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China should introduce fuel tax in proper time
Updated: 2004-12-07 13:43

A World Bank expert said it would be better for China to charge oil at the full world market prices,and then introduce a fuel tax when oil prices drop to what he called a proper level.

Bert Hofman, lead economist and chief of the Economics Unit of the World Bank's Beijing Office, explained that China does not charge oil at the full world market prices right now.

"The oil prices at the pump are cheaper than the world oil prices," he said in an exclusive interview with Xinhua on Friday.

"If you want to build a rational economic structure, if you want to make sure people invest in energy saving industry, you need to get that price signal rights."

Oil resources are limited, and 50 years from now, the world will have even bigger scarcities and China will use a lot of oil, already it is using too much energy now, compared with other countries, said Mr Hofman.

He said China should eliminate what he called oil subsidy firstand start taxing oil if politically feasible.

"The best time to do that is when oil price is coming down, because everybody is happy, because the price at the pump still comes down. But in the meantime, you eliminate the subsidy, put upa tax, which is good for the long-term structural feature of the Chinese economy.

"And we think (2005) is a good year (for China) to do it," saidthe expert as the oil prices are likely to decline from their highlevel of 2004.

China's booming economy, which is expected to grow by around 9.3 percent this year, is feeling the pinch caused by shortages of energy resources, including oil.

Jia Yinsong, an official from the State Development and Reform Commission, said China is expected to import more than 100 million tons of crude oil this year, exceeding the 100-million-tonlevel for the first time. This will bring the nation's dependence on oil imports up to nearly 40 percent.

The nation's annual output of crude oil will reach 174 million tons this year, Jia predicted.

China produced 130 million tons of crude oil in the first threequarters of the year, a year-on-year growth of 3 percent. The country imported 85.8 million tons of crude oil and processed 202 million tons, up 36.2 percent and 15.4 percent respectively, Jia said.

To ease energy shortages, the Chinese government stepped up theprospecting and extraction of domestic oil and natural gas resources, while striving to improve energy efficiency and seek alternative energy.

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