China works to curb 'structural price rise'
Updated: 2008-01-30 20:32
A recent clampdown had reduced liquefied petroleum gas (LPG) retail prices by 19 percent in major Chinese cities.
The move was another effort taken by the government after the temporary price freeze on gasoline, natural gas, electricity, water, heating and urban public transport fees.
China's leaders made it clear at the annual central economic conference in December that curbing economic overheating and inflation was their highest economic priority in 2008.
"Taking effective measures to stabilize commodity supply and regulate the market order is crucial for maintaining the country's economic growth momentum and social stability," said Wang.
Wang pointed out food prices rose 12.3 percent in 2007 year on year, which contributed to 85.4 percent of the CPI rise, or 4.1 points on the CPI surge, while non-food price increases only accounted for 0.7 points of the 4.8 point CPI rise.
In particular, the average pork price nationwide rocketed 48.3 percent in 2007 from a year earlier, driving up the CPI increase by 1.5 points.
"The pork price was underestimated in 2006, which resulted in a sharp decline in the number of pigs, especially sows. The shortfall was aggravated by a pig cull after a serious outbreak of blue-ear disease last year," said Xie Fuzhan, director of the National Bureau of Statistics.
"The cause of rocketing prices is overheating and excess liquidity," said Lin Songli, a macroeconomic analyst at Guangzhou-based Guosen Securities.
China's central bank, the People's Bank of China, used six interest rate hikes and 11 reserve requirement ratio increases since last year to tighten monetary supply. On January 25, the reserve requirement ratio rose by half a percentage point to 15 percent, the highest in 24 years.
China's grain output exceeded 500 million tons in 2007, and the inventory of major farm products including wheat, rice and maize is enough to meet domestic market demand, Wang said.
"More than 70 percent of industrial products and more than 80 percent of consumer goods are oversupplied in the market. The price hikes have been confined only to shortages of a few items," he added.
If the government could take effective measures to cushion short-term price rise factors and increase supply, prices would stabilize, he said.
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