China's Wen says price rises threaten social stability

By @ibtimes on

Rapid price rises in China have affected social stability, Chinese Premier Wen Jiabao said on Sunday, telling citizens that taming inflation is a government priority that he is sure can be met.

Wen, speaking in an online forum ahead of China's annual parliament session from March 5, did not cite specific examples of how social stability had been affected, but his comments reflected the sensitivity among top Communist Party leaders to public grumbling about rising real estate and food prices.

Rapid price rises have affected the public and even social stability, Wen said.

Wen said China has ample grain and abundant foreign exchange reserves that would help to keep price rises in check.

The Party and government have always made a priority of keeping prices at a generally stable level, he said during the online chat.

Chinese inflation was lower than forecast in January at 4.9 percent, compared with a year ago, but price pressures remain strong enough to demand deeper tightening. Food prices rose 10.3 percent.

China raised interest rates on February 8, the third rate increase since China began a monetary tightening cycle in earnest in October. It announced the previous rate rise on December 25.

Beijing has also imposed a slew of measures to target property prices that have stayed stubbornly high. The country's leaders, aware of public anger over unaffordable housing, have said they would not tolerate property inflation and speculation.

Even so, housing prices have continued to climb. New home prices climbed in January from a year earlier in 68 of the 70 major cities tracked by the National Bureau of Statistics, with 10 of them registering double-digit growth.

There must be unwavering determination to contain investment and speculative demand in housing. We're adopting economic and legal measures, as well as when necessary administrative ones, Wen said.

I'm confident that through our efforts, we'll see results in reining in speculative and investment purchases of housing.

There are no signs of the relatively mild price pressures in China sparking major social unrest, but the ruling Communist Party is wary of any signs that public complaints could coalesce into deeper discontent that corrodes top-down control.

That wariness has been amplified by official jitters about reverberations from the unseating of authoritarian rulers in the Middle East.

Wen said the government was determined to stamp out corruption, and cited the recent dismissal of the Liu Zhijun, the former railways minister suspected of corruption.

I have in fact said before that if price rises become linked to the problems of graft and corruption, that will be enough to spark public discontent, and even create serious social problems, Wen said.

The Premier did not say how the government might use its foreign exchange reserves to combat inflation.

The head of China's State Administration of Foreign Exchange (SAFE), Yi Gang, said on Saturday that the government could not invest much of the forex reserves in the global commodities market because doing so would only push up the prices of the raw materials the economy depends on.

(Reporting by Chris Buckley; Editing by Ken Wills)

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