China's economy is faced with the biggest price rise pressure since 1997. Talking of this issue, Liu Yonghao, CEO of a feedstuff enterprise New Hope Group who is dubbed "China's No. 1 pigman", believes he knows it as well as the central bank governor.
"The international price of corn has almost doubled, and so has the price of soybean. This pushed up pig-raising costs," said Liu, who is a member of the 11th National Committee of the Chinese People's Political Consultative Conference (CPPCC). "If we don't raise the price of pork, how could farmers earn their daily bread? "
The political advisor pointed out that increase of migrant workers also contributed to the nationwide price rise. "About 250 million farmers have flooded into cities and turned from being producers of agricultural products to being consumers," he said.
Premier Wen Jiabao, according to media report, agreed to Liu's opinion while joining discussion with the political advisors. In the Government Work Report he delivered on March 5, the Premier especially underscored the development of agriculture, including production of basic necessities like grain, edible oil and pork.
"We will continue to implement the system of provincial governors assuming responsibility for the "rice bag" (grain supply) program and city mayors for the "vegetable basket" (nonstaple food supply) program," Wen said.
"Increasing supply of agricultural products is crucial to curbing price spikes," said Chen Xiwen, director of the Office of the Central Leading Group on Rural Work and member of the CPPCC National Committee.
Food price rise contributes to more than 80 percent of last year's price spike, said Chen. The snow disaster earlier this year greatly plagued China's agriculture. "Guarantee of agricultural supply holds the sway in our anti-inflation efforts this year," he said.
Price rises are among the "topics of most concern" that Chinese netizens hope this year's parliament session would have addressed, including housing and social security, according to an online survey by several leading Chinese websites including xinhuanet.com and sina.com.
Last year, the country's gross domestic product grew 11.4 percent year-on-year to 24.6619 trillion yuan (3.43 trillion U.S. dollars), but the risks of spiraling inflation and economic overheating were also rising.
In 2007, China's consumer price index (CPI), the main gauge of inflation, rose 4.8 percent year-on-year, well above the three percent target.
In February, the CPI rose to a decade record monthly high by 8.7 percent, a result of price increases during the Chinese Lunar New Year and after the severest winter weather hitting central, southern and eastern China in five decades.
Like farmers, China's central bank was also pushed to the front line in checking inflation. The People's Bank of China has pledged to continue its tight monetary policy this year.
After the entry of the World Trade Organization, China saw a big increase in foreign trade, which led to the expansion of its foreign exchange reserve. While exchanging foreign currencies in the domestic market with Renminbi, the central bank, to avoid over-supply of the currency which incurs inflation, had to take measures so as to reduce fluidity of money.
The central bank raised the reserve ratio 10 times and interest rates six times to soak up liquidity last year. The reserve ratio has so far been raised once in 2008.
But room for the adjustment is limited because of globalization, especially after the subprime loan crisis in the United States, noted Zhou Xiaochuan, governor of the People's Bank of China.
"Inter-reliance of interest rates between nations is growing, which is a challenge to China," he said.
Experts believe that China will face heavy pressure of inflation fuelled by growing costs from all aspects for a medium or long period.
According to Wang Yiming, an expert from the National Development and Reform Commission, as China's import of crude oil and raw material soars, high international oil prices and surging iron ore costs will further aggravate the situation.
"Besides, the newly decreed labor contract law boosted China's labor cost," he said.
As China stresses social security, environmental protection and energy saving in recent years, Xu Shanda, former vice director of the State Administration of Taxation and political advisor, believed that more policies to be implemented addressing these issues would force up the cost in some enterprises.
"The cause of China's inflation pressure is complicated," said Liu Shijin, vice director of the Development Research Center of the State Council, who called it a "Chinese characteristic", "it is mixed with both domestic and international factors, short-term or long-term."
"The focus of our policy against this pressure should be to limit the inflation with our acceptability, so as to gain more time to speed up economic transformation and pave the way for future development," he said.
(Xinhua News Agency March 14, 2008)