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The Honolulu Advertiser
Posted on: Thursday, September 20, 2007

China orders price freeze as inflation surges

By Joe McDonald
Associated Press

BEIJING — China's government has ordered some prices frozen and told officials to closely monitor others in its most drastic step yet to contain a surge in inflation.

The order, issued late yesterday, came after inflation rose to 6.5 percent in August — its highest monthly rate in 11 years — propelled by a double-digit rise in politically sensitive food prices.

The order stressed the importance of maintaining "market stability" ahead of a key Communist Party meeting next month. It said controlling inflation would affect China's development, reform and stability.

Government-set prices would be frozen under the order, though it did not specify which items were covered.

A list on the Web site of the Beijing city government planning agency said products for which the state still controls prices include cooking oil, sugar, tobacco, salt, coal and fertilizer.

The immediate impact of the measure appeared to be only psychological, because it did not change any prices.

Market order must be maintained to ensure the "smooth opening of the 17th Party Congress," said the order. It was issued jointly by key economic agencies, including the ministries of finance, agriculture and commerce and the cabinet's planning body.

The congress, held once every five years to appoint senior leaders, opens Oct. 15 and is expected to see President Hu Jintao consolidate his power by promoting allies to key posts.

Communist leaders are especially worried about the political impact of soaring food prices, which hit China's vast, poor majority especially hard.