Regulatory control curbed price rise, National D & R Commission

The following is an interview with Cao Yushu, spokesman of the National Development & Reform Commission.

Reporter: Since the end of the last year, the constant price rise has lapped up people's attention, and some people suggest: be vigilant against inflation. How do you view the country's price situation at present?

Cao: In my opinion, the present market price is stable on the whole.

The country's commodity price was in negative growth for 14 successive months since October 2001, and began to turn from negative to positive growth in January 2003. There are many factors that ascribe to the present rise in price, and the carryover effect of last year's rise in price is the main factor. In the first 5 months of this year, the consumer price went up by 3.3 percent, of which 60 percent was caused by the carryover effect of the previous year's price rise, and 40 percent the new factor. The impacts of carryover effect will last till the third quarter of this year. However, in terms of chain situation, the price in May saw a negative growth of 0.1 percent as against that of April. It is thus evident that the price rise at present is still controllable. In addition, townsfolk can still afford the present price change.

Reporter: What measures have the National Development and Reform Commission taken in strengthening the price supervision and market regulation?

Cao: Since this year, the National Development and Reform Commission has published many documents concerning the strengthening of price supervision. For example, "Regulations concerning strict control of publishing price-rising programs" requires the locals to strictly control the publishing of price-adjusting programs so as to maintain basically stable the market. It specifies that if the monthly increase of resident consumer price exceeds 1 percent, or accumulative total of the year-on-year increase exceeds 4 percent for three successive months, the publishing of price-rising program should be suspended for 3 months. "Regulations on strengthening the price supervision, and further the inspection work of agricultural means of production such as chemical fertilizers and seeds" and "Regulations concerning continually carrying out the preferential policies on the electricity price for chemical fertilizer production", require the locals to prevent the price of the agricultural means of production from skyrocketing, and protect the interests of farmers.

It can be said that the series of regulation measures published by the country have played an important role in stabilizing the market price. In May, the chain index of grain price decreased by 0.5 percent, and it was the first time the chain index decreased since August last year. The price of the means of production in the circulation link dropped by 1.4 percent, which is the first fall after 7 successive months.

Reporter: So are we still confronted with the pressure of constant price rise? And is it true that there will be no inflation any more?

Cao: There still exists the pressure of price rise. One reason is that the price of the means of production on year-on-year basis increased by a large margin. In May, although the chain index of the means of production on a monthly basis went down, the year-on-year chain index increased by more than 14 percent. Another reason is the grain price, and its year-on-year index went up by 32 percent. The rises in both the means of production and the grain prices bear obvious driving nature, and will inevitably exert some impacts on the overall market price level. The price increase may see no drop in the third quarter, but it will gradually go down in the fourth quarter.

Moreover, I think the price rise and inflation are two different conceptions and whether there'd be any inflation or not should be analyzed from various aspects.

First, the price rise is mainly reflected by the price of certain products, while the root cause of inflation is the unbalance of the society's total supply-demand; in other words, the total supply fall far behind the total demand. According to the present situation of the country and the judgment on the development tendency in the future, the total supply still exceeds the total demand. This kind of setup has not been changed so far. Under this circumstance, the fundamental reason for inflation is still untenable.

The second is the influence of the price in the international market. Judging from the international market, except the primary products like petroleum whose price goes up to some extent, the prices of most of the other commodities haven't gone up too much, thus having no great impacts on China.

Lastly, viewing from the price change itself, the main factor that propels the rise in price is now convergent. I've mentioned above that although the year-on-year increase of the means of production and grain price was high, the chain indexes of May and April are both in minus. As the macro-control gradually begins to take effect and various regulating measures are further implemented, the kind of situation will keep on going like this.

Reporter: How will this year's grain price change?

Cao: This round of price rise dates back to last November. It features mainly a recovering increase. Before that, the country's grain price witnessed a decrease of 84 months on end.

Because of long and continual decrease of the grain price, it spells a problem for the increase of farmer's income that affects farmer's consumption. The low-level consumption of farmers causes an overall consumption problem. In order to maintain a sustained, rapid and sound development of the economy, the proportionate relationship between consumption and investment must be made reasonable, and the proportion of consumption in the whole GDP should be increased. Therefore, how to increase farmer's income constitutes a striking contradiction and problem that we should be determined to deal with. The rise in grain price since last year is the result of the function of the market mechanism, which has positive effects on the development of the entire economy. In view of the present situation, the rise in grain price also has a convergent characteristic. In order to maintain the grain price basically stable at a reasonable level, the country has established the lowest purchasing price of farmers' grain. Generally speaking, the country's current grain market and grain production are good.

At present, though the macro-control has made evident achievements in maintaining the market price, we can never be negligent, instead we should pay close attention to the tendency of the changes of commodity prices, and go on implementing various regulatory measures published by the Central government, and make great efforts to maintain a stable market price on the whole.

By People's Daily Online