Editorials

Timely harvest

(China Daily)
Updated: 2010-12-04 07:50

With a record harvest expected this year, China has got some more breathing space to check inflation. But the good news on the supply side does not mean the country's policymakers can afford to be less aggressive in containing inflationary pressures that are pushing up consumer prices, especially food prices.

Preliminary statistics show China's grain output this year rose 2.9 percent year-on-year to 546.41 million tons, making 2010 the seventh consecutive year of rich harvest.

This is surely a much-needed shot in the arm for the policymakers, who are intensifying efforts to prevent consumer inflation from rising further.

The government had planned to keep inflation below 3 percent for the whole of this year. Yet a sharp increase in inflation from 3.6 percent in September to 4.4 percent in October, a 25-month high, has left the policymakers no choice but to fight inflation with greater urgency.

A double-digit jump in food prices is widely considered the leading driver of inflation in October. Consequently, the government has introduced a series of measures to increase subsidies for low-income families, ensure smooth food supplies and punish hoarders.

These stopgap measures may have succeeded in checking price increase in the shot term, but none of the measures are as reassuring as the record harvest. The record harvest will practically rule out the fear of a supply shock, which could have sent food prices through the roof.

With adequate supply of grains, the policymakers can now focus on taming other factors that keep driving up consumer prices.

In fact, if inflation rises further despite the record harvest, the policymakers should realize that prices did not increase because of food shortage. Instead, the root of the problem lies on the demand side: too much liquidity fueling demand for agricultural products.

If that is the case, the policymakers should take bolder measures to mop up excess liquidity to effectively tame inflation.

For the world, too, China's record harvest is good news, especially after the Food and Agricultural Organization's warning that food prices could rise through next year unless production of major crops rises significantly, raising the specter of 2008's food crisis, referred to as a "silent tsunami".

China's success in feeding one-fifth of the world's population with only 10 percent of the world's arable land is not only crucial for its economic stability and growth. It is also a great contribution to global efforts to deal with an emerging food crisis as falling production in some places drives up prices, and rising population and income increase demand.

To ensure a steady growth of grain production, the policymakers should review and strengthen government support for agricultural production timely. And to feed a global population, estimated to reach 9 billion by 2050 with the majority being in the developing world, developing countries can draw some useful lessons from China on how to increase their food output substantially.