BEIJING: China's government Wednesday announced food subsidies for poor families as it tries to cool a double-digit surge in prices that communist leaders worry might stir unrest. The Cabinet promised to ease shortages of vegetables and grain that helped push up food prices by more than 10 percent in October. It promised more supplies of diesel to end fuel shortages that have disrupted trucking and industry. The Cabinet said it was not ordering direct price controls but said they could be imposed if necessary. The statement gave no details of the subsidies or how the government would try to increase food supplies. Inflation is politically volatile in China, where poor families spend up to half their incomes on food. Rising incomes have helped to offset price hikes, but inflation erodes gains that help support the ruling Communist Party's claim to power. “Inflation is one of the biggest political issues today,” said Robert Broadfoot, managing director of the Political and Economic Risk Consultancy in Hong Kong. “I think you're going to see isolated demonstrations over living costs.” The jump in food prices, which has been blamed on summer storms that damaged crops, pushed inflation to a 25-month high of 4.4 percent in October – well above the government's 3 percent target. Surging food prices are not confined to China with agriculture in other countries also hurt by unpredictable weather from drought to storms and floods. The UN Food and Agriculture Organization Wednesday said global prices of most commodities are up sharply from last year and further spikes are likely unless production of major food crops rises. The international community must remain vigilant against further supply shocks in 2011, the FAO said in its Food Outlook report. The Chinese announcement said Beijing will release stockpiles of grain, cooking oil and sugar to increase supplies in the market. It promised more money to subsidize school meals for poor children and said local authorities were ordered to increase supplies of vegetables. The jump in food costs came as Beijing is trying to steer China's rapid growth to a more manageable level and restore normal conditions following its stimulus-fueled rebound from the global crisis. Banks were ordered last week to increase reserves to curb loan growth. A report by a government think tank this month suggested inflation might be even higher than reported because official data fail to fully account for costs of services and housing. The economy also faces strains from diesel shortages triggered by government conservation efforts. Authorities have imposed rolling blackouts on factories to meet energy-saving goals, prompting thousands to buy their own diesel-powered generators, which boosted demand at a time when industry analysts say China's major state-owned oil companies are withholding supplies in anticipation of a rise in the government-set price. That has led to rationing and long lines at filling stations, disrupting cargo shipments.
