Economy

Speculation on food products not to push up CPI sharply

(Xinhua)
Updated: 2010-05-29 15:50

BEIJING - Speculation on food products like mung beans is unlikely to sharply push up China's Consumer Price Index (CPI), an important gauge for inflation, analysts have said.

The rising food prices earlier this year were mainly because of bad weather not speculation, said Yao Jingyuan, chief economist of the National Bureau of Statistics (NBS).

In light of the volatile stock market and strengthening regulation on the property market, many believe that speculative capital has flowed into food products like mung beans and small red bean since their prices have tripled from last year, Yao said.

Output of food grains other than wheat and rice produced in China dropped 30 percent from 2003 to 2.5 million tonnes in 2008, according to data from the National Development and Reform Commission (NDRC).

Drought in northeast China, one of China's main grain-producing area, aggravated the situation last year.

Mung bean was priced at nine yuan ($1.32) a kilogram last October, but soared to 20 yuan in May, according to NBS data.

Bad weather played a big role in the price rise, but such a sharp price jump in beans could have attracted speculation, said Zhao Jidong, a senior official with the Jiangsu branch of NBS.

NDRC has urged price regulators to take action against rising food prices amid high inflation expectations.

The top Chinese economic planner Thursday told local governments to step up efforts to strengthen market monitoring and clamp down on speculators who force up the prices of farm produce including mung beans and garlic.

Profiteers' illicit earnings will be confiscated and they may face fines of up to one million yuan, NDRC said in a statement posted on its website.

Regulators should make every effort to curb price manipulation, according to NDRC.

Related readings:  Experts call for CPI wrinkles to be ironed out  CPI moderate rise in Q2 triggers no rate hike  Macao's CPI up 2.56% in April  China CPI to be around 3% in May, June: NDRC

China's CPI jumped 2.8 percent in April, driven mainly by food price increases, with a 14.9 percent rise in vegetables and 16.4 percent increase in fruit.

NDRC has projected that the second-quarter CPI will continue to rise, with CPI in May and June at around 3 percent. But it also said prices of vegetables and fruits should drop as temperatures rise with the start of summer.

"Since the central government's intense preventative measures on food product speculation, I don't think the CPI figure will sharply increase in respect to this," said Wang Li, a research fellow with the Institute of Quantitative & Technical Economics under Chinese Academy of Social Sciences.

In a statement released after China's State Council's executive meeting chaired by Premier Wen Jiabao Wednesday, the Cabinet pledged to crack down on farm produce profiteers, as prices have soared remarkably for garlic, mung bean, black soy bean and other coarse food grains.

Food prices have dropped slightly recently because of improving weather. China will be able to meet its inflation target of about 3 percent for 2010, according to NDRC.