China Lifts Price Controls on 4 Foods

China has lifted price controls on four major food items, risking further inflation in a bid to end shortages and cut costly subsidies it can no longer afford.

The People’s Daily announced Friday that Peking will lift controls on vegetables, pork, eggs and sugar nationwide, although local governments could decide how rapidly to implement the measure.

The newspaper said urban residents would receive 10 yuan ($2.70) a month to help compensate for price increases. Western diplomats said authorities hoped this added expense would be temporary, and that the whole package would eventually reduce state costs.

“This measure has two advantages,” the People’s Daily said. “It will make the public understand government policy and help reduce the state’s financial burden.”

Western analysts thought the move was a huge gamble. Prices are certain to rise, at least in the short term, and people are already discontented over inflation running at record levels.

Sensitive Time

One Western diplomat said the government was gambling that the lifting of controls would raise output and supply, with the compensation temporarily cushioning public anger and keeping protests off the streets.

“The leadership has decided the old system of rationing and administrative controls was not curing inflation but causing it,” he said.

The ambitious reform came at a sensitive time. Retail prices rose 11% nationwide in the first quarter of 1988.