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Petrol is subsidized and price regulated in China.

The quality of the diesel is not to European or Japanese standards and many non-farm vehicles can not use it. This is not just a little not up to standards, but in many places it is kill the engine within a few minutes sort of sub-standard. To change would mean increasing the cost which is not possible since so many farmers use diesel exclusively.

There is more likelihood of creating a new class of diesel for non-farm vehicles and charging a higher price for it, or better regulating the refining plants to increase quality, though govt would have to subsidize the sale in farming areas.
 
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