Beijing to announce anti-inflation measures, Asian markets react with concern
Beijing (AsiaNews/Agencies – China is dealing with its worst inflation in a decade. Prime Minister Wen Jiabao yesterday announced that measures would be taken to contain rising prices. Asian stocks reacted negatively to the news, as many operators wonder what those measures might be. “When necessary, temporary intervention measures will be implemented on prices of some important daily necessities and production materials,” China’s state council (cabinet) announced today.
Last month, the consumer price index hit a 25-month high in October, up 4.4 per cent year on year, with energy prices and especially food prices (+ 10.1 per cent) leading the way.
Expectations that prices might continue to rise has led to panic buying, accentuating the upward trend.
The Ministry of Commerce released figures yesterday, indicating that in the first two weeks of November, the average wholesale price of 18 staple vegetables was 62 per cent higher than in same period last year, and 11.3 per cent higher than at the beginning of this year.
In the big cities however, ordinary people are complaining that food prices are rising at a faster rate, with several hikes a week.
The authorities are now expected to set a ceiling on food prices. However, many observers are unconvinced that it will work. They point out that in May, when Beijing set limits to various food items, speculation continued and wholesale prices for meat rose.
In recent days, line-ups have appeared as people try to buy as much as possible ahead of expected price rises. Last Saturday, Zhang Juan, a 77-year-old retiree, told the South China Morning Post that she left home at 7.15 am to go to the shop, which opens at 8 am, but found about 50 people in front of her.
There are also concerns over the impact on China’s economy of the ongoing crisis in the West.
The United States does not appear willing to take steps to contain inflation. In Europe, alarm bells are going off over the crisis in Ireland and Portugal, especially after Irish authorities seem unwilling to accept EU support.
Experts note that China’s current bout with inflation is also due to massive public injections of capital to stimulate the economy at the height of worldwide financial meltdown.
Across Asia, stocks have declined, as investors wait for news from the mainland. Beijing has shown that it is capable of acting quickly and decisively in economic matters and that it will consider only its own interests.
The Shanghai Composite Index lost 4 per cent yesterday. Investors fear that China’s central bank will increase the cost of money by reducing liquidity in order to tackle inflation.
At the same time, “Attention has shifted from the U.S. to concerns about Europe’s debt issues,” currency strategist Keiji Matsumoto told Bloomberg, and this “will be around with us at least till the end of this year.”
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26/08/2018 13:18
