BEIJING— China's two largest oil producers have started cutting retail prices in some parts of the country in response to weakening demand brought about by the economic slowdown, state media reported Thursday.

PetroChina and Sinopec have lowered the cost of gasoline and diesel by around one percent at some filling stations in central Hubei province and Shandong province in the east, the China Business News said.

The move came after private oil retailers took similar action amid softening demand, it said.

Chinese companies are allowed to adjust retail prices of oil products within an eight-percent band on either side of a guidance price set by the government, the newspaper said.

Even though the market plays a growing role in China's economy, the government maintains strict controls on energy prices.

As the global cost of crude rose to unprecedented highs in recent months, China persisted in keeping domestic prices artificially low due to fears higher fuel or power costs could fan inflation.

However, with global prices now plunging, the situation has changed, and retail gasoline prices in China are around 30 percent more expensive than in the United States, earlier media reports here said.

(AFP, Nov 7, 2008)