The common Chinese saying that food ranks above all else is weighing on the minds of mainland officials. They well know that the largest component of inflation is rising food prices and that unless they can bring costs under control, social unrest could ensue.
Not-too-distant history is ample proof of inaction: protests that led to bloodshed at Tiananmen Square in 1989 were partly sparked by increases in food prices. With upcoming leadership changes at the Communist Party's congress in the autumn and the Olympic Games looming, stability takes precedence, so getting to grips with the rises has to be a priority. This is easier said than done in the mainland's booming economic climate. The usual tools used to control inflation - such as aggressively raising interest rates, slowing the money supply and capping prices - are not applicable. Such measures could stall or even reverse the main benefit of growth: lifting people from poverty.
But as we report today, with the cost of even the most basic of food, instant noodles, rising sharply, more intrusive means than releasing stocks from food reserves - as has so far been the perceived solution - is necessary. The rise in the price of instant noodles of up to 40 per cent is not entirely unexpected, given that the price of ingredients such as wheat and rice flour and palm oil has also been increasing. The trend is global, but especially so on the mainland, where agricultural land is at a premium.
Affluence has meant a demand for protein-rich foods like beef, while the search for energy alternatives to oil and coal has sparked a boom in growing crops for biofuels. Mainland officials reacted recently by ordering local governments to rein in ethanol processing plants that use grain. Other foodstuffs, such as pork, have had even more dramatic increases; blue ear disease has led to a shortfall of millions of pigs over the past year, pushing up prices almost 60 per cent. This has, in turn, contributed to inflation. June consumer prices were up 4.4 per cent, 1.4 points above expectations, driven by a 7.6 per cent boost in the cost of food.
Food price rises are not a major concern to the mainland's city dwellers, whose grocery bills account for only a small part of their living costs. For the mostly poor people who live in the countryside, however, the increases are quite another matter. The majority of rural people are farmers and they have been benefiting directly from rising produce prices. Their gains are being steadily eroded by the prices they have to pay for processed food - and the cost of instant noodles, the cheapest of all these - is indicative of their circumstances.
China's growth rate for the second quarter was 11.9 per cent and on Saturday the benchmark interest rate was raised to its highest level in eight years, 6.84 per cent. The rate has been gradually lifted to counter an economic bubble and so long as the measure is not slowing growth, authorities do not appear to be seriously concerned. But rising food prices are quite another matter. It is vital to ensure that those living in the countryside have enough to eat.
