Chinese Premier Wen Jiabao says his government is preparing steps to tame price rises, adding his voice to official efforts to reassure consumers irked by a rapid rise in the price of food.
Wen made the comments during a recent visit to the country's far south, the official Xinhua news agency reported, and they fed into market expectations that China will intensify tightening policies in the coming months.
Along with food price controls, reports in the Chinese press on Wednesday pointed to interest rate increases, higher reserve requirements and more restrictions on bank lending as weapons in the government's arsenal against inflation.
Consumer prices in the fast-growing economy have been rising at their fastest pace in more than two years, and Wen, the country's head of government, said his cabinet was planning action to tame inflationary pressures.
"Market supply and demand and prices are a direct interest of the public, and we have to pay a lot of attention to them," he said while visiting a supermarket in Guangzhou, capital of Guangdong province, according to a Xinhua report late on Tuesday.
"The State Council is drafting measures to curb excessively fast price rises," he said. The State Council is China's name for its central cabinet.
The report did not give any details of what those measures may be.
Wen's remarks were widely publicised in Chinese-state run media on Wednesday, in what appeared to be part of a concerted effort to reassure consumers that officials are heeding complaints about the price of vegetables, meat and grains.
On Tuesday, a leading official newspaper said that China will unveil food price controls and crack down on speculation in agricultural commodities, while central bank governor Zhou Xiaochuan highlighted inflation as a risk.
Consumer price inflation sped to a 25-month high in October, with prices rising 4.4 per cent from a year earlier. Food, which makes up about a third of China's consumer price index, led the way, climbing 10.1 per cent. Non-food items rose just 1.6 per cent.
Unlike past bouts of food inflation in China, there have been no major droughts or diseases to stoke prices this year. Instead, fast money growth appears to be the primary culprit.
To that end, many analysts believe that rather than imposing heavy-handed administrative controls on food costs, Beijing will do more to tighten broader monetary conditions.
The tendency of China's central bank to raise interest rates around the 20th day of the month makes this Friday a "sensitive window" for a rate rise, China Securities Journal said, citing unnamed analysts.
In fact, of the past six rate decisions by the central bank, none have been on the 20th or on a Friday.
Separately, Caixin magazine said that the central government is likely to set a target for new local-currency loans at about 6-7 trillion yuan next year, a lower ceiling than this year's 7.5 trillion yuan ($1.15 trillion).
The central bank has gradually guided its monetary stance back to normal after an unprecedented lending spree last year to counter the global financial crisis. Banks issued 9.6 trillion yuan in new loans in 2009.
Beijing raised interest rates last month for the first time in nearly three years. It has also officially raised banks' required reserves four time this year, ordered banks to rein in their loan issuance and used a series of measures to tamp down on soaring property prices.
Reuters