Adopt balanced approach
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It seems farm produce is overtaking housing as the preferred investment choice in China these days. This is not to say food-price inflation is round the corner just yet, even if the nation's consumer price index is expected to show a rise by the targeted 3 percent before the year is out.
Policymakers, however, need to carefully track recent hikes in food prices. Even so, any harsh measure to curb the rise must be weighed against likely gains accruing to farmers from higher prices for their produce.
A month after the government took the toughest measures yet to cool the sizzling property mart, developers are beginning to shy away from investing in the sector.
Now, the media has discovered another hot topic: it seems investors are making a killing from the rising prices of non-staple agricultural products like garlic and mung beans.
The wholesale price of garlic had risen ten-fold from a year earlier, to about 12.2 yuan ($1.78) per kilogram at the end of April. The price of mung beans in Beijing has soared from 9 yuan a kilogram at the end of March to 18 yuan. The volatility is certainly worrying to policymakers already concerned about domestic inflationary expectations.
Policymakers have reportedly sent teams to local markets to investigate if there has been some sort of runaway speculation.
It will be no surprise if the authorities do spot some speculative activity, but they must be careful to balance the rigorous drive with the desire to help farmers get better prices from prospective buyers.
They should also realize that higher food prices, which are essential to securing farmers' incomes, are the symptom rather than the cause of such inflation.
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