No inflation forecast despite grain price hikes

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Last updated at: (Beijing Time) Sunday, November 16, 2003

No inflation forecast despite grain price hikes

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Chinese officials and experts have denied a possible inflation following the current price rises of grain and relevant products, insisting that it is a kind of rational readjustment of grain prices which reflect the real changes on domestic and foreign markets.

Minister of Agriculture Du Qinglin said recently that it was a normal phenomenon as the price rises were not caused by grain shortage. The prices increased by 10 percent to 20 percent and the fluctuation was within a normal scope.

Since August, China has witnessed price rises in grain, edible oil and cotton, and then in vegetable, meat and relevant products, but there has been no sign of great worry among the public. However, some people question whether there will be a possible inflation following the price rises.

Between 1985 and 1995, China experienced three major inflationsthat followed fluctuation in grain prices, but now grain prices have much less impact on consumers as they are consuming much lessgrain than they did a decade ago, said Li Wenqiao, a professor with the financial institute of the Guangdong College of Commerce.

With a sufficient grain stock, the government is capable of controlling grain prices, and domestic grain prices are still higher than the international prices, the professor noted.

The current prices are only 85 percent of the grain prices in 1998 and equivalent to those in 2000, said Han Jun, head of the department of agricultural studies under the State Council Research Center on Development. After a successive price fall in the past six years, the current price rises are a boon to Chinese farmers who have long suffered from cheap grain prices, Han said.

The expert said that to help bolster farmers' initiative in grain production, it is a must to let them make money by growing grain crops and to let the market have the final say, but efforts should be made to prevent possible market manipulation. He suggested that temporary subsidies be distributed to low-income families in cities.

According to these experts, the current price rises of grain and relevant products are a result of the reduction of grain output due to an oversupply of grain on the market, the decrease of farmland, the government's efforts to turn farmlands to forestsand grasslands, and price rises on international grain market.

The world's top grain producers like Canada, the United States and Australia have experienced a reduction in grain output.

Moreover, the market is playing the major role in the current grain price fluctuation, thanks to decades of market-oriented reforms, the experts said.

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