China has raised fuel prices for the second time this year as it tries to get to grips with the rising cost of crude oil. Gasoline and diesel are to be subject to 6.4 point and 7 point cost increases respectively.

The move represents significant progress in both domestic energy and economic policy, and suggests the political establishment is getting increasingly comfortable with the concept of inflation. In previous years, the government has employed a strict strategy of price controls to stifle the impact of rising energy prices, but has allowed slight increases in recent months.

At the weekend, Chinese Premier Wen Jibao issued a statement asserting that the Chinese government will continue to offer oil subsidies if international oil prices increase. Western sanctions against Iran, the world's fifth largest oil producer, have forced global oil prices up further than ever in recent weeks.