China will cut retail ceiling prices for gasoline and diesel by about 3 per cent from Sunday, taking prices off record highs at a time when headline inflation eased from a three-year peak.

The National Development & Reform Commission (NDRC), the country's macro policy maker said the price cut, at 300 yuan per ($47) per tonne, was triggered as global crude prices fell under a current fuel pricing mechanism.

'The price cut will help lower the operational cost of the society, ease the upward pressure of overall price levels and is conducive to the steady and relatively fast growth of the economy,' the NDRC said in a statement posted on its website.

The modest price cut, much expected by the market, came six months after the previous price change in early April when the government lifted prices by around 5 per cent to record highs.

It may help lift fuel demand in the world's second-largest oil user, which appears on track to deliver annual growth of around 6 per cent this year, half its pace in 2010 but still leading the world.

The International Energy Agency last month pegged China's oil demand growth at 527,000 barrels per day this year, contributing more than half of the world's incremental demand.

The price cut, announced the first day government offices returned from a seven-day national holiday, came after China's inflation pulled back to 6.2 per cent in August from a three-year high of 6.5 percent in July and is widely expected to cool steadily for the rest of the year.-Reuters