This week, China announced that the January consumer price index rose 7.1 per cent year-on-year – the highest increase since 1997. Checking inflationary pressures is now the government’s primary stated goal, and it has conceded that inflation may remain at “a high level for some time.”
A recent nationwide survey ranked "rising prices" as the Chinese
population’s major concern, followed by income inequality and
corruption. In response, China is turning once more to price
intervention.
Prime Minister Wen Jiabao said this week that China would freeze energy
prices including oil, natural gas and electricity for public
consumption, as well as the rates for public water bills. This comes at
a time when state media has repeatedly blamed food prices as the
primary driver of rising inflation.
The move to freeze energy prices seemingly contradicts this view. It is
not only food that is driving Chinese inflation, energy and resource
price rises are also significant factors. Food is only one of eight
categories used to calculate the Chinese CPI. Medical and health care,
traffic and communications, entertainment and education, tobacco and
alcohol, clothing, house appliances and housing related expenditures
are the other seven official categories. By freezing energy prices, the
government has acknowledged that blaming food is not assuaging popular
concerns about price rises across the economy.
On Saturday, China announced another possible anti-inflation
instrument, a more flexible yuan. State media reports that allowing the
yuan to rise further in value would help curb inflation by reducing
import costs – particularly the cost of imported energy supplies.
News & Interviews 
(0 vote)
