food prices control in China
(From Chinadaily) Top agriculture experts warned against further rises in food prices, calling for effective measures to ease the impact on society.
Huang Jikun, director of the Center for Chinese Agricultural Policy of the Chinese Academy of Sciences, said agricultural commodity price rises on the global market are the major reason for current food price hikes.
Food prices have soared on the global market over the past two years, and China is being increasingly influenced by global economic trends, Huang said while addressing the Ninth China Development Forum in Beijing, a high-level forum held annually by the State Council Development Research Center (DRC).
However, Ma Xiaohe, vice-president of the Academy of Macroeconomic Research under the National Development and Reform Commission, told the same forum that the huge liquidity in the market is the foremost reason for the food price rises, as China now has sufficient grain supplies and there is no reason for price rises as a result of supply problems.
Despite the diverse reasons given for agricultural product price rises, experts agree that they will keep rising.
The cost of agricultural production has also risen, which is further influenced by fewer natural resources and the heavy cost of environmental protection, Ma said.
Meanwhile, the country is expected to see increased demand for meat products, which will drive up demand for grain.
Han Jun, director-general of the rural economy research department under the DRC, added that the country is rapidly entering a phase of reliance on overseas food markets, with 70 percent of edible oil coming from imports.
However, those experts hold that food price hikes will not generate overall inflation, though food price rises contributed to 93 percent of the 4.8 percent rise in the consumer price index last year.
“Food price increases will not trigger excessive inflation as long as China can flexibly tighten its credit supply and maintain better control over its macroeconomic conditions,” Han said.
Some experts hold that current food price hikes are simply because agricultural commodity prices had become too low and hurt farmers’ interests.
China’s GDP growth slowing down
(From Chinadaily) Declining export growth, notably affected by the U.S. credit crunch, is likely to drag China’s GDP growth down to 10.5 percent this year, still above official target of 8 percent, a leading university research paper said on Monday.
China’s booming exports are likely to see a sharp decline, which will tame the 11.4 percent GDP growth last year to a slower 10.5 percent in 2008, against the backdrop of the subprime mortgage crisis and calming global economy, according to the research paper released by the Economic Research Institute of Renmin University.
The tempered figure, however, still beats the official target of 8 percent despite of government’s cooling measures, the report said.
The economic overheating risks showed signs of relief after GDP peaked at 11.4 percent last year, Deputy Dean of the Economic School of Renmin University Liu Fengliang said.
The opinion was echoed by Guo Qingwang, Dean of School of Finance in the university, reckoning the GDP will grow below 11.5 percent in the coming two years.
It said inflationary pressures will remain a tricky problem for the Chinese government after the consumer price index hit a near 12-year high of 8.7 percent in February, and with the continuous price rise in metal, crude oil, and agriculture products.
A 1 percent rise in the international energy price will lift China’s CPI by 0.1 percent, the report said.
China faces the potential risk of drastic economic fluctuation, while tackling the biggest challenges of soaring prices and mounting inflationary pressure, Premier Wen Jiabao said last Tuesday.
Wen said his government will ensure rapid yet stable economic development and at the same time effectively hold down inflation and address problems of “unstable, uncoordinated and unsustainable” development.
The report claimed slowing world economic growth, the US dollar appreciation and the credit crunch’s repercussions on China’s capital market will add more uncertainties to China’s economic outlook this year.
China’s GDP has been expanding at double-digit growth for five straight years, peaking 11.4 percent in 2007, the highest in the past 13 years. Risks of spiralling inflation and economic overheating were also rising.
Pressure on RMB
(From attimes) Pressure is picking up once more on China to appreciate its currency at a faster rate, with a call by the Group of Seven of leading industrialized nations for more efforts to strengthen the yuan echoed last Thursday in Beijing by International Monetary Fund managing director Dominique Strauss-Kahn. On the same day, Bloomberg reported that China had surpassed Canada to become America’s largest importer.
The elevation of China’s trading position and non-US demands for a stronger yuan lend support to advocates of revaluation of the currency in Congress, which last summer debated legislation to increase pressure on Beijing to move faster in this direction.
“The trade numbers that came out today and which show another record deficit with China is further evidence that this problem is getting worse and not better,” said Ohio Democratic Representative Tim Ryan, a co-sponsor of currency legislation.
The debate in Congress may well return to prominence on Capitol Hill, given three other big China-related stories from last week - US allegations of espionage, Steven Spielberg’s high-profile resignation from involvement with the Beijing Summer Olympic Games to be staged in August, citing the country’s policies on Darfur, and questions over the safety of a drug compound shipped from China to the US for the manufacture of heparin.
Yet the Chinese government still has some breathing space before it will be threatened by the effects of any legislation, which is unlikely until after the new president is sworn into office next January 1. The George W Bush administration is unlikely to agree to it; nor is any meaningful legislation likely to muster the two-thirds majority needed to override a presidential veto.
The administration’s leader on the issue, US Treasury Secretary Henry Paulson, testified before the Senate Budget Committee this month that the effort to pass yuan legislation was “bordering on the silly”. He expressed his desire for appreciation to occur more quickly, but countered this expression with the realization that “the rate of appreciation of the currency roughly doubled last year to 6.7%”.
The administration has been just as consistent in its efforts to squelch legislation as Congress has been in promoting it.
And why now, or at any time before Bush leaves office, should the administration make a deal with Congress? Bush will not be in office 10 months hence. The fact that the timetable for favor-swapping is dwindling means that favor-swapping is less likely to occur. Prospective future favors are becoming a non-issue. In other words, the idea that “tomorrow will be brighter because of the deals I make today”, doesn’t make much sense.
The only reason for the administration to compromise on yuan legislation would be that it would receive a commensurate “gift” from Congress. Congressional politicians prefer to trade favors with the newly elected popular president coming into office, rather than with the less-popular president exiting it.
According to Dr Gregg Johnson, assistant professor of political science at the University at Buffalo, “A newly elected president claims to have an electoral mandate to pursue the policies he or she advocated during the campaign. Legislators are more willing to stand up for these policies and less likely to resist them when the president is seen as popular, like they are during their first year in office. The most obvious example of this is FDR’s [Franklin D Roosevelt’s] First 100 Days legislation that was designed to ameliorate the causes of the Great Depression.
“President Bush lacks standing as a ‘lame duck - he’s in his last year and cannot run for reelection - and, barring a real meltdown of the US economy, Congress is unlikely to pass anything negative before November’s election.”
Johnson further noted that neither the US nor China “has strong short-term incentives to push too hard on the topic. The US relies on China and other nations to cover its enormous budget deficit (as well a private sector debt) and China relies on the US as its largest export market. We are too economically interdependent to really push each other too hard on this topic.”
Lending further credence to the likelihood that a bill will not be passed until a new president takes office is the fact that no major US newspaper wrote on Thursday about China’s recent usurpation of Canada as America’s number one source of imports. People in the US are not really talking about this story and other China-related concerns. They’re talking about the presidential elections.
Of course, it would be assuming too much to say for certain that a yuan bill won’t be passed on Bush’s watch. However, if history is any measure, that is the likely scenario. As China’s first great historian Sima Qian (ca 145-90 BC) noted, “Those who do not forget the past are the masters of the future.”