National Development and Reform Commission

A tall order and a magic weapon

PUBLISHED : Sunday, 17 April, 2011, 12:00am
UPDATED : Sunday, 17 April, 2011, 12:00am

China's consumer price index may be at a 32-month high but the country is still doing better than other major emerging economies. That was the assessment of the spokesman for the National Bureau of Statistics after it released data on Friday, showing the CPI in March was 5.4 per cent.

In comparison, Brazil's CPI last month was 6.3 per cent, Russia's 9.5 per cent and India's about 9 per cent, the spokesman said.

But independent commentators have expressed concern about even higher prices and their impact on the country's growth prospects.

In the National Business Daily, economist Ye Tan said China had to prepare for 'a protracted war' against inflation, given the global flood of liquidity and ever-rising commodity prices.

Meanwhile, Liu Yuanchun, deputy dean of Renmin University's school of economics, told the Economic Information Daily that the threat of imported inflation- the flow-on effect of higher prices in the global market- would remain high in the second quarter.

The newspaper said Liu represented a growing number of economists who had recently corrected forecasts that inflation would begin to taper off in the second half of the year because of global market uncertainties as well as excessive liquidity- money that can push up prices in any industry at any time.

Liu was joined by Zhang Yansheng, director of the National Development and Reform Commission' s (NDRC) Institute for International Economics Research, who said worldwide increases in prices for crude oil, basic foods and other resources would carry over into the domestic market and contribute 30 to 40 per cent of mainland inflation.

'Even without so much pressure from the overseas, it would be hard enough for China to keep its 2011 inflation rate below [the government's target of] 4 per cent,' Zhang was quoted as saying. 'The tall order is getting taller.'

Peking University economist Ma Guangyuan, said on his microblog the CPI would continue to rise until the third quarter. But it wouldn't come down quickly and inflation could worsen next year.

There is no end to the innovative administrative controls the mainland rolls out. One new magic weapon, according to a commentary in Dazhong Daily, is to persuade market players to abandon planned price rises- no matter how much they paid to their suppliers.

Many big-brand consumer goods suppliers, including multinationals and overseas-invested firms, have been admonished in face-to-face talks with officials from the NDRC.

They were asked to delay planned price increases to show due concern about the nation's 'big picture'. But the question, the Dazhong Daily commentary said, was that at a time of unprecedented inflationary pressure, can such talk ward off the threat of inflation?

While the government may have stopped some price rises by major companies, there are many smaller items that have become more expensive, according to a column in the 21st Century Business Herald.

But no one can count on the NDRC to block the price rise trend unless it also talks some of the most powerful government agencies into mending their ways, most importantly asking the Ministry of Transport to lower road tolls, the Ministry of Land and Resources to stabilise the cost of land use rights, and asking the two state-owned oil duopolies not to shift their costs on to consumers.

But it seems, the commentator said, that the NDRC did not have the courage to invite those powerful state-sector players for a chat. It only has the courage to talk to the country's powerless citizens and ask them to stop complaining.

The China Youth Daily added one more industry to the list of organisations that NDRC should talk to, namely the national power-generation and supply companies.

A commentary in the weekly China Business Journal, signed by Wang Yahuang, said the NDRC's 'call-to-talk' method could not solve the root cause of price rises, especially those of raw materials, when state monopolies were allowed to up their charges.