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Curb all-pervasive inflationary pressures

By Zhu Qiwen (China Daily) Updated: 2011-05-12 07:59

China's consumer price index (CPI) edged a little lower to 5.3 percent last month, having jumped to a 32-month high of 5.4 percent in March, latest statistics show.

This could be a cause for optimism for the Chinese government, which has been battling hard for a full-year inflation target of 4 percent since the beginning of the year.

However, policymakers should not take it at face value as the country's war against inflation is far from over. Signs show that persistent inflationary pressures are finding their way, in many unexpected forms, into the pockets of domestic consumers.

With food prices, which account for nearly a third of the basket of goods in the nation's CPI calculations, still surging 11.5 percent year-on-year in April, it is obviously far too soon for the country to declare victory in its fight against inflation.

Given the importance of stabilizing food prices to control the stubbornly high inflation, it is understandable that some policymakers would like to view the recent fall in vegetable prices as evidence that government measures are having an effect.

The drop in vegetable prices that can be observed in urban markets does guarantee a much-needed fall in consumer inflation, and the pricing authorities can even claim credit for their aggressive attempts to prevent supermarkets in cities from putting a dearer price tag on vegetables, as well as other daily necessities.

Yet, such a success in stabilizing prices for urban consumers does not amount to a genuine stab at curbing inflation that is largely fueled by increasing labor costs, rising commodity and fuel prices and excessive liquidity.

Worse, it has come at a price that is too prohibitive for many farmers.

It was reported that after a heavy loss from his cabbage land, farmer Han Jin committed suicide on April 16 in Jinan, capital of Shandong province. Some farmers have been throwing away vegetables they are unable to sell at all. Some long-term problems affecting the efficiency and distribution costs across the country have also been highlighted.

For instance, recent media reports have found that road tolls have bitten deeply into drivers' pockets and driven up distribution costs. Some toll-collecting companies were found to be even more profitable than property developers and oil giants.

Given the country's huge regional development gap, China must cut distribution costs to encourage cross-regional commercial activities to boost economic growth in central and western areas. That is why the Ministry of Transport has vowed to make 96 percent of the country's road mileage toll free in the future.

The current fight against inflation has only made it more urgent than ever to substantially cut unjustified road tolls.

In addition, the looming shortage of electricity in many Chinese cities due to the growing losses suffered by power companies as a result of the rising cost of coal also indicates that inflationary pressures can take many forms.

Since inadequate supply of vital services will result in a considerable rise in the cost of living for consumers, Chinese policymakers should not allow it to stay below the radar if the country is to effectively bring inflation under control.

The author is a writer with China Daily. E-mail: zhuqiwen@chinadaily.com.cn

(China Daily 05/12/2011 page8)