Beijing, Jan. 16 - China on Wednesday issued a list of producers of daily necessities that must apply for government permission to raise prices, fleshing out a cabinet decision last week to begin direct market intervention to curb inflation.
Consumer inflation reached an 11-year high of 6.9 percent in the year to November, setting alarm bells ringing in the halls of power.
The State Council, or Cabinet, said on Jan. 9 that it would maintain a freeze on energy prices and would temporarily intervene in the market to hold down prices of essential goods.
The National Development and Reform Commission (NDRC), the top economic planner, said that all major producers or processors of flour, rice, noodles, cooking oil, milk and liquefied petroleum gas must apply to provincial or central governments for the go-ahead if they want to increase prices.
The requirement went into effect on Monday, the NDRC said.
Nationwide firms such as Uni-President China Holdings Ltd , a big instant noodle maker; Luhua Group, an edible oil heavyweight; and major dairy firms Inner Mongolia Yili Industrial Group and Mengniu Dairy need to get the nod from the NDRC itself before raising prices.
"This is to stabilise market expectations and price levels," the NDRC said in a statement on its Web site.
The agency said that large wholesalers and retailers of daily necessities including grain, cooking oil, meat, milk, eggs, milk and liquefied petroleum gas should notify the authorities within 24 hours of any one-off price rise of more than 4 percent.
They also need to give notification if they raise prices by 6 percent over a 10-day period or by 10 percent in a month.
The authorities are empowered to reverse the price increases if they judge them to be inappropriate, the NDRC said.
The intervention would cease once prices stabilise, the planner said, adding that increasing production had to be at the heart of efforts to cap inflation.
Beijing is sensitive to inflation not just for its economic implications. Rapidly rising prices have in the past been a spark for social unrest, meriting extra attention from policy makers.
Data due to be issued next week will probably give authorities only limited comfort.
Official sources told Reuters earlier this week that inflation in the year to December eased to 6.5 percent, off an 11-year high of 6.9 percent in November.
But Merrill Lynch economist Ting Lu noted that if that figure proves accurate, it would imply a quickened pace of month-on-month inflation -- to 0.93 percent in December from 0.7 percent in November.
"We believe the MoM inflation is a better measure of short-term price movement and inflation pressure is still high in China for the moment," Lu said in a note to clients.