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Farmers pay for China's vegetables

The Ministry of Commerce and the Ministry of Agriculture in China is taking immediate action to help farmers facing an oversupply of vegetables that’s lead to a fast fall in prices. On one hand, the drop in prices has been expected by Chinese policy makers to cool off soaring consumer inflation.

The cost to the farmers however, is far too dear. Some are even destroying produce as vegetables from north China ripened early to join a market already saturated with vegetables from south China.

China’s pricing authorities are defending the Chinese government’s controls to keep consumer inflation under control yet failed to review price intervention measures in line with its potential impact.

Since food accounts for one third of goods used to calculate China’s consumer price index, policymakers have tried to prevent the prices of food staples from skyrocketing. However consumer inflation still jumped to a 32 month high of 5.4 percent in March.

In China, there’s a close link between food prices and the cost of urban living. Therefor restraints on food prices have eased inflationary pressures in cities. Chinese policymakers have however failed to grasp the consequences of price controls on farmers at the end of the value chain.

When it comes to an oversupply however, authorities can only intervene in consumer prices to depress inflationary expectations. The current decline in prices is really China’s cost of battling inflation - but it’s not fair for farmers to foot the bill.

Local government’s solution: Urge consumers to buy more vegetables.

Is that enough?

by S. C.
07 may 2011, World News > Asia