Beijing has many weapons to fight inflation. But for the time being, none seems quite as useful as the clumsiest one - administrative price controls. Even before the government takes any measures, prices for some farm products, including cotton, sugar, ginger and garlic, are already starting to tumble as speculative money moves out of the market. But mainland economists say price controls are like a painkiller, with no long-term effects. So the question remains as to what Beijing is going to do to eventually reduce the huge amount of cash sloshing around the country, blowing bubbles here and there. The government pledged this week to resort to price caps whenever necessary. But there are other policy weapons in its anti-inflation arsenal. 'Monetarily, the government can raise interest rates and bank reserve requirements, and fiscally, it can budget less spending and fewer development projects,' said Xiao Meng , editor of the journal Comparative Economic and Social Systems. 'Besides that, raising the [yuan's] exchange rate to the [US] dollar can also help reduce the pressure driving domestic prices.' But central government leaders seem to be facing 'a dilemma', she said. They cannot afford to drain liquidity too quickly, because they want to keep the economic growth rate high, especially when they are not sure about global prospects, including recovery in the United States. Tightening credit lines and reducing public spending would affect economic growth and job creation. And a strengthening of the yuan would bring widespread protests from exporters and be opposed by the Ministry of Commerce. So the easiest thing Beijing can do at the moment is tell grumbling consumers it is stepping up its policing of the market. How much economic sense this makes is another matter. Cheng Manjiang , BOC International's research head, sees Wednesday's State Council announcement about administrative controls as a political necessity. 'Any responsible government will have to tell citizens that it is quick to grasp control,' Cheng said. She said behind the current round of inflation is a long and complicated story that partly reflects domestic economic changes that were only interrupted by the 2008 global crisis. 'There were ample signs of inflation in the first half of 2008, and the current round may be seen as a continuation from that time,' Cheng said. But the stimulus policies of the past two years, designed to counter the global financial crisis, may have added more fuel to inflation. He Jun , chief economist at Anbound, a Beijing-based consultancy, said: 'The price rises that we see nowadays are a kind of penalty we have to pay for the excesses in our reaction to the crisis.' First there was the four trillion yuan (HK$4.54 trillion) stimulus programme, the largest single growth-boosting plan in the world. The US plan was, in comparison, mainly a bank bailout. He said that sum soon grew to 10 trillion yuan of investment, followed by the provision of more cash, in various forms, to aid the economy's expansion. Two weeks ago, Professor Li Daokui , a Tsinghua University economist and an adviser to the central bank, said the mainland's liquidity - referring to the total available supply of money, broadly defined - exceeded US$10 trillion in September, or as much as 200 per cent of the gross domestic product. Zhang Monan , a researcher with the National Development and Reform Commission's State Information Centre, told mainland media that liquidity as a percentage of GDP was 60 per cent in the US, 80 per cent in South Korea and India, and 100 per cent in Japan. According to data from the People's Bank of China, M2 - a narrower measure of money supply that comprises cash and near-cash - grew from 21.92 trillion yuan in 2003 to 61 trillion yuan last year, almost tripling in six years. Wu Xiaoling , a former senior central bank official and now vice-chairman of the National People's Congress financial and economic affairs committee, has said money supply was 'extremely generous' last year. Professor Zhou Qiren , a Peking University economist and another adviser to the central bank, said that with so much money in circulation, even interest rate increases cannot help curb inflation. Zhou called interest rate increases 'pacifiers for the tiger' of excess liquidity and said the tiger is bound to make trouble again, including 'stir-frying' prices in various market sectors. Zhou's prescription for the problem is to have a stronger central bank and to rein in liquidity. Cheng said some tightening of fiscal and monetary policies may become unavoidable from now to at least the first half of next year. But the official line on how much tightening there will be is unlikely to be clarified until the annual session of the National People's Congress in March. In the meantime, says Dang Guoying , an economist with the Chinese Academy of Social Sciences' Rural Development Institute, the government does not need to panic. 'From my area of research, which is mainly rural development, I can tell that after a few sudden speculative rises earlier this year, the prices of farm commodities will soon come down to their normal level,' Dang said. Some speculators lost money after the government intervened in the market using its strategic reserves. Farm products are not easy prey for speculators as long as there are state reserves, Dang said. Wang An , managing editor of the investment magazine Capital Week, said the securities and property markets have a role in providing 'reservoirs' for the money sloshing around the mainland. 'Unfortunately, these reservoirs are not functioning very well at the moment,' Wang said. 'But asking rich investors to pay more for what they invest in is a much lesser evil than asking poor consumers to pay more for their daily necessities, isn't it?' Another way to soak up cash would be to cede some state monopolies to private investors, Wang said. 'Not people like us, who depend on our salaries, but those who can afford mines and railways,' he said. 'Allowing them to jointly invest with the state would also be a way to prevent them from [driving up prices in] other areas.'