Chinese premier promises action on inflation

With prices increasing at up to double-digit rates, especially for key commodities, Premier Wen Jiabao has acknowledged the risk of public unrest.

Police arrest a man in front of the Peace Cinema in downtown Shanghai, after calls for a 'Jasmine Revolution' protest, organised through the internet.

BEIJING // Rampant inflation in China threatens social stability, Premier Wen Jiabao, warned yesterday, as scores of police were deployed in the country’s two largest cities to quell scheduled protests.

With prices increasing at up to double-digit rates, especially for key commodities, Mr Wen acknowledged in an online question-and-answer session the risk of public unrest.

Shortly after he made his comments, scores of police were deployed in Wangfujing street, the capital’s main shopping area a few hundred yards from Tiananmen Square, after online calls for protests modelled on those that have toppled leaders in Tunisia and Egypt and caused turmoil in Bahrain and Libya.

While there was no obvious sign of protesters, uniformed and plain-clothes officers blocked or pushed away camera crews and journalists. The police filmed those who had congregated.

One camerawoman was shoved inside a shop as she tried to film before being taken away by two men, and there were reports of several other journalists, photographers and camera crew being detained.

The police presence and response was heavier than a week earlier, when there were similar calls for peaceful protests in favour of political reform.

Near Shanghai’s People’s Square, uniformed police blew whistles nonstop and shouted at people to keep moving, though about 200 people, a combination of onlookers and quiet sympathisers who formed a larger crowd than a week ago, braved the shrill noise. Journalists at the scene said a Bloomberg television reporter was attacked before being detained. In Beijing, trucks normally used to water the streets drove repeatedly up the busy commercial shopping district spraying water and keeping crowds pressed to the edges. While there is little sign of the popular revolt that has swept the Arab world, the authorities in China remain sensitive to the risk that disenchantment among the public could spark unrest. They have reportedly detained more than 100 activists recently in what Chinese human rights defenders described as the biggest crackdown in five years.

Improving prosperity and living standards have been the key for the Communist Party to retain legitimacy, and high inflation, a factor behind the disenchantment that led to the 1989 Tiananmen Square protests, is seen as a threat.

This is especially true in a country where income disparities have grown, with the Gini coefficient of income inequality, which measures inequality on a scale of zero to one, estimated to have reached about 0.47, well above the “warning” level of 0.40 of a decade ago. For comparison, the Gini coefficient is below .34 in most of western Europe, above .45 in the United States, and above .60 is South Africa.

Mr Wen said yesterday, a month after annual food price inflation was recorded at 10.3 per cent: “Rapid inflation affects people’s livelihoods and may affect social stability.

“I know the impact that prices can cause a country and am deeply aware of its extreme importance.”

Mr Wen said China was downgrading its annual economic growth target from eight per cent to seven per cent, after signs of overheating. As well as heavy inflation in food and other goods, property prices remain high, stoking fears of a bubble, and Mr Wen yesterday promised “unwavering determination” to control the market.

Ren Xianfang, a Beijing analyst at the research company IHS Global Insight, said the authorities have been "pretty serious" about curbing inflation. After multiple interest rate rises, curbs on bank lending and other actions, Ms Ren said the biggest threat might be that measures to cool the economy go too far.
The critical concern for the government was to overdo it, she said. "It's a double-edged sword. We want to control inflation. The cost is the possibility of a slowdown in the economy. That will hurt employment."

China is preparing to reveal further details of its 2011-to-2015 five-year plan at the annual meeting of its National People’s Congress legislature early next month. This is expected to signal further attempts to move the economy away from its reliance on exports to instead being sustained by domestic consumption.

Some analysts have also questioned whether China’s central authorities will be able to rein in local officials focused on achieving high growth targets, and implement the sometimes painful reforms required for the economy to be reconfigured.

The environment, which in China suffers from heavy air, waterway and soil pollution, desertification and other problems, would be given a higher priority in the coming five-year plan, Mr Wen said.
"We'll never seek a high economic growth rate and size at the price of the environment, as that would result in unsustainable growth with industrial overcapacity and intensive resource consumption," he said.

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