China giving greater support to agriculture to cool inflation

BEIJING—China promised on Wednesday to increase financial support for agricultural production as part of a larger effort to cool an inflation surge blamed on food shortages.
“Reinforcing agriculture has a pivotal role in maintaining sound and fast economic development, curbing inflation and safeguarding stability,” the State Council, or the Cabinet, said in a statement. The Cabinet agreed in an executive meeting chaired by Premier Wen Jiabao that China would “immediately” increase the subsidies for farmers’ purchase of production materials and seeds, and raise the government’s purchasing prices of grain.
The move was meant to “mobilize the initiative of farmers to plant crops and ensure an adequate supply of agricultural and sideline products,” it said. The announcement added to a string of efforts to end shortages of pork, China’s staple meat, and other basic commodities that pushed the inflation rate to a near 12-year high of 8.7 percent in February. Pork production fell dramatically last summer on breeders’ dampened enthusiasm due to rising feed costs in addition to a massive pig cull after the outbreak of blue-ear disease in some regions.
The unusually harsh winter weather also dealt a serious blow to vegetable and rapeseed crops in many areas and killed many pigs and chickens. The central government’s budget earmarked for agriculture, farmers and rural areas reached 562.5 billion yuan (79.2 billion U.S. dollars) this year, 130.7 billion yuan more than in 2007, according to the government work report delivered by Wen earlier this month.
The sum included a subsidy of 48.2 billion yuan for production materials purchase, 4 billion yuan for farm tools and 7.07 billion yuan for seed. Chinese Premier Wen Jiabao said Tuesday that the government is fully confident in controlling inflation this year, although it will not be an easy job.
He made the remarks at a press conference following the conclusion of the annual session of the National People’s Congress (NPC), the country’s top legislature. Wen acknowledged that it will be hard for China to attain its goal of holding the rise in consumer price index (CPI) at about 4.8 percent and controlling price hikes this year, and it is made even more difficult by the worst sleet and snow disaster in decades in the first two months of this year.
“But we have no plan to change this goal,” he told reporters. The premier explained that it shows the resolve of the government to control price rises and curb inflation by setting the goal, and it will help stabilize the people’s expectations for price rises by doing so. “With price rises at a very rapid pace, the expectations for price hikes are usually more fearful than the price rises themselves,” he said.
In addition, China has set this goal because it has confidence in what it has, he said, referring to the country’s grain reserves of 150 to 200 million tons and general oversupply of major industrial products. “As long as we take right policies and effective measures, we are fully confident that we can control the trend of excessive rises in prices,” he said.
China’s CPI rose 4.8 percent year-on-year in 2007 in China, mainly due to large increases in the cost of food and housing, Wen told the NPC annual session while delivering the government work report on March 5. The key inflation indicator rose 8.7 percent in February over the same month last year, the highest monthly increase in nearly 12 years.
The figure was mainly pushed up by soaring food prices and the severe winter weather that wrought havoc in south China from January to February. Food prices surged 23.3 percent in February, with pork prices up 63.4 percent, and vegetable prices rising 46 percent, contributing to about 80 percent of the CPI increase. Non-food prices edged up only 1.6 percent from a year earlier.
The February index was 1.6 percentage points higher than last month.

—Xinhua