Rocketing food prices in China have sown deep concern among the communist leadership, ever wary of social unrest, as they fumble to control inflation without repeating past mistakes, analysts say.
Overall inflation in China is running at a 10-year high -- around 6.9 percent in November year-on-year, official statistics show.
Inflation is now being driven almost exclusively by increases in the price of food, in particular the staple meat, pork, which has spiked 60 percent year-on-year.
Prices have faced even greater upward pressure in recent weeks, as severe weather has crippled the country's transport system at the time demand is greatest, over Lunar New Year, the major annual holiday when millions of people return home.
A report by Credit Suisse said 10 percent of China's farming land has been affected by the extreme cold, and 1 percent could see a complete loss of crops and vegetables.
Price increases have been seen in food items ranging from cooking oil to apple juice, as China's growth and global demand creates what economists have dubbed "agflation" referring specifically to rises in prices of agricultural commodities.
Analysts say authorities in Beijing are becoming increasingly concerned about the prospect of food prices getting out of hand, but add that the problem is not yet approaching the levels that led to widespread popular dissatisfaction almost a decade ago.
"They [the central government] are increasingly nervous about it," said Andy Rothman, Shanghai-based China Macro-Strategist for CLSA. "But it is a long, long way from the inflation problems before 1989."
Last month, the National Development and Reform Commission announced tightened supervision of prices for grain, edible oils, meat, poultry, eggs, feed and other items in both wholesale and retail markets.
This followed the announcement in late December that from Jan. 1 the government would slap taxes ranging from 5 percent to 25 percent on exports of a range of products including wheat, corn, rice and soybeans to try and ensure stable food supplies at home.
The actions appeared to be stoked by memories of the widespread protests that resulted from the government's clumsy handling of food price controls that led to inflation of around 50 percent in the summer of 1988.
Public anger about inflation prompted the demonstrations that the following summer morphed into anti-government protests and the death at the hands of the army of hundreds, possibly thousands, of unarmed civilians in central Beijing.
"Most of the price rises were for staple foods, thereby causing the maximum economic pain to the maximum number of people," Joe Studwell wrote in his 2002 book The China Dream.
Vincent Chan, head of China research for Credit Suisse, cited another change in recent months, saying people were now expecting price rises, an often self-fulfilling situation that leads to even higher market prices.
"If you look at the statistics, then China's inflation problem is simply a food inflation problem," he said. "In the past, we have not really had a problem of inflation expectation, [but] this year we have already seen that. And that normally means that prices will rise."
Rothman said pork price inflation was only a short-term problem, and predicted prices will start to fall back later this year.
"This is a supply problem. In 2006, pork prices had a 10-year low. There was not any incentive for farmers to raise more pigs. This was made worse by blue-ear disease, which stopped supply when demand was rising," he said.
Rothman said although demand had risen by between 5 percent and 7 percent over the past few years, no sudden jump had provoked the current huge increases and that China's position as the world's biggest producer of pork meant it would be able to control supply.
The other major factor in Chinese inflation, cooking oil, was more complicated, he said, as 60 percent is imported.
"The major contributor to the rise is US ethanol policy and there is little the Chinese can do about that," he said.
Subsidies in the US have seen a major switch in land use to grow crops for fuel, rather than food, prompting worldwide increases in some staple foods.
The UN's Food and Agriculture Organization (FAO) said in its annual Food Outlook report that the US will increase its maize crop specifically for ethanol use by 50 percent this year, at the expense of acreage for other food crops, in particular wheat.
Wheat stocks are at their lowest level for 25 years, according to the FAO.
Maize, or corn, is the main crop used in grain-based ethanol. The Chinese government has said it will not grow crops for energy use.
Rothman said the price control announcements had been overplayed as CLSA had surveyed seven of the 12 companies the government had reportedly said would be subject to possible restrictions and found that none had received specific instructions.
"I think what they [Chinese authorities] are doing is what governments always do -- try and talk down inflation expectations," he said. "I think it is a clever move, whereas introducing price controls would be pretty stupid."
Nevertheless, the FAO said in October that China was expected to slash its exports of cereals from 7.7 million tonnes in 2006 and last year to 6.2 million tonnes last year and this year. At the same time it would probably increase imports to 10.1 million tonnes from 9.3 million tonnes.
Both imports and exports could be expected to rise in the wake of the recent weather disaster that could have an adverse medium-term impact on domestic output and supply.
China imported 32.2 million tonnes of oilcrops, including corn and soybeans, in 2006 and last year, which the FAO said was expected to rise to 37.3 million tonnes in 2007 to 2008, with exports expected to fall to 1.3 million tonnes from 1.5 million.
Rothman said there had been anecdotal evidence of subsidies to poor rural areas, which are the hardest hit by any price fluctuations, which if accurate could indicate the government's willingness to take action to keep a lid on food prices and prevent any hint of social unease.
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
Former president Ma Ying-jeou’s (馬英九) trip to China provides a pertinent reminder of why Taiwanese protested so vociferously against attempts to force through the cross-strait service trade agreement in 2014 and why, since Ma’s presidential election win in 2012, they have not voted in another Chinese Nationalist Party (KMT) candidate. While the nation narrowly avoided tragedy — the treaty would have put Taiwan on the path toward the demobilization of its democracy, which Courtney Donovan Smith wrote about in the Taipei Times in “With the Sunflower movement Taiwan dodged a bullet” — Ma’s political swansong in China, which included fawning dithyrambs