On June 20, the National Development and Reform Commission (NDRC), China's top economic planning authority, announced an oil price increase. This was surprising because just ten days ago a senior NDRC official stated publicly that deferring any action on oil product prices is a stabilizing factor for the economy. What caused such a dramatic change in just 10 days?

According to unknown sources quoted by the Economic Observer, two Chinese major oil companies played a key role in bringing forward the rise in oil product prices.

Since February this year, the two oil companies have been constantly flagging their losses caused by surging international oil prices to the NDRC. These reports became daily in early June.

Correspondingly, the NDRC has been filing formal reports to the State Council for a month, proposing an oil price rise. Meanwhile, the two oil makers also sought other channels including high-level internal reports, to get to the government's decision-making level. Finally, the issue attracted top officials' attention.

On June 10, the NDRC held a small-scale internal meeting to discuss whether it was necessary to raise oil prices. Representatives from the two oil producers and officials from relevant government organs attended the meeting. The meeting determined details of the proposed oil price increase, including when and by how much to raise prices. The meeting specifically noted that there was no need to invite any experts' opinions.

During the recent fourth round of the China-US Strategic Economic Dialogue, US Treasury Secretary Henry Paulson proposed that the Chinese government should loosen control over oil prices. According to government sources, his clear-cut attitude, along with other international pressure, was also a driver in the recent oil price hike.

For more details, please read the full story in Chinese

(http://www.eeo.com.cn/Politics/beijing_news/2008/06/24/104120.html).

(China.org.cn by Yan Pei June 24, 2008)