As inflation rages, China would freeze some prices

By Joe McDonald
Associated Press
via Yahoo News
Thursday, September 20, 2007

http://news.yahoo.com/s/ap/20070920/ap_on_bi_ge/china_inflation;_ylt=AqB...

BEIJING -- China's government has ordered some prices frozen and told officials to closely monitor others in its most drastic step yet to contain a surge in inflation.

The order, issued late Wednesday, came after inflation rose to 6.5 percent in August -- its highest monthly rate in 11 years -- propelled by a double-digit rise in politically sensitive food prices.

The order stressed the importance of maintaining "market stability" ahead of a key Communist Party meeting next month. It said controlling inflation would affect China's development, reform, and stability.

Government-set prices would be frozen under the order, though it did not specify which items were covered. A man who answered the phone at the NDRC and refused to give his name said he was unclear what goods would be affected.

A list on the Web site of the Beijing city government planning agency said products for which the state still controls prices include cooking oil, sugar, tobacco, salt, coal, and fertilizer.

The immediate impact of the measure appeared to be only psychological, because it did not change any prices.

Market order must be maintained to ensure the "smooth opening of the 17th Party Congress," said the order. It was issued jointly by key economic agencies, including the ministries of finance, agriculture and commerce and the cabinet's planning body.

The congress, held once every five years to appoint senior leaders, opens Oct. 15 and is expected to see President Hu Jintao consolidate his power by promoting allies to key posts.

Communist leaders are especially worried about the political impact of soaring food prices, which hit China's vast, poor majority especially hard. Families in the countryside and the urban working class spend about one-third of their incomes on food.

Pork prices in particular have soared recently due to shortages caused by a decline in pig rearing, rising feed costs, and an outbreak of a pig disease that killed more than 70,000 and infected 280,000 swine since the start of the year.

The government has tried to bring down the price of pork, the country's staple meat, by encouraging farmers to raise more pigs with promises of free vaccinations and other aid.

Wednesday's order told local authorities to closely watch market prices of pork and other meat, eggs, electricity and liquified gas but did not order controls on them.

In July the government barred local authorities from changing state-set prices for consumer goods in areas where they had already surpassed official targets.

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