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Last Updated: Wednesday, 25 August, 2004, 09:49 GMT 10:49 UK
China raises domestic fuel prices
Man filling up car with petrol
Pump prices have a significant effect on consumer spending
China will raise domestic petrol and diesel retail prices by 6% as crude oil prices stay near record highs.

Gasoline prices are expected to rise by 240 yuan ($29; 16) a tonne on Wednesday while diesel will rise by 220 yuan per tonne, industry sources say.

The cost of crude oil has climbed by almost 50% this year, pushing prices close to the $50-a-barrel mark.

China is one of the world's biggest oil importers and its demand for oil is seen as a main cause of high prices.

Drained dry

China's demand for oil has risen as its economy has grown.

Soaring energy demands have led to blackouts and some firms have been forced to put staff on holiday to keep demand under control.

The government has recently taken steps to cool economic growth, amid concerns that the economy is in danger of overheating.

Those steps seem to have eased inflationary pressures and given Chinese oil refiners room to lift fuel prices.

Chinese worker in oil refinery
China has been a net importer of crude oil since 1996

Growth hit

The rise in crude oil prices is already expected to impact on China's growth rate.

State Information Centre senior economist Niu Li has forecast that that growth this year is likely to slow to 9% from the forecast 9.8%.

State officials are cautiously optimistic about the economic outlook.

"Our economy is developing in the direction anticipated by the macro-control measures," state media quoted Zhou Xiaochuan, governor of the People's Bank of China, as saying on Wednesday. He added however that inflation and growth had not eased yet.

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