikes of 4 percent to 4.5 percent were in line with expectations following recent gains in global crude prices.
Oil rose above $84 a barrel Wednesday in Asia, breaking a five-day slide, as rising global stock markets raised optimism over the global economic outlook.
The government releases data Thursday that are expected to show the economy grew at a nearly 12 percent annual pace in the first quarter.
The fuel price hikes suggest Beijing is confident it has a handle on inflation pressures despite the rapid expansion.
The government has kept stimulus in place while trying to curb lending and discourage excess investment it worries could undermine growth in the long term.
Many are watching to see whether the March data show the economy is overheating and requires more drastic action.
"Policymakers seem to think that inflation is still well under control and they seized the opportunity to raise fuel prices, as they expect it will not harm the economy," said Qiu Xiaofeng, a petroleum industry analyst at China Merchant Securities, in Shanghai.
Inflation rose to 2.7 percent in February compared with a year earlier, close to the government's official target of 3 percent for the year.
Beijing has been gradually raising government-set fuel prices to bring them into line with global levels and help state-owned refiners that suffered massive losses due to soaring crude costs.
This week's change is the first since November.
Last year, the government raised prices eight times as it reformed its pricing system.
Raising prices is crucial for convincing refiners to keep capacity running at high enough levels to meet demand as the economy recovers.
"The price rise is to ensure fuel supplies to meet the peak consumption as spring planting season approaches and industrial activities accelerate," the National Development and Reform Commission, the government's main planning agency, said in a notice on its Web site.
Higher prices also will encourage conservation, the NDRC said.
It acknowledged the price hike would push overall inflation slightly but said the direct impact was estimated at a relatively low 0.07 percent.
"We will strictly control any chain reaction of price adjustments to ensure price stability and adequate supplies of processed oil, liquefied petroleum gas, food, edible oil, pork, vegetables and other important commodities," it said. - AP
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