Price controls to fight inflation

PUBLISHED : Tuesday, 01 March, 1994, 12:00am
UPDATED : Tuesday, 01 March, 1994, 12:00am

BEIJING is set to announce tough measures this week to fight inflation by restoring price control on at least 24 commodities and services.


And in what amounts to a setback to price reform, the State Planning Commission will be given more authority to ensure that prices will not rise beyond the ability of urban citizens to absorb the shock.


Informed sources said the commission would soon announce a system of inspection and supervision to stem urban inflation, which has reached more than 20 per cent according to figures.


Under the new regulations, enterprises and commercial outlets that want to increase the prices of their products by up to eight per cent will have to register the increase with their local Price Administration Bureau.


However, businesses which intend increasing prices beyond the eight per cent ceiling - or which plan to raise their prices more than once within a designated period - will have to apply beforehand to the bureaus.


It is understood the commission has asked the bureaus to turn down most such applications through ''outright denials of approval, persuasion, interference, and providing guidance'' to the enterprises concerned.


Bureaus in all cities must report local price levels to a price co-ordinating centre at the commission twice a month.


The commission will be empowered to impose strict price ceilings on particular commodities and services should an emergency such as panic buying occur.


At least 24 commodities and services will be subjected to price control. They include foodstuffs like grain, oil, and vegetables; popular clothing items; consumer products such as colour television sets and bicycles; and services such as rent, water, consumer electricity, and various types of transport.


The sources said it was the first time the Government had imposed controls on the services.


Most cities will be asked to stockpile essential commodities, particularly grain and staple foodstuffs.


The sources added that before the National People's Congress (NPC) opened on March 10, the Government would announce two large-scale, nation-wide price inspections.


Analysts said Beijing was anxious to convince the populace inflation could be brought under ten per cent, the goal for the mid-1990s.


They said the central Government had timed the announcement of the measures ahead of the NPC, where inflation, which was inching towards 30 per cent in many cities, would likely become a contentious issue.


Economic analysts in Beijing, however, indicated they were not optimistic that the price spiral could be controlled soon.


A cut in credit would hurt state enterprises, and the analysts said Beijing could not deal with the political problems that would follow in the wake of the massive layoff of workers.


Bank loans are scheduled to grow by at least 470 billion yuan (HK$417 billion) this year, while the currency in circulation would expand by 180 billion yuan.


''Beijing has sacrificed price reform to fight inflation,'' said a Western diplomat. ''Enterprise reform will also be dealt a blow as the powers earlier granted them to fix the prices of their products will be largely suspended.''