The Chinese government is taking action to keep a firm lid on
inflation as it has promised.
The State Council urged on Wednesday all local authorities to
strengthen price management and supervision and to take necessary
steps to keep market prices in order and safeguard consumers'
interests.
Such a national effort to contain price hikes is well expected
since the central authorities made it a clear-cut priority at the
end of last year to prevent current price hikes from evolving into
overall inflation.
China's inflation rate hit a new 11-year high of 6.9 percent
last November. The acceleration of price gains in the second half
of 2007 had already bitten deep into the pockets of low-income
families.
To ensure that people's livelihood can be improved along with
the country's economic expansion, policymakers recognized that more
efforts must be made to stabilize prices and tame inflationary
expectations.
Now, as the Spring Festival, China's traditional lunar new year,
approaches, it is fairly understandable that the authorities have
taken pre-emptive measures to check possible price hikes amid the
coming spending spree.
Yet, in the fight against inflation, price intervention is
always only a stopgap measure that policymakers can make use of
when racing against time to bring into place targeted
subsidies.
A blanket subsidy in the form of controlled prices usually
benefits the rich who consume a lot more than the needy who are
most affected by rising costs. Even if the government has the
wherewithal to support such universal price subsidies, it should
not stick to them for they are just too insufficient and
inequitable.
It is going to be a very painful process to adapt the nation to
higher living costs, especially when the country's wealth gap is
huge and widening.
For the government, during a year of continuous price gains
driven by a number of domestic and international factors, top
priority should be given to identifying who are those most affected
and subsiding those most needy promptly and properly.
Nevertheless, before such targeted subsidies have assumed their
roles in cushioning specific needy people against sharp rises in
inflation, efforts to pre-empt further excessive price hikes are
still needed as a stopgap anti-inflation measure.
That is why the State Council announced that it would only
"temporarily intervene" in the setting of prices of daily
necessities in line with the Price Law.
Eventually, the market will take the lead to rein in upward
price spirals by encouraging supply and holding down demand.
(China Daily January 11, 2008)