BIZCHINA> Review & Analysis
Stabilize grain supply
(China Daily)
Updated: 2008-04-30 15:41

The Ministry of Railways' announcement of its plan to accelerate shipment of grain from the grain-rich northeast to the country's south is both reassuring and worrying.

Hopefully, the urgent transportation of quality rice from the northeast will help ease supply imbalances and stem price rises in the south.

But the deadly collision of two passenger trains on Monday, that killed at least 70 people and injured more than 400 others, raises concerns over the safety of accelerated transportation.

It was reported that the ministry has ordered railway authorities in the northeastern provinces to improve efficiency and send 10 million tons of grain from there to the south from May 1 to June 30.

The news sends a clear signal to the market that the central government is determined to curb rises in grain prices, especially those caused by short supplies in some local markets.

Soaring grain prices in the international market have already cast their shadow on some parts of China. According to the customs of Guangdong province, a major industrial powerhouse in southern China, there has been a 68.6 percent hike in the prices of imported grain this year.

Surprisingly enough, rice prices had begun to drop remarkably in the northeast since last fall in spite of the fact that the highest inflation that China is suffering in more than a decade is mostly blamed on increasingly higher food prices.

The imbalance of supply and demand in different local markets should have made grain trade between them profitable for all sides. Yet, unfortunately, transportation bottlenecks impeded the ferrying of quality rice from the northeast to the south, where a short supply has been pushing prices up.

Policymakers must understand that even abundant grain reserves cannot ensure price stability across the country if the transportation system does not function efficiently.

The latest effort by the Ministry of Railways to prioritize grain shipment is only a stopgap measure to meet the demand of grain in the south. It should highlight the urgency to build a national transportation network that can respond promptly to the price signals different local markets send.

It is expected that the railways department can swiftly and safely transport grain out of the northeast to ease shortages in the south. The completion of the task is crucial to the country's tough war against inflation.

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