China imposes price controls as inflation threatens social unrest

[Hannah Bell]

China’s cabinet, the State Council, announced on November 17 that price controls were being adopted to stem inflation, which historically has been a major factor in triggering social unrest in the country. Two days later, the Chinese central bank raised the banking system’s capital reserve requirement—for the fifth time this year—to rein in bank lending that is fuelling speculative rises in property prices.


According to the National Bureau of Statistics, China’s consumer price index (CPI) increased 4.4 percent in October from the same period last year—the highest rise in 25 months. Food prices soared by as much as 10.1 percent. Inflationary pressures will increase over the coming months, with high demand during the New Year and Chinese New Year season, exacerbated by the difficulties of transporting agricultural produce to urban areas in winter.

The most likely targets of the price controls will be items immediately connected to daily life, such as grain, cooking oil, meat, eggs and milk, as was the case when similar measures were imposed in 2004 and 2008. In some cities, such as Fuzhou in Fujian province, price restrictions have already been imposed on four main vegetables. Beijing is also seeking to control rising utility prices through temporary subsidies of coal, oil and gas.

The State Administration of Grain started selling corn, soybeans and vegetable oil from its strategic reserves last week to stabilise prices. The State Council has also ordered local governments to ban toll collections on trucks transporting agricultural produce, and to crack down on speculation and the hoarding of commodities such as sugar and cotton. The China Banking Regulatory Commission has urged banks to provide additional lending to the agricultural sector, while admitting there is a severe shortage of corn, cotton and other crops.

In 1989, inflation was a major factor in the mass movement that developed against the regime and which was only ended by the brutal military crackdown in Tiananmen Square. This year, there have been clear signals of developing militancy in the working class. In May-June, a wave of strikes by young workers in auto and electronics plants forced employers to raise basic wages, but often at the expense of other bonuses and with increased workloads. Just two days after Beijing announced the price controls, 7,000 workers at an affiliate of electronics giant Foxconn in Foshan in southern China, took to the streets, protesting over poor pay and the company’s plans to relocate factories to inland provinces where labour is cheaper.

Moreover, the pricing measures cannot counteract the vast global economic forces working beyond the national borders of China. Food prices are rising internationally due to rampant speculation in commodity markets. Neil Watkins, a director of ActionAid, told Asia Times Online recently: “As more and more investors get involved in commodity markets, are being pulled away from real purchasers and sellers and more into the financial world.”

http://www.wsws.org/articles/2010/nov2010/chin-n30.shtml

[leftstreet]

1. K&R

I guess when you fear your citizens might take to the streets, you think about your options