China Imposes Price Controls on Regional Retailers to Counter Inflation

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Dec. 10 – Faced with pressure from rising inflation and the whole of China’s attention to the coming November Consumer Price Index (CPI) that is speculated to peak when released on Saturday, China is starting to implement various price control measures and retailers in Kunming, Yunnan Province seem to be the first to face such temporary price ceilings.

A municipal government announcement released in Kunming on December 3 says the government will impose temporary price ceilings on various daily necessities. It requires five major retailers in the city including Walmart, Carrefour, Metro Cash & Carry International, ParknShop, and a domestic convenience store chain Yunnan Zhijia to report any price adjustments and give reasons for changes 48 hours in advance.

In addition to the five retailers, the announcement also listed other food, dairy products, cooking oil and beverage producers and requests them to apply for price alteration from the city’s Development and Reform Commission 10 business days in advance. Other daily necessities such as main food, vegetables, power and water also face price ceilings. The temporary price control that already started on December 3 will not stop until February 28, 2011.

China’s central government did not deny the possibility of price ceilings outside Yunnan Province. According to a report on China Business News on December 10, the central government said it would impose price ceilings in places when necessary to curb inflation.

The CBN report also cited words of Soul Lam from Aeon Stores (Hong Kong), to further confirm the rising government price intervention. As the managing director of the Hong Kong-based retailer who is engaged in General Merchandise Stores operation, Soul believes the government “has started to intervene” and it will “not allow prices to rise beyond a certain level.” Soul also compliments the price control as “a good thing for consumers,” and points out the necessity of such measures because although huge, the Chinese market is “not mature enough.”

Despite enjoying rapid economic growth during the past year, the Chinese government has been warned of the inflation risk and the surging CPI over the past 10 months. While a majority of economists expect November’s CPI will reach a local high and the stock market reacts to speculation of another bank interest rate raise, China receives mounting pressure to implement new monetary policies.