With prices increasing at up to double-digit rates, especially for key commodities, Premier Wen Jiabao has acknowledged the risk of public unrest.
As police in China quell protests, premier promises action on inflation
BEIJING // Rampant inflation in China threatens social stability, the premier, Wen Jiabao, warned yesterday, as scores of police were deployed in the country's two largest cities to quell scheduled protests.
With prices increasing at up to double-digit rates, especially for key commodities, Mr Wen acknowledged in an online question-and-answer session the risk of public unrest.
Shortly after he made his comments, scores of police were deployed in Wangfujing street, the capital's main shopping area a few hundred yards from Tiananmen Square, following online calls for protests modelled on those that have toppled leaders in Tunisia and Egypt and caused turmoil in Bahrain and Libya.
While there was no obvious sign of protesters, uniformed and plain-clothes officers blocked or pushed away camera crews and journalists. The police filmed those who had congregated.
One camerawoman was shoved inside a shop as she tried to film before being taken away by two men, and there were reports of several other journalists, photographers and camera crew being detained.
The police presence and response was heavier than a week earlier, when there were similar calls for peaceful protests in favour of political reform.
In Shanghai, police blew whistles and shouted at people to keep moving, according to the Associated Press, yet nonetheless about 200 onlookers and sympathisers congregated near the city's People's Square. Journalists at the scene said a Bloomberg News television reporter was attacked before being detained.
While there is little sign of popular revolt, the authorities in China remain sensitive to the risk that disenchantment among the public could spark unrest. They have reportedly detained more than 100 activists recently in what Chinese Human Rights Defenders described as the biggest crackdown in five years.
Improving prosperity and living standards has been key for the Communist Party to retain legitimacy, and high inflation, a factor behind the disenchantment that led to the 1989 Tiananmen Square protests, is seen as a threat.
This is especially true in a country where income disparities have grown. One measure of inequality, a statistic known as the Gini coefficient, which rates inequality on a scale of zero to one, is estimated to have reached about 0.47 in China, well above the "warning" level of 0.40 of a decade ago. In Canada and many north-west European countries, the index is below 0.35, although in many developing countries it is above 0.50.
"Rapid inflation affects people's livelihoods and may affect social stability," Mr Wen said yesterday, a month after annual food price inflation was recorded at 10.3 per cent.
"I know the impact that prices can cause a country and am deeply aware of its extreme importance."
Mr Wen said China was downgrading its annual economic growth target from eight per cent to seven per cent, following signs of overheating.
As well as heavy inflation in food and other goods, property prices remain high, stoking fears of a bubble, and Mr Wen yesterday promised "unwavering determination" to control the market.
The authorities have been "pretty serious" about curbing inflation, said Ren Xianfang, a Beijing analyst at the research company IHS Global Insight. Following multiple interest rate rises, curbs on bank lending and other actions, Ms Ren said the biggest threat might be that measures to cool the economy go too far.
"The critical concern for the government is ... [not] to overdo it," she said. "It's a double-edged sword. We want to control inflation. The cost is the possibility of a slowdown in the economy. That will hurt employment."
China is preparing to reveal further details of its 2011 to 2015 five-year plan at the annual meeting of its National People's Congress legislature early next month. This is expected to signal further attempts to move the economy away from its reliance on exports to instead being sustained by domestic consumption.
Some analysts have questioned whether China's central authorities will be able to rein in local officials focused on achieving high growth targets, and implement the sometimes painful reforms required for the economy to be reconfigured.
The environment, which in China suffers from heavy air, waterway and soil pollution, desertification and other problems, would be given a higher priority in the coming five-year plan, Mr Wen said.
"We'll never seek a high economic growth rate and size at the price of the environment, as that would result in unsustainable growth with industrial overcapacity and intensive resource consumption," he said.