China has formally announced a series of measures to fight consumer price inflation that dump the task squarely in the laps of local officials. The State Council has instructed local governments to boost farm production, stabilize supply and lower food and fertilizer prices, all while ensuring coal, power and oil and gas supplies are uninterrupted. Local officials have also been given authority to impose local price controls where necessary on daily necessities and raw materials. Other measures range from suspending road tolls for vehicles carrying farm produce to clamping down on food hoarding. Most of the measures have been trailed over the past few days.
Decentralizing their implementation is probably the only realistic way of administering the new measures, though it means that the effects are likely to be patchy. It also means that central and local government officials will bear a common political responsibility for their success. Another way of looking at that is that Beijing will have a convenient whipping boy if food prices remain high. As we and many others have noted, for all their political sensitivity high food prices are the symptom not source of China’s inflation. The excess liquidity slopping about the system is the underlying economic cause, and dealing with that falls firmly in the lap of central government.
China Bystander 