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China Says Price Controls Will Not Distort Market

Reuters
Wednesday, 16 Jan 2008 | 11:33 PM ET

China's recently introduced price controls are aimed at stabilizing inflationary expectations and will not distort the market economy, planning officials said on Thursday.

China unveiled this week planned-economy style controls on prices for a range of goods from instant noodles to liquefied gas in what it describes as a temporary intervention to battle surging inflation.

All major producers of flour, rice, noodles, cooking oil, milk and liquefied petroleum gas must apply to authorities before raising prices substantially, the National Development and Reform Commission (NDRC) has said.

"The government has never and will not ask companies to operate while making losses," Zhou Wangjun, a deputy director in the NDRC's pricing department, said on Thursday in an interview published on the government website.

"The government intervention will not distort normal business activities," he added.

Cao Changqing, the pricing department's head, said the measures are intended to soothe fears and break the cycle of market behavior that he blamed in part for driving up inflation.

"If a supplier anticipated further price rises, he would reduce selling and take his stocks off the market," Cao said. "And if a consumer anticipated further price rises, he would increase his purchases."

Annual consumer inflation hit an 11-year high of 6.9 percent in November, alarming officials who have said that stabilizing price rises is a key target in 2008.