The State Council will attempt to rein in inflation from its highest level in more than a decade by curbing illegal price-fixing activities that have partly driven up prices on basic goods such as cooking oil, eggs and flour.

The revised rules not only sharply increase penalties for price-fixing, but are also designed to closely monitor industry associations to keep prices in check.

Those who manipulate market prices and ignore the prices set by the government in emergencies face a maximum fine of 1 million yuan ($138,000), up from 400,000 yuan.

Anyone involved in price manipulation will be fined, even if they do not profit, the rule state.

Previously, those who did not earn a profit were exempted from fines, but could have been stripped of their business licenses.

Profiteering industry associations be can fined up to 500,000 yuan if they are found to have manipulated market prices and deliberately spread "rumors on price information".

Those found guilty of "serious cases" of market manipulation can be banned permanently, the rules state.

Insiders said the central government is taking a harder line on suspected industry associations, which have been suspected of playing key roles in previous cases of price-fixing, such as the instant noodle industry.

In addition to the major changes, the new regulation specifies that deliberate hoarding as a means of driving up prices must be punished.

The new rules, passed by the State Council on Wednesday and published on its website on Sunday, were made on the basis of regulations passed in 1999 and amended in 2006.

An unnamed official with the State Council's Legislative Affairs Office and the National Development and Reform Commission said: "The revision is because illegal price-fixing activities have pushed up prices in some industries and regions, which has disturbed the market economy order."

The prices of staples such as grain and pork surged last year, lifting the consumer price index to 6.9 percent in November, well above the government's target of 3 percent.

(China Daily January 15, 2008)