The Beijing municipal government yesterday announced immediately effective rises in state-owned shops' retail prices for flour, rice and related processed food by between 10.7 and 80 per cent. Economists worried the rises would boost this month's inflation rate. The central government said earlier this year it would increase grain purchase prices in the second half of this year in a bid to narrow price differences between state-owned shops and free markets. Yesterday's move by the municipal government was thought to be in response to an increase in central government grain purchase prices. Xinhua (the New China News Agency) said general-purpose flour rose the most, by 80 per cent from 1.3 yuan to 2.34 yuan a kilogram (from about HK$1.20 to $2.17). General-purpose rice rose 10.7 per cent from 2.8 yuan to 3.1 yuan. The retail prices for processed food from flour and rice increased by between 15.3 per cent and 21.7 per cent. The agency said the aim of the rises was to maintain growing grain production in China and to ensure that farmers willingly sold their products to the state. The report said government grain subsidies paid to consumers so they could afford to buy on the free market would be increased if the central government refused to lift purchasing prices paid to farmers. This was because farmers would prefer not to grow crops, or sell their produce on the free market at higher prices instead, if state purchasing prices were not raised.
