Sat, Aug 18, 2007 - Page 11 News List

Noodle makers to blame for inflation, Beijing says

INVESTIGATION The report came amid a nationwide probe into whether alleged price-fixing by producers is to blame for a steep jump in food prices last month

AP, BEIJING

Beijing slammed Chinese instant noodle makers yesterday as being partly to blame for a surge in inflation, saying they illegally colluded to boost prices by up to 40 percent in a scheme that prompted a public outcry.

The report came amid a nationwide probe into whether alleged price-fixing or hoarding by producers is to blame for a 15.4 percent jump in food prices last month over the year-earlier period. The government accused violators of damaging social stability.

Investigators found managers of China's major noodle companies met three times since December to illegally set prices, the Cabinet's National Development and Reform Commission (NDRC) announced.

Their collusion "seriously disturbed market price order, harmed normal competition among managers and injured consumers' legal rights," the agency said on its Web site.

The NDRC cited no individual companies or managers and gave no indication of what penalties they might face or when results from probes of other food producers might be released.

Chinese law allows for companies to be fined up to five times the illegal income from price-fixing and possible confiscation of business licenses in serious cases.

Instant noodles are a staple of the Chinese diet and the price hike prompted public complaints on Internet bulletin boards and appeals for a government investigation.

An official of China's branch of the International Ramen Manufacturers Association, quoted by the official Xinhua news agency, said the price hikes were a response to soaring raw material costs.

The price of palm oil, which accounts for 18 percent of the cost of noodles, has more than doubled to 8,200 yuan (US$1,100) over the past year, the official, Meng Hesu, said. He said profit margins have been cut to just 1 percent to 2 percent.

"If we don't lift the prices, there will be no profit," Meng was quoted as saying.

Among other food items, pork prices have risen fastest, jumping by 86 percent last month over the same month last year. Authorities have blamed the rise on a shortage of pork caused by farmers' reluctance to raise pigs when prices were low earlier.

The cost of eggs was up 30.6 percent last month and that of edible oil up 30.1 percent, according to government figures.

Food processors have been squeezed by price competition in China's grocery industry, which has blocked them from passing on rising raw materials costs.

The NDRC said earlier its investigators also would look into why prices of grain, vegetable oil, pork, beef and poultry were rising so fast.

"Some industry groups have organized coordinated price rises," the agency said on an Aug. 3.

It said the collusion "influences social stability."

The International Ramen Manu-facturers Association is an industry organization based in Japan. The group includes ventures owned by Ajinomoto Co and Uni-President Enterprises Corp (統一企業), Asia's two largest processed food producers by sales, and Taiwan's Ting Hsin International Group (頂新集團).

"Prices of Uni-President's instant noodle products were raised by at least 10 percent since June across China after we got notification from Shanghai headquarters, and the notice only mentioned the increase was a result of rising costs," Qian Zheng, a company branch manager in Hunan Province, said by telephone.

Additional reporting from Bloomberg

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