SHANGHAI - Bloomberg
Fisherman Cao Jianzhou may abandon the job his family has done for more than half a century because rising fuel costs mean he loses money every time he sets out to sea from his home northeast of Shanghai.
�About 70 percent of the fishermen in our village lost money in the first half of this year,� said Cao, 44, who catches crab and shrimp with his eight-man crew off Chongming Island. �Some have quit and survive on the fee from selling their boats for scrap.�
Cao is one of 750 million Chinese fishermen, farmers and their families who are being squeezed after the government in June joined India, Malaysia and Indonesia in raising state-controlled fuel prices to cut losses for refiners. The 17 percent increase in gasoline prices and 18 percent jump in diesel fall disproportionately on rural China, where household incomes average 315 yuan ($46) a month.
�This will add to the pressure on millions of Chinese fishermen and farmers suffering because they have to pay more for raw materials,� said Tommy Xiao, a research director at Shanghai JC Intelligence Co., which advises investors on commodities. �Farmers have no choice but to keep chugging along.�
While the central government has eliminated taxes on grain and increased subsidies to keep farmers on the land, rising fertilizer and fuel costs have canceled out those incentives, farmers say.
Billions in subsidies:
About 730 million Chinese earn a living from farming and more than 20 million depend on fishing, using diesel to fuel their tractors and trawlers. Average rural incomes are less than a third those in urban areas, government figures show.
The state pledged 19.8 billion yuan in subsidies to ease the pain for fishermen, farmers and public transport operators after the latest fuel-price increase.
Cao said that may not be enough to save him or the jobs of his crew, even though he lives in one of the largest houses in his village -- a two-story, whitewashed building that he shares with his wife, parents and 18-year-old daughter.
�The government has said there will be some subsidy, but nobody knows when we will get it or how much it will be,� Cao said in the kitchen, decorated with a picture of the local deity who is believed to protect fishermen and bring them prosperity.
Including payments from the state, he made a profit of about 100,000 yuan last year, down from about 200,000 yuan in previous years. That's about the same as Cao estimates he could earn by scrapping his 6-year-old blue, wood-and-metal boat, moored just meters from his front door, along with dozens of others.
China resisted increasing fuel prices for almost eight months, even as oil in New York advanced more than 40 percent, to shield the world's most-populous nation from inflation and reduce the risk of civil unrest. Instead, it paid billions of dollars to subsidize money-losing refineries run by state- controlled oil companies China Petroleum & Chemical Corp. and PetroChina Co.
Even so, fuel supplies dried up as some privately owned refiners cut production rather than sell goods at a loss, prompting China to raise prices.
Ma Bingshen, a farmer in Hebei province, south of Beijing, said the cost of harvesting a field of wheat had almost doubled before the latest fuel increase. Ma, 54, is paying twice as much for fertilizer as a year ago.
�Even though the government scrapped the agricultural tax two years ago, rising farming costs have put increased pressure on our lives,� said Ma, whose family has worked 20 mu, an area equivalent to 3.3 acres, for at least three generations.
The cost of harvesting each mu of wheat has increased to 60 yuan from 35 yuan last year, Ma said. That's reduced the income he uses to support his wife, 78-year-old mother, three daughters, a son, daughter-in-law and 1-year-old grandson.
China increased gasoline prices to about 23.50 yuan a gallon, or $3.42, on June 20, encouraging refiners to produce fuel. That's still 31 percent below the price of imported fuel, Goldman Sachs Group Inc. said at the time. Diesel rose to about 24 yuan a gallon, or $3.49.
While oil prices have dropped 16 percent since June 20, that hasn't relieved pressure on consumers because fuel prices are set by the state, not the market. PetroChina, the nation's second-largest refiner, last month said it doesn't expect the government to raise prices before the Beijing Olympic Games end Aug. 24.
A decision on adjusting fuel prices after the Games will depend on the market situation, Zhang Guobao, director of the National Energy Administration, said in Beijing yesterday.
�We all know that there's likely to be another price hike in the coming months,� said Dou Pingsheng, 23, who uses his truck to deliver soy sauce to customers near Shanghai. �It's always like this. When crude oil goes higher, supply becomes tight and then the government is forced to increase prices.�
Cao, the fisherman, has abandoned plans for his daughter to follow him in trawling the waters off ********* and is considering his options if he sells his boat.�I haven't figured out what to do after that,� said Cao, who like most of the island's fishermen, is the only earner for his family. �But I cannot remain in a business that makes me lose money.�