Subsidies Ending for Meat, Fish, Eggs : China Hikes Food Prices in Peking

China on Thursday took the most politically risky step yet in its economic reform program, announcing that the price of meat, fish and eggs in Peking will be raised by an average of more than 50% beginning today.

The higher prices are aimed at eliminating government-subsidized food prices and subjecting these products to the forces of supply and demand.

Officials said they will give every resident of the city 7.50 yuan a month, about $2.65, to help offset the increased prices. They said this amount is more than adequate to meet the higher prices. Also, many workers and government employees are scheduled for a wage increase soon.

Peking shoppers responded to news of the higher prices by crowding into food and department stores in the hope of buying virtually anything edible. Ordinary Chinese have no freezers and, at best, relatively small refrigerators, so canned foods were selling at a premium Thursday.

“Ordinarily, we Chinese don’t like canned pork,” one shopper said, “but people are buying it today.”

The prices of the most important food items--rice, bread, other grains and cooking oils--will be held at current levels. But the prices of about 1,800 non-staple food items will be raised substantially and then allowed to float.

The higher prices will have a greater impact on daily life than any other aspect of China’s economic reform program. The government appears to have taken extraordinary care to avoid the sort of political protests that have accompanied price rises in other countries, among them Poland and Egypt. It announced the plan to overhaul the price system six months ago. In the past month, it has carefully tested the waters by raising prices on certain food items in 22 other cities. Price controls on pork were lifted last month in Shanghai.

The authorities waited until now to disclose the price changes for Peking, which is not only the seat of government but also the place where many of China’s most important protest movements have originated.

Huge Upsurge in Demand

In an effort to reassure the public, Peking officials allowed stores to stay open until midnight Thursday. They also brought in extra supplies in an attempt to meet the huge upsurge in demand by people anticipating the higher prices.

Word of the impending increases began to spread early in the week, and people crowded into the stores to get their last baskets of relatively cheap food. The Xidan market, Peking’s largest, was so crowded that some entrepreneurs set up shop outside, selling canned goods to shoppers who couldn’t buy inside.

Beginning today, pork prices in Peking will rise by 37% to 67%, depending on the quality of the meat. Beef prices will be 120% to 130% higher, and egg prices will be raised by 18%. The cost of some varieties of fish will go up by more than 300%.

Officials said that restaurant prices will be raised in line with food costs.

For years, the authorities have kept food prices down by buying commodities from producers and selling them to consumers at lower prices. According to Deputy Mayor Han Boping, the city has been spending about 400 million yuan a year--about $143 million--on these indirect subsidies.

Han said the government will not save any money at the outset, because the 400 million yuan will be distributed among the people to offset the higher prices.

A Western analyst said he was stunned by the size and scope of the price increases. He said he had heard of price increases of 15% to 20% on some food items in other cities, and added: “But 50% on the average? It seems to me that’s a pretty hefty jump.”

Even after the changes take effect, food prices in Peking will still not be determined completely by market forces. After the prices are raised, they will be allowed to float only within limits. Peking has assigned 11,000 inspectors to ensure that there are no unapproved price increases.

“Because ours is a planned economy,” Deputy Mayor Han said, “the government will take measures to ensure that the prices are relatively stable.”