China intervenes in commodity prices
Updated: 2008-01-18 14:11
"Unreasonable price hikes have had a negative impact on the society," said the NDRC, adding that illegal pricing activities, including colluding to raise prices, hoarding goods and jacking up prices and spreading rumors on price rises, had harmed the interests of consumers and disturbed market order.
"When essential commodities and services see or are expected to see substantial hikes, the State Council and local governments could take intervention measures, including restrictions on enterprise profit rates, setting price ceilings and price rise reporting practice," Cao said, citing Article 30 of the country's Price Law.
"The interim interventions are helpful to keep market order, curb the unreasonable price hikes and stabilize the market."
Rising prices of crude oil, grain and other primary products on the international market also exerted huge pressure on domestic prices, said macroeconomic analyst Lin Songli of the Guangzhou-based Guosen Securities.
China's leaders made it clear at the annual central economic conference in December that curbing economic overheating and inflation was their highest economic priority in 2008.
The move of the NDRC was another effort taken by the government after the latest price freezes on gasoline, natural gas, electricity, water, heating and urban public transport fees in the near future.
China's central bank announced on Wednesday it would raise the required reserve ratio for commercial banks by half a percentage point on January 25.
The ratio would be raised to 15 percent, the highest since 1984, part of the stringent monetary policy. This was to siphon excess liquidity at banks and curb the overly-fast growth of credit against the backdrop of the country's foreign exchange reserve that had reached $1.53 trillion by the end of 2007, up 43.32 percent from a year earlier.
"The interim administrative interference and monetary policy are both targeted at the inflation and excess liquidity and give a clear signal that the government will do its best to tackle these problems," Ou Minggang, deputy editor-in-chief of "Chinese Banker" magazine, told Xinhua on Wednesday.
He added the government should also take into consideration the international economic background in formulating macro-economic policies to achieve better results.
Chinese shares saw their sharpest decline in nearly eight weeks on Wednesday, losing about three percent in reaction to heavy losses on Wall Street and deepening concern over a US recession.
Ou added the influence of a US recession on the Chinese economy was difficult to say now. It would definitely make it more difficult for the Chinese government to implement its prudent fiscal policy and a tightening monetary policy while maintaining economic growth, as exports were a big contributor to the nation's economic expansion.
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