Thursday, March 27, 2008

China to support grain farmers in inflation fight

China will soon increase its subsidies for farmers who plant grains and raise its minimum purchasing prices for grains as part of efforts to fight inflation, the cabinet said on Wednesday.

In a regular meeting, the State Council decided to take the action as part of an overall increase in incentives for farmers to plant grains and guarantee adequate supply of other agricultural products, the official Xinhua news agency said.

"Stepping up agricultural production plays a crucial role in maintaining sound yet rapid economic growth, keeping inflation in check and maintaining overall stability," Xinhua said the meeting concluded.

The report was short on details, but it said more specific implementing regulations would be issued soon.

China is facing its worst inflation in nearly 12 years, and has pledged to take a range of steps to check price rises.

Increases in grain prices have so far been modest. They rose by 6 percent in the year to February, compared with 8.7 percent for overall consumer inflation and 41 percent for cooking oil.

But some economists have expressed concern that, with prices for vegetables and meat rising more quickly than those of staples like rice, wheat and corn, farmers could have less of an incentive to plant them, leading to future supply shortages.

Premier Wen Jiabao said earlier this month the country's grain reserves stood at 150-200 million tonnes, adding that it was sufficient to keep grain price rises in check.

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