China’s government is widening its anti-inflation campaign, on Wednesday ordering a crackdown on speculators it accuses of illegally pushing up commodity prices.
The order comes as Beijing enforces measures announced last week to cool food prices that soared more than 10 percent in October. Analysts expect Beijing to hike interest rates in coming months to rein in inflation even as Washington and other major developed economies try to shore up lacklustre growth.
On Monday, the government banned hoarding of oil and coal.
“Illegal operators are using swindling, conspiring, price-fixing and hoarding to push up commodity prices,” said the Cabinet’s National Development and Reform Commission in a statement.
Local authorities are ordered to “severely investigate speculative activities and safeguard market and price order,” the agency said.
Chinese families spend up to half their incomes on food. Inflation so far is limited mostly to food, but analysts say price pressure could spread to other areas unless Beijing hikes rates and tightens credit. They blame money flooding through the economy from Beijing’s multibillion—dollar stimulus and two years of massive lending by state banks.
Communist leaders are trying to guide China’s rapid expansion to a more sustainable level after growth eased to 9.6 percent in the three months ended September, down from a post—crisis peak of 11.9 percent in the first quarter.
The government has ordered banks twice in the past three weeks to raise the amount of money they hold in reserves to rein in lending growth.
Food subsidies to poor families
Last week, Beijing promised to boost vegetable production, pay food subsidies to poor families and increase supplies of diesel needed by farmers and truckers. It said it might impose direct price controls if necessary.
Wednesday’s announcement said speculators were driving up cotton prices, which have surged in recent months. It gave no details of other commodities believed to be targeted by price—manipulation.
Energy industry analysts say the diesel shortage was caused in part by state—owned oil companies holding back supplies in hopes Beijing would raise retail prices in line with higher global crude costs.
In Beijing, city officials will give 100 yuan ($15) in food subsidies to each of the Chinese capital’s 223,000 low—income residents this month, the official Xinhua News Agency said.
Keeping meal prices stable
Local governments in other areas are handing out subsidies and giving money to university cafeterias to keep meal prices stable, Xinhua said.
The government of Shaanxi province in the northwest has allocated 60 million yuan (about $9 million) to help subsidize campus meals, the report said.