NOTHING highlight the problems faced by economies in transition from central planning and control to a free market as dramatically as food price policies. Price rises enrage consumers, cause social unrest and can topple governments. Yet farmers demanda fair return for their products. If they cannot get it from the market, they expect it from the government. Otherwise they stop producing or hoard goods to drive up prices. By reimposing controls just seven months after the old grain market regime was lifted, the Beijing municipal government will disappoint those who hoped China could push ahead with reform without losing control of prices. But while it is not exactly orthodox market economics, a price clamp will demonstrate government's willingness to impose a degree of austerity and take some of the pressure out of inflation. It will also take some of the sting out of new taxes. Until China dismantles the state agricultural purchasing and distribution system, it will continue to distort farm incomes. But it will also let the government push down consumer prices by releasing its own stockpiles on to the market. In theory, free competition between state and private sectors could be healthy. But state intervention is an expensive and, in the long run, ineffective route to price stability. By subsidising Beijing consumers while continuing to hold out the promise of price rises to farmers next year, the Chinese authorities have done nothing to encourage producers to release stockpiled goods early. They may encourage consumers to indulge in even more panic buying before feared value added tax increases come in next year. The success of the new price controls depends on whether they are imposed country-wide and then on how quickly they are lifted. Few analysts believe economics chief Zhu Rongji wants permanent subsidies. Most would argue this is intended as a transitional measure for a transitional problem. Until now China has seemed ready to grasp the nettle of price reform firmly enough to succeed. The question is whether runaway inflation and the threat of social unrest will now weaken its resolve. Mr Zhu's ominous insistence that state orders to stabilise grain prices are in line with the principles of a market economy suggest he may be wavering. But the cost to financially strapped central Government of maintaining subsidies indefinitely should once again stiffen his backbone.