Beijing to buy vegetable markets in an attempt to stabilise food prices

PUBLISHED : Saturday, 30 April, 2011, 12:00am
UPDATED : Saturday, 30 April, 2011, 12:00am


Beijing's municipal government plans to invest in retail vegetable markets to strengthen its ability to stabilise prices.

The government will buy 10 vegetable markets and invest in another five in each of the city's 16 districts in an effort to 'fundamentally solve the problem of government control over vegetable retailing', the city's commerce commission said.

Farmers on the city's outskirts and elsewhere will be able to sell their vegetables directly to designated community markets in inner-city areas so that a simplified supply chain can keep prices low and guarantee farmers' interests, it said.

The commission did not detail the size of the stake the city intends to hold in each of the new markets, who the other investors might be or the estimated cost of the scheme.

The Chinese Academy of Social Sciences' Professor Weng Ming, who has studied farm-produce trading, said: 'Experience has proved that the market economy cannot solve all problems. For instance, we have seen rampant food safety problems and speculation in the food market. The government can have a bigger say in pricing if they invest in markets.'

State-owned vegetable markets could probably contain high prices in the short term, he said, but that did not mean they would be able to provide good service in the long term.

'I don't think things can improve if there are more Jingkelong stores, which, like many others, soak apples in water to make them heavier,' he said, referring to a leading state-owned supermarket chain in Beijing.

Wang Wanli, a vendor at the Jinying vegetable market in Beijing's Tuanjiehu community, said government intervention on prices was unrealistic because 'everybody has to obey the market. They can't ask us keep prices low when the purchase price is high.'

Stall rent in his market has risen to 2,970 yuan (HK$3,542) a month, up from 2,300 yuan in December and 1,700 yuan in 2009, increases which he said made it impossible for him to continue selling vegetables.

Urban consumers have had to cope with soaring prices for farm produce in the past year, but farmers have failed to benefit, with multiple layers of traders playing a major role in mark-ups. The issue hit newspaper headlines again recently after a poverty-stricken farmer in Shandong killed himself after hearing that cabbage prices had slumped due to oversupply.

After the agriculture and commerce ministries ordered local departments to help farmers sell vegetables last week, the Ministry of Finance said on Thursday that it was setting aside 700 million yuan to build farm produce bases for big and medium-sized cities in the north.

Monitoring by the Ministry of Commerce has found that vegetable prices have fallen by 20 per cent in the past four weeks.

But despite the seasonal drops, Lu Ting , an economist with the Bank of America Merrill Lynch, said long-term prices would 'still trend up at a pace faster than perhaps any other consumption items'.

Analysts say the inflation rate is expected to remain above 5 per cent in the next few months.