11/26/2010, 00.00
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In Guizhou, students go on a rampage after cafeteria raises prices

Students protest price increases in school cafeteria. Local authorities intervene to ensure low-cost food supplies. Everyone in the country is facing prices rising faster than economic growth. Beijing tries to intervene quickly.

Beijing (AsiaNews/Agencies) – More than a thousand students stormed their high school cafeteria in Liupanshui, Guizhou, after it raised food prices. Fearing such outburst of popular unrest, Beijing has pledged action over the next few weeks to tackle inflation.

Last Monday night, students who went to the cafeteria after classes found prices had jumped by almost 50 per cent on a range of items. Water went from 70 fen to a yuan a bottle, entrees cost 50 fen more; even rice and bread were more expensive. All this was too much for students who eat at the cafeteria every day. After talking about it among themselves, they went on a rampage, breaking windows, dishes and furniture (pictured).

Liupanshui government spokesman Yuan Guozhong blamed price hikes on soaring food prices. “Some students” are “from low-income families,” he explained, and are very price-sensitive.

To address the issue, “We arranged for a company to provide cheaper food the next day," he said. At the same time, “The municipal government had a meeting” with the students to try “to figure out tentative measures to help students”. Steps were taken to get slaughterhouses and wholesale markets to supply pork and vegetables directly to the school at lower prices.

The privately run cafeteria had already increased its prices at the start of the school year, but said it was forced to raise prices again because the cost of vegetables had risen by a third.

The incident is symptomatic of the country’s potential for unrest as food prices keep rising. Vegetables and pork are basic items on the Chinese dinner table.

The Council of State (cabinet) decided last week to help farmers cut their production costs. It also decided to sell wheat and cooking oil at marked down prices. It added that it might also impose a price ceiling, “if necessary”.

However, some experts note that such steps could actually reduce production and decrease supplies if farmers are forced to sell below cost.

Now all eyes are on the Central Economic Work Conference, which takes place every year in early December, to see what decisions it will take in relation to next’s year inflation, projected to be between 4 and 5 per cent.

Chinese economists blame inflation on excess liquidity in the economy, easy lending and the government’s stimulus package of recent years. US monetary policies meant to keep US standards of living from falling even if they export inflation to emerging economies, especially China, are also blamed.

“Now we are playing a totally different game from the United States, Europe and Japan,” said Lu Zhengwei, senior economist at Industrial Bank. For China, it is “time for some real tightening”. For this reason, “companies will have to take into account this fundamental reality that no more easy loans are available."  

At the same time, this will require decisive action against corruption and irregular government procurement. In fact, many extant projects will not get more money.

China’s growth has been export-driven. The situation is such at present that the yuan might have to be appreciated to reduce the cost of imports and hold prices in check. The challenge is to do it without affecting production whilst keeping unemployment under control.

Experts however have accused the government of underestimating actual inflation, concerned more about growth per se rather than its impact.

Last month, growth stood at .6 per cent, whilst food prices rose by more than 10 per cent.

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