China's aviation regulation authority is lifting the restrictions on how much government-owned carriers are allowed to list as fares for Chinese domestic routes.
In a statement by both the Civil Aviation Administration of China and the National Development and Reform Commission Friday, the new policies will take into effect immediately and will cover 300 routes in China. For its application, an airline could raise its prices by as much as 10% a year on a route served by a minimum of 5 airlines.
The new rule is seen as a move for allowing market-based pricing for domestic flights in China, which could help the Chinese carriers boost their earnings. In the last few years, the country has been liberalizing policies for airlines with moves including removing fare caps on designated routes.
China's aviation industry has also seen competition from high-speed rail, which is also seeing large growth and investment. The Chinese government is investing 3.5 trillion yuan (USD $504 billion) to improve the country's rail system before the year 2020.