The Chinese government said on Tuesday it will scrap long-standing state price controls on most medicines, effective June 1, as part of market-oriented reforms.

The government will no longer impose upper limits on retail prices for drugs, government agencies including the National Development and Reform Commission (NDRC) and National Health and Family Planning Commission said in a joint statement.

"The reform of drug prices needs to... fully utilise the resource allocation role of the market," the statement said.

Price controls will be relaxed over drugs covered by medical insurance, blood products, immunisations, anti-AIDS and birth-control medicines, the statement said.

But controls over prices of what the statement called "narcotics" as well as some psychotropic pharmaceuticals will remain, it said.

China started imposing maximum prices in 2000, but the NDRC said in a separate statement: "Rich market competition... as well as stronger market supervision ability over drug prices have created the conditions to cancel the ceiling retail prices for medicine."

China has relaxed price controls in several sectors, including telecommunications, tobacco, air transport, natural gas and electricity, the official Xinhua news agency reported.