CICC believes that raising the price of refined oil by 50% can make the gross profit of domestic refining consistent with international standards.
Yesterday, China International Capital Corporation Limited (hereinafter referred to as CICC) released a research report in Hong Kong. In the report, Ha Jiming, chief economist of China International Capital Corporation, pointed out that China should proceed from its own interests to increase the price of refined oil by 50% so that the gross profit of domestic refining is in line with international standards. This will benefit the Chinese economy in many ways, including the increase in the efficiency of energy use and the decline in long-term inflation expectations.
Just on the 3rd of this month, in a report released by CICC, it was suggested that China should learn from emerging market countries and cancel subsidies for refined oil. At that time, CICC believes that China's refined oil prices are far below the international level by more than 50%, and the country’s implicit subsidies for oil prices have exceeded RMB 220 billion (0.9% of GDP) in 2007. CICC believes that "refuelling is not as good as food supplement," and the government should abolish subsidies for refined oil, rationalize energy prices to reduce energy consumption and transform economic growth.
The report released by CICC more specifically recommends the Chinese government's clear digital targets for refined oil price reform and further analyzes the relationship between China's oil price reform and the international economy. The international oil price level depends to a large extent on China’s energy price policy, because China already accounts for 40% of the global new oil consumption. If China does not reform its energy prices, the Chinese economy will continue to overheat and the inflation rate will rise to 2009. 8.7%. If China increases refined oil prices by 50% in mid-2008, China's inflation rate in 2009 can be reduced to 7.3%, and inflation in other economies will also slow.
A new round of inflation in the world economy, the CITIC Corporation, proposed in its report that the world economy is undergoing a new round of inflation, and that this round of inflation has obvious similarities to the inflation of the 1970s. There are also differences.
The report said that in this round of inflation, the lack of surplus production capacity of non-OPEC oil-producing countries has reduced the ability of global oil production capacity to respond to rising oil prices. The rapid growth of the highly energy-intensive emerging market economy has significantly increased the share of new demand for increased commodities. As the euro rises as an important international reserve currency and the European Central Bank takes a tough response to inflation, the weakness of the dollar will continue for a longer period of time.
In contrast to the 1970s, the continued rise in oil prices and food prices will lead to the first collapse of the weakest emerging market economies: In the 1970s, inflation in both developed and developing countries was much higher than current levels. In the late 1970s, as the United States increased interest rates sharply, the prices of oil and other commodities fell, and led to a severe economic downturn in the early 1980s. In contrast, inflation in many developing countries has risen to apparently unsustainable levels, and inflation in the United States and other developed countries has only recently risen.
The report pointed out that the end of the current rise in commodity prices is more likely to be the adjustment of some emerging market economies in the second half of 2008 and sharp policy and economic growth in 2009, and some major advanced economies may take The tightening monetary policy will accelerate this process.
The oil price subsidy has been difficult to maintain for a long period of time. In the report, CICC pointed out that the current price of domestic refined oil has fallen below the level of certain oil exporting countries. As a large energy importer, this energy price policy is detrimental to China's own interests. China should raise the price of refined oil by 50% so that the gross profit of domestic refining can be in line with international standards.
Regarding the timetable for China’s refined oil reform, during the meeting of the five energy ministers held on the 16th of this month, Zhang Guobao, deputy director of the National Development and Reform Commission and director of the Energy Bureau, said that suspending the refined oil price reform is conducive to stabilizing the social economy. The CICC report also fully noted the position of the relevant government officials. The CICC report stated that China may continue to control domestic energy prices in the short term because the cost of control is still within the acceptable range, and the Chinese government Concerns that short-term inflation caused by energy price reforms will have an adverse effect on social stability before the Olympics.
However, CICC expressed its own view that the delay in energy price reform will increase the risks faced by the Chinese economy, but China will not be the first country to fall. If oil prices reach the level of US$200 per barrel by the end of 2009, the ratio of China's oil price subsidies to GDP will reach 26.3%, which is higher than the sum of state-owned company profits and fiscal balances. This will seriously weaken China’s fiscal position and may lead to the bankruptcy of oil refining companies. Therefore, oil price subsidies are difficult to maintain for a long time, and the forced increase in oil prices at that time will be regarded as an exposure to China's economic weakness. Of course, at that time many other countries would have far more inflationary and fiscal deficits than China.
Yesterday, China International Capital Corporation Limited (hereinafter referred to as CICC) released a research report in Hong Kong. In the report, Ha Jiming, chief economist of China International Capital Corporation, pointed out that China should proceed from its own interests to increase the price of refined oil by 50% so that the gross profit of domestic refining is in line with international standards. This will benefit the Chinese economy in many ways, including the increase in the efficiency of energy use and the decline in long-term inflation expectations.
Just on the 3rd of this month, in a report released by CICC, it was suggested that China should learn from emerging market countries and cancel subsidies for refined oil. At that time, CICC believes that China's refined oil prices are far below the international level by more than 50%, and the country’s implicit subsidies for oil prices have exceeded RMB 220 billion (0.9% of GDP) in 2007. CICC believes that "refuelling is not as good as food supplement," and the government should abolish subsidies for refined oil, rationalize energy prices to reduce energy consumption and transform economic growth.
The report released by CICC more specifically recommends the Chinese government's clear digital targets for refined oil price reform and further analyzes the relationship between China's oil price reform and the international economy. The international oil price level depends to a large extent on China’s energy price policy, because China already accounts for 40% of the global new oil consumption. If China does not reform its energy prices, the Chinese economy will continue to overheat and the inflation rate will rise to 2009. 8.7%. If China increases refined oil prices by 50% in mid-2008, China's inflation rate in 2009 can be reduced to 7.3%, and inflation in other economies will also slow.
A new round of inflation in the world economy, the CITIC Corporation, proposed in its report that the world economy is undergoing a new round of inflation, and that this round of inflation has obvious similarities to the inflation of the 1970s. There are also differences.
The report said that in this round of inflation, the lack of surplus production capacity of non-OPEC oil-producing countries has reduced the ability of global oil production capacity to respond to rising oil prices. The rapid growth of the highly energy-intensive emerging market economy has significantly increased the share of new demand for increased commodities. As the euro rises as an important international reserve currency and the European Central Bank takes a tough response to inflation, the weakness of the dollar will continue for a longer period of time.
In contrast to the 1970s, the continued rise in oil prices and food prices will lead to the first collapse of the weakest emerging market economies: In the 1970s, inflation in both developed and developing countries was much higher than current levels. In the late 1970s, as the United States increased interest rates sharply, the prices of oil and other commodities fell, and led to a severe economic downturn in the early 1980s. In contrast, inflation in many developing countries has risen to apparently unsustainable levels, and inflation in the United States and other developed countries has only recently risen.
The report pointed out that the end of the current rise in commodity prices is more likely to be the adjustment of some emerging market economies in the second half of 2008 and sharp policy and economic growth in 2009, and some major advanced economies may take The tightening monetary policy will accelerate this process.
The oil price subsidy has been difficult to maintain for a long period of time. In the report, CICC pointed out that the current price of domestic refined oil has fallen below the level of certain oil exporting countries. As a large energy importer, this energy price policy is detrimental to China's own interests. China should raise the price of refined oil by 50% so that the gross profit of domestic refining can be in line with international standards.
Regarding the timetable for China’s refined oil reform, during the meeting of the five energy ministers held on the 16th of this month, Zhang Guobao, deputy director of the National Development and Reform Commission and director of the Energy Bureau, said that suspending the refined oil price reform is conducive to stabilizing the social economy. The CICC report also fully noted the position of the relevant government officials. The CICC report stated that China may continue to control domestic energy prices in the short term because the cost of control is still within the acceptable range, and the Chinese government Concerns that short-term inflation caused by energy price reforms will have an adverse effect on social stability before the Olympics.
However, CICC expressed its own view that the delay in energy price reform will increase the risks faced by the Chinese economy, but China will not be the first country to fall. If oil prices reach the level of US$200 per barrel by the end of 2009, the ratio of China's oil price subsidies to GDP will reach 26.3%, which is higher than the sum of state-owned company profits and fiscal balances. This will seriously weaken China’s fiscal position and may lead to the bankruptcy of oil refining companies. Therefore, oil price subsidies are difficult to maintain for a long time, and the forced increase in oil prices at that time will be regarded as an exposure to China's economic weakness. Of course, at that time many other countries would have far more inflationary and fiscal deficits than China.
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