Thursday, January 17, 2008

Chinese Price Controls...

Prices are going up in Mainland China, so the Government has enacted price controls. From today's SCMP editorial...

"The tough measures introduced yesterday to cap soaring food prices on the mainland clearly signal that Beijing is seriously concerned about inflation - and determined to combat the problem. These are the most stringent controls on the prices of basic necessities for 15 years. Their introduction shows that even as the mainland continues to move ahead with free-market reforms, the government is not afraid to use tough administrative measures when it believes they are necessary."

The tone of the editorial suggests that price controls represent a difficult, but ultimately effective, policy to combat increasing inflation. I'm far more sanguine. Price controls never have been, and in my view never will be, an effective policy to try to lower inflation- see my earlier posts here and here for more.

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