Moreover, the price of domestic middle and high grade products now surpasses those in Western developed countries. Consequently few Chinese overseas holiday makers take basic necessities with them on their travels as they did a few years ago, a phenomenon that highlights Chinese purchasing power overseas. All these factors imply that the advantage to China of producing lower price goods is waning.

    But this is just a beginning. The price of world crude oil is now US $30-40 per barrel. If world oil prices were to rise as they did during the first half of 2008, consumers would find it hard to accept the proportionately higher price of finished oil. The good news is that the government is still able to set the ceiling price.

    One item worth mentioning is that the fuel tax reform has cut the government’s fee collection costs. The communication departments formerly needed 200,000 or more staff to collect road and waterway maintenance and management fees that amounted to less than RMB 200 billion per year. It now remains for the government to devise a re-employment plan for the fee-collecting staff laid off as a result of reforms.