Beijing (AsiaNews/Agencies) – Speaking yesterday on a popular radio talk show, Prime Minister Wen Jiabao said that his government would contain inflation and prices. For months now, ordinary Chinese have been increasingly concerned about the rising cost of basic items like food. On Saturday, the People's Bank of China raised its benchmark one-year lending rate, the second time in recent months.
In November, inflation increased by 5.1 per cent, the highest in 28 months. However, food items have risen even more. The government has blamed the problem on speculators, and launched a campaign against profiteers. It also reduced liquidity in the economy, but so far to little avail. As part of it, China’s central bank raised its key lending and deposit rates, which it might do again in the coming months.
On the China National Radio talk show, Wen (pictured) was treated to a number of complaints from listeners about rising prices. He acknowledged that “recently prices have risen across the nation and under these circumstances, the lives of middle- and low-income earners are evidently more difficult;” however, he insisted that “steps taken in the past month,” including higher rates and bank reserve requirements, have “started to produce results.”
At the same time, the central government tightened measures to put a brake on soaring property prices, but that has not been enough. Without going into too many details, Wen pledged more action. In fact, the government plans to build 10 million units of affordable housing next year.
“I believe we can keep prices at a reasonable level through our efforts,” he said, adding that "inflationary expectation is worse than inflation itself”. He urged listeners to trust the government.
"The front-loaded tightening, before the peak of consumer inflation in the first half of 2011, is helpful to curb inflationary expectations," said Ba Shusong, a senior economist with the Development Research Centre under the State Council (cabinet). “The rate rise shows China is quickening its pace to normalise monetary policy," he added.
After the global crisis burst out two years, the Chinese government stimulated investments and lending to overcome its effects, but this fuelled inflation.
Higher prices have caused popular dissatisfaction with trust in government down and labour disputes up, as evinced by a recent policy paper released by the China Academy of Social Sciences (CASS).
"If this is sustained over a certain length of time—for example, two or three or more years—then it is likely to bring with it social instability and diminishing levels of confidence in society,” said Chen Guangjin, deputy director of the sociology department at CASS.
People are fed up with problems at work, wages rising at a slower pace than inflation, and official trade unions that do not do their work well.
Prof Hu Xingdou, from Beijing Science and Technology University, noted “because the union representatives are part of the company, so they have a huge vested interest”. For this reason, “Union officials should . . . be made completely independent” from the authorities.
In the meantime, there are thousands of mass protest incidents in China every year, triggered largely by economic issues like land and property seizures.
Corruption by local officials is another major sour point for ordinary Chinese, a problem that the central government has so far failed to solve.
