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China Acts To Slow Rise In Food Prices

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Facing an unexpected acceleration of inflation, the Chinese government announced Wednesday that it would take forceful measures to limit price increases for a wide range of foodstuffs and cotton, and that it would distribute additional supplies of fuel, for which prices are already regulated.

Higher costs of consumer goods in China have been confined largely to food and energy, and government policy makers want to keep it that way.

Over all consumer prices were 4.4 percent higher in October than a year earlier, the National Bureau of Statistics announced last week. Remove food and energy from the consumer price index, and prices for everything else were up 1.3 percent from a year earlier, according to the government.

Rising prices for food and energy are a global problem. But they particularly affect lower-income countries, where these necessities claim a much larger share of household incomes. The consumer price index in China assumes that food represents a third of a family’s spending.

The State Council, China’s cabinet of ministers, decided Wednesday that it would stabilize prices for grain, oil, sugar and cotton in particular, according to a statement on a government Web site. During previous bouts of inflation, like those in 2004 and 2005, similar promises to stabilize prices quickly led to detailed price controls.

The State Council said that the government would also make sure that more diesel fuel reached service stations and that power stations had an ample supply of coal. Factories have been burning more diesel in backyard generators as power companies have reduced electricity generation to meet national goals for limiting energy consumption. Power stations have struggled to buy enough coal because the government requires mining companies to sell its electricity to companies at low, regulated prices, and the mines prefer to sell at higher prices on the open market.

The State Council also ordered that local governments and other government entities provide temporary subsidies to help the needy cope with rising prices and that they increase allowances for needy students and student canteens, Xinhua, the official news agency, reported.

Thank god China isn't a bubble....

Prices controls coming in a temporary act or more of a long term thing?

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