China Raises Price of Staples in Risky Reform

China has quietly begun raising the state-set consumer prices of many daily necessities in a risky economic reform move that is already prompting hoarding and price speculation among residents of Beijing.

The government has made no detailed public announcement about the potentially disruptive hikes, beyond statements saying that price reform is an economic necessity.

Officials fear a return of the widespread panic buying that struck Beijing in the summer of 1988, when the government tried to free prices of staples.

The State Price Commission declined to discuss the increases. But Beijing residents, store clerks and traders said home heating coal, liquid propane and cotton goods had already gone up, and price hikes in other basic goods were in the works.

The latest hike came Wednesday, when the price of cotton clothing rose 20%. Widespread rumors early this week sent droves of worried shoppers to state-run stores where they snapped up cotton goods by the bale.

Price reform is the most sensitive of the market-oriented changes envisioned by the government. China has kept prices in its restive cities artificially low for decades through steadily increasing government subsidies, forcing huge spending deficits.

Since the government crushed the pro-democracy demonstrations of the spring of 1989, officials have paid more attention to ensuring stability than restructuring the economy, and have shelved most measures that could spark unrest.

But ballooning deficits and lack of vigor in China’s balky economy are forcing the government’s hand.