Food price controls to tackle inflation

0 CommentsPrint E-mail Shanghai Daily, November 17, 2010
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China will unveil food price controls and crack down on speculation in agricultural commodities to contain inflationary pressure that its central bank governor highlighted as a risk yesterday.

With consumer prices rising at their fastest pace in more than two years, the government is releasing stockpiles of pork and sugar into the market in a bid to tackle double-digit food price rises.

Pork is China's staple meat and prices are closely watched.

This is one of a number of direct intervention measures being introduced as the country ups the fight against inflation.

They follow a surge in the Consumer Price Index last month.

Releasing sugar and frozen pork stocks will help "stabilize prices," said Commerce Ministry spokesman Yao Jian at a regular briefing yesterday.

Yao said the government is also taking steps to increase vegetable production.

Meanwhile, the National Development and Reform Commission, the country's top planning agency, is preparing to take "administrative measures" with other ministries to curb price rises directly, according to the China Securities Journal yesterday.

Possible steps include price controls, subsidies for shoppers and a crackdown on hoarding. City mayors may be made responsible for supervising the price of a basket of items, and people found speculating on corn or cotton will be punished severely.

Such direct intervention marks an escalation of government efforts to tame inflation.

"Policies are being considered to contain the momentum of price increases," the newspaper quoted an anonymous source as saying.

Last week, China announced a rise in the reserve requirement ratio - the money that banks must put aside - by 50 basis points to a record 18 percent.

Interest rates for both deposit and lending were lifted last month as part of the monetary efforts to curb inflation.

The CPI, the main gauge of inflation, rose at the fastest pace in 25 months of 4.4 percent in October.

The government has set a target of keeping inflation below 3 percent for the year. But with little time left in 2010 to check the trajectory of rocketing consumer prices, it is already mission impossible.

Zhang Ping, head of the National Development and Reform Commission, admitted last week that China may miss its 3 percent goal.

China's consumer prices jumped 3 percent year-on-year in the first 10 months, powered by rising food costs. And it has grown into an all-around inflation in recent months when the non-food sector reported faster price increases, too.

Natural disasters in China were once blamed for price surges. But now excessive liquidity on the market and other countries' easing policies are cited as factors.

Zhou Xiaochuan, governor of China's central bank, said yesterday that China's economy is growing in line with the government's road map, but price rises are a concern.

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