China boosts subsidies to counter rising fuel prices

Beijing said it has doubled subsidies paid to farmers and those most severely affected by higher fuel prices, the Wall Street Journal reported. Subsidies rose to US$5.7 billion during the first three quarters of the year, compared to US$2.8 billion for the same period of 2006, with most of the money coming from a special windfall tax on oil producers. Windfall tax revenues are set to hit US$8.1 billion for 2007 as a whole, up from US$6 billion in 2006, according to the National Development and Reform Commission. Analysts expect Sinopec to get a separate subsidy to cover the losses it incurs by selling fuel at below-market prices set by the government. Last year the company received US$675.6 million and US$1.3 billion in 2005. China was forced to increase retail fuel prices in November after rising global crude oil prices saw many small refiners stop production as they were losing too much money.