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Contain Price Hikes
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Premier Wen Jiabao's vow to ensure the pork supply will help allay public concern over soaring pork prices. It also indicates that China's policymakers are paying more attention to the country's inflationary pressure.

On Sunday, the premier took an inspection tour in northwest China's Shaanxi Province to assess pork supply and demand.

According to the Ministry of Agriculture, in April live pigs nationwide were priced 71.3 percent higher than a month earlier, and pork, 29.3 percent higher.

In Beijing, pork prices rose more than 30 percent in recent days. Wholesale prices in Shanghai hit 16 yuan (US$2.10) per kilogram, a record high for a decade, up 20 percent from a month earlier.

Ever since the consumer price index (CPI), a major inflation gauge, rose 3.3 percent in March, the country began to brace itself for mounting inflation.

Though the CPI dipped a bit in April to 3.0, double-digit increases in pork prices clearly left policymakers with no choice but to take efforts against possible upward spirals in consumer prices.

The causes of the latest hike in pork prices appear obvious.

One factor was that low pork prices in the past few years dampened farmers' interest in raising pigs. The dwindling supply was exacerbated by this year's outbreak of blue ear disease, leading to many pig deaths. An increase in the price of feed has substantially increased the cost of raising pigs.

As consumers are now feeling the pinch, the government should respond promptly to ensure that low-income families are properly cushioned.

It is also important to allow market-driven prices to signal changes in supply and demand so farmers can adjust production and can profit accordingly.

That the price hike in pork will affect people's diets is a sound reason for Premier Wen to step in.

However, for policymakers, the more pressing task is to prevent spiraling prices from rippling through the economy.

As local governments are mobilized to support farmers in raising more pigs, it is more than likely that the supply of pork will be significantly increased in several months to meet the demand and bring down the price.

But it is another thing to curb the gradual increase in overall consumer prices, as indicated so far this year by the CPI.

(China Daily May 29, 2007)

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