BEIJING—China is cutting its heavily regulated gasoline and diesel prices for the first time in six months, which could boost growth in the world's No. 2 economy by reducing industrial users' input costs.
The downward price move could also help trigger changes to the system the government uses to determine when to adjust oil product prices, as consumers are more likely to accept an overhaul when prices are lower.
Between January and March, the Chinese economy grew 8.1%, substantially slower than its 8.9% rate of the preceding quarter—indeed, the slowest pace since the first quarter of 2009. China has set a growth target of 7.5% this year, down from an 8% target for each of the previous seven years.
The National Development and Reform Commission, China's top economic planning body, said Wednesday that it would lower its benchmark domestic retail gasoline and diesel prices by 330 yuan and 310 yuan (about $52 and $49) a metric ton, respectively. They represent cuts of more than 3% from the current average benchmarks, which are 9,980 yuan and 9,130 yuan, according to Dow Jones Newswires calculations. Prices can still vary locally.
The NDRC periodically adjusts retail fuel prices, taking into account both changes in global oil prices and domestic economic factors such as inflation concerns. It last cut them in October, tracking a decline in global crude-oil prices. In February and March, as global prices rebounded, it raised retail prices—signaling that the government was relatively comfortable with the inflation outlook.
Under China's oil product pricing system, domestic fuel prices may be adjusted when the moving average of a basket of international crudes changes by more than 4% over 22 working days.
The State Council, China's cabinet, is considering shortening the pricing cycle to 10 business days and including the world's most-liquid grade of crude oil, West Texas Intermediate, in the crude basket used to calculate domestic prices, local media reported.
Although the government is more likely to announce those changes when global prices are falling, it is unlikely to do so before it announces a new progressive electricity-price system for residential users, expected by June, said Miao Tian, an energy policy analyst at North Square Blue Oak. The government generally spaces out such changes to cushion the price shock.
The NDRC recently announced it would implement pricing reforms in residential electricity and natural gas as part of a government effort to steer the economy away from energy-intensive industries.
Ms. Tian said under the reformed oil product pricing system, the NDRC will likely give oil majors greater flexibility in adjusting prices below the ceiling without the NDRC's approval.
