China wary of importing food inflation

  • 01/05/2008

  • Financial Express (New Delhi)

Beijing, Apr 30 A Chinese saying sums up Beijing's efforts to immunise itself from global price shocks: a half-closed door will not shut out everything. Worried that a surge in international energy and agricultural prices could stoke inflation, which is already at 11-year highs, Beijing has stiffened its broad self-sufficiency in food by deterring agricultural exports, including those of rice, wheat, flour and fertilizer, through export quotas and taxes. Yet though China is a net exporter of farm produce, inflation is still sneaking in through the agricultural commodities that China does import, as well as through a soaring bill for crude oil and metals to feed its ravenous industries. Even for those things it does not buy, inflationary expectations are driving up prices, economists say. "The Chinese market is linked to the global market by thousands of threads," said Qi Jingmei, a senior economist at the State Information Centre. "You can't cut them off completely." Qi's think tank reports to the State Council, China's cabinet. A spike in pork and other fresh food prices pushed up China's inflation to a 12-year peak of 8.7 % in February. It ebbed a little to 8.3% in March. As well as limiting exports, Beijing has tried to keep a lid on prices by releasing supplies from the state's reserves of wheat, rice and pork. It has also increased subsidies to spur farmers to raise more hogs and grow more grain. However, some economists say such measures will have only a fleeting impact and could eventually distort market-based pricing, thus discouraging farmers from planting more. "The potential for prices to go up may well rise in future, because you can't always tap the grain reserves," said Huang Jikun at the Centre for Chinese Agricultural Policy at the Chinese Academy of Sciences. Huang said international agricultural inflation accounted for about 40 % of the recent spike in consumer prices. Jun Ma, Deutsche Bank's chief China economist, agreed that surging overseas grain prices as well as rising fertilizer costs were helping to push up domestic grain prices, even though the only grain China imports is soybean. "The surge in rice prices in Asia following many Asian countries' restrictions on rice exports may have a psychological impact on Chinese grain," he said in a recent note to clients. Some Asian rice prices have almost trebled this year. Rising global prices have sparked protests from Haiti to Cameroon.