Economists Blame Price Freezes For Power Shortage

treeIn an effort to fight high inflation, Beijing has been freezing prices for everything from energy to pork. According to a report from the Associated Press, international economists worry these measures risk sending the country into a tail-spin.

The controls are meant to shield China’s poor and working classes, who spend up to half their incomes on food. But the inflation spike is blamed on shortages of pork and grain, and economists warn that putting a lid on prices just shifts the hardship to farmers, discouraging them from raising output, which would bring down high prices.

“It’s a balancing act — whether the government wants to control inflation or whether it’s going to make sure there is abundant supply for these very basic, important goods,” said Jing Ulrich, chairwoman of China equities at JP Morgan.

The report goes on to say that, while similar tactics worked in 1993 to 1994 when there was a 20 percent inflation rate, economists warn China’s economy may not respond the same way this time now that it is more dependent on private business.

Food costs rose 18.2 percent in November.

February 10, 2008 11:49 PM
Categories: Economy