November 25, 2010

China to raise planting area to combat inflation

The planting area of vegetables across China is to be increased on-year by 7% this winter as part of the central government's efforts to drag down the increasing prices of agricultural products.

The Ministry of Agriculture announced that the total planting area of vegetables this winter will reach about 8.3 million hectares, up 0.53 million hectares over the previous year.

The move is part of coordinated efforts by the central government to head off the recent price rises.

To increase the market supply and ease the pressure for further price hikes, the State Administration of Grain said that starting this week it will sell a set amount of cooking oil and soy from government reserves, in addition to the weekly sales of reserved wheat, rice and corn that have already begun.

The administration will also send officials to the country's major grain production regions to inspect and guide the purchases of autumn grain and to regulate business practices, it said.

The State Council has also urged local departments to reduce delivery costs, while vehicles transporting fresh and live farm products will be exempted from road tolls starting December 1.

The consumer price index (CPI) in China, a key gauge of inflation, surged 4.4% in October from a year earlier, reaching a 25-month high, according to the National Bureau of Statistics. Some analysts have predicted the figure may rise to nearly 5% in November.

The rise was mainly due to a 10.1% surge in food prices, such as grain and vegetables. Food prices have a one-third weighting in China's CPI calculation.

Analysts believe that the latest actions by the central government were designed to combat price hikes by increasing grain and vegetable supplies and clamping down on hoarding and speculation.

"It's the first time that the Ministry of Agriculture has announced that it would increase its vegetable planting areas in winter. And such measures may last for the next few years, as the rises in vegetable prices are likely to continue," an analyst said.