Editorials

Anti-inflation recipe

(China Daily)
Updated: 2010-05-26 07:54

Talk of giving subsidies to low-income families may strike a deep chord in the minds of the public anxious about the rising rate of inflation.

Yet, such a move is neither practical nor effective enough to deter inflationary pressures, which seem to be rising more rapidly than what the official CPI numbers indicate.

The National Development and Reform Commission (NDRC) suggested at a recent national conference that such a subsidy be doled out to low-income citizens.

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The suggestion, however, is in sharp contrast to efforts by statisticians trying to explain the difference between high inflationary pressure and mild price gains registered in the official data.

According to the National Bureau of Statistics, China's consumer price index (CPI), a key gauge of inflation, increased by 2.8 percent year-on-year in April.

The rise in consumer prices has derailed the government's goal of pegging inflation below 3 percent for the whole year. The public, especially low-income families, is feeling the inflation scourge more keenly. The average price of vegetables, for instance, rose by nearly 25 percent in April from a year earlier.

In theory, the subsidy crutch mooted by the NDRC may help cushion the impact of soaring food prices on the most vulnerable section of consumers in the country.

Nevertheless, the lack of a functioning and institutionalized mechanism to subsidize low-income families on time will make such promises hard to keep.

The recent round of consumer price hikes seems to be the result of the country's credit binge last year to combat the effects of the global downturn.

If the authorities have recognized the imminent danger of inflation, then the more effective policy response should have been to turn off the credit tap.

(China Daily 05/26/2010 page8)