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Food Prices Rise Prompts Inflation Watch
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Central government agencies have pledged to closely monitor any potential inflation following recent reports about food price increases.


At an international conference held in Beijing on Monday, Zhou Xiaochuan, governor of the People's Bank of China (PBOC), said even though the country’s consumer price index (CPI) remained low and within an acceptable band there was potential that inflation may "raise its head" at any moment.


Zhou said the PBOC "has to remain concerned" about the CPI. Fluctuation on the global market could also affect domestic prices, he added.


His remarks coincide with the release of a report by the Rome-based Food and Agriculture Organization (FAO) of the United Nations which identifies that the surge in the world's cereal prices this year had reached "levels not seen for a decade."


According to figures from the National Bureau of Statistics (NBS) last month China's CPI rose 1.9 percent year on year. This compares to an investment analysts' forecast of 1.5 percent.


The majority of economists interviewed by China Daily said that during the festival season from December to February the price of all food items was likely to remain high.


NBS figures show the CPI last month rose 1.8 percent in urban and 2.1 percent in rural areas. This indicates higher prices for farm products.


In fact food prices recorded the highest rise, up 3.7 percent year on year, compared to just 1 percent for non-food items. Cereals were up 4.7 percent, edible oil 6.2 percent, meat and poultry 7.6 percent and eggs 11.7 percent.


The central government has moved to stabilize grain prices in the last few weeks by releasing state grain stocks to the market. The move was necessary to maintain social harmony especially during the festival season, Wang Jinmin, an official with the State Council Development Research Centre, told China Daily.


Grain price rises were likely to level off in a few weeks. But the cost of fruit and vegetables would continue to edge upwards, according to a forecast by the Ministry of Commerce.


China's food price rises have been fuelled by investor enthusiasm in biofuel production particularly of ethanol, according to Xu Weiping, an information officer with the Ministry of Agriculture.


There’s been a rising demand for grain as an industrial material with the nation enjoying good summer and autumn harvests, according to NBS grain output reports.


The FAO report said the world's rising cereal prices were due to a growing demand for biofuel production and poor harvests in some countries.


Commenting on China's role, an FAO commodity analyst called Abbassian, told China Daily that the country’s selling or buying would "have a great impact" on the world's food prices.


If China had exported more corn to the international market the world price wouldn’t have gone up so sharply, Abbassian said. By not having significantly increased its imports of wheat China had helped the world price remain stable.


(China Daily December 12, 2006)

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