A few weeks ago, Momagri alerted its readers to the new measures taken by China to combat volatility in agricultural markets1. These measures included penalties of up to 120,000 euro for offenders who had made large profits by speculating on agricultural produce.
The Chinese government is now confirming this policy: on June 1st, it again intervened to restore prices for certain agricultural products to a “balanced level”, according to a senior official from the National Development and Reform Commission. It is true that some prices, such as those for garlic and green beans, have rocketed since 2009, due to a combination of two factors: firstly, a supply shortage in the country which accounts for three-quarters of world production, and secondly, an excess of liquid assets in circulation. In 2009, for instance, the price of garlic rose by 560%.
Faced with this new speculative bubble, the Chinese government has decided to introduce not only penalties, but also an early-warning system and regulation of online financial markets, regarded as the primary channels for speculative trading.
Ensuring agricultural price stability has therefore become an urgent priority for the Chinese government, which is no longer reluctant to publicize its new policy to fight speculation. This is strong medicine from the Chinese authorities, who are nevertheless aware that increases in agricultural prices are vital for stimulating investment on the part of farmers and thus ensuring food security in the long term. This was recently affirmed by Li Guoxiang, a researcher at the Rural Development Institute of the Chinese Academy of Social Sciences. This example shows that efforts to fight speculation in agricultural products may sometimes result in brutal forms of interventionism – a compelling reason, in Momagri’s view, for major international negotiations to establish global rules in matters of market governance and regulation.
1 China takes steps to fight price volatility in agricultural markets, http://www.momagri.org/UK/a-look-at-the-news/China-takes-steps-to-fight-price-volatility-in-agricultural-markets-_700.html, 14 June 2010