[rionetrozasa]

China plans 'price controls' to curb inflation

Premier Wen Jiabao said China is drafting measures to contain prices as the authorities grow increasingly concerned about an inflation rate at its highest in two years and a surge in food prices.



In the first 10 days of this month, the average wholesale price of popular vegetables in 36 Chinese cities was 62.4pc higher than a year earlier, official data showed.

AFP 7:13AM GMT 17 Nov 2010

Premier Wen Jiabao said China is drafting measures to contain prices as the authorities grow increasingly concerned about an inflation rate at its highest in two years and a surge in food prices. In comments posted late on Tuesday on the government's website, Mr Wen warned that, "great attention should be paid to market supply and demand and prices because they are related to the public's basic interests.

"The State Council (cabinet) is formulating measures to curb the overly fast rises of prices," he said, giving no details. He made the comments during a visit to a supermarket last Thursday in the southern city of Guangzhou. Mr Wen spoke after data last week showed the nation's consumer price index rose 4.4pc year-on-year in October, much higher than the government's full-year target of three percent. It was the fastest since September 2008, after which the global financial crisis slowed down price rises.

Inflation fears are always a concern of Chinese officials due to the potential for price rises to spark unrest. Such fears have been further fuelled by the US Federal Reserve's decision to pump money into the American economy. Chinese stock markets have slumped since the data raised expectations of government moves to damp down the economy. The benchmark Shanghai Composite Index has lost more than 9pc since Thursday.

The current round of inflation has mainly been driven by soaring food prices as well as rising rents. In the first 10 days of this month, the average wholesale price of popular vegetables in 36 Chinese cities was 62.4pc higher than a year earlier, official data showed. Authorities may introduce a package of policies including price caps on some products and measures to prevent hoarding of food, the official China Securities News said Tuesday, citing unnamed sources.

Mr Wen also urged local officials "to ensure smooth supply channels" and maintain order in markets. Vice Premier Li Keqiang, who is widely tipped to succeed Wen in 2013, also called for efforts to "manage inflation expectations", including ensuring adequate grain supplies, the state-run Xinhua news agency reported Wednesday. Chinese officials have warned that US stimulus measures worth some $600bn (£370bn) move could cause damaging fund flows into emerging economies such as China and trigger inflation.

The government on Monday tightened rules on property purchases by foreigners to curb speculative inflows, following a series of steps this year aimed at dampening real estate speculation. China's economy is already awash with liquidity. Banks in the country extended 6.89 trillion yuan ($1.04 trillion) in new loans from January to October, or 92pc of Beijing's lending target for the whole of 2010.

The government is likely to cut its 2011 new loan target to between six trillion yuan and seven trillion yuan, one Chinese media outlet has reported. The 2010 target is 7.5 trillion yuan. China last month raised interest rates for the first time since 2007. It has raised the amount of money banks must keep in reserve on four occasions this year to curb lending.

[brandiweb]

When Gahment does it they call it price control... When private sector does it they call it price fixing!