Inflation Jiujitsu in Shanghai

Rare it is to admit – but I am coming to realize that inflationary pressures can have their bright sides.

Recently I have run across various claims to the effect that the Chinese Government is attempting to impose price controls in some food markets to hold back inflation. Given the historical zero success track record of such measures, it is hard to believe that anyone with some historical knowledge could believe they might “work”. [Though perhaps in today’s ‘ahistorical’ day and age that’s precisely the catch.]

Perhaps more to the point, it is even harder to imagine that Chinese food markets, with their fine-tuned ability to undermine virtually all government attempts at interference, could ever be effectively controlled at the point of sale. 

Carrot Market Crash

After several months of constant rises – the retail price for one jin of carrots had risen from under 2 kuai to around 3 kuai -I was surprised to discover that prices for fresh fruits and vegetables HAD in fact come down – by almost 33%! Prices fell as far as 2 kuai before rebounding to around 2.50 at the moment.

Today I found out what happened.

How The Deed Was Done

The government, no doubt afraid of inflation hitting too close to home, abolished all highway tolls for trucks carrying vegetables. Since the government owns all roads and extracts tolls for their use, this essentially amounts to a significant tax cut. Truckers coming from 500 kilometers away can probably save 1000 yuan per load – quite a bit in the vegetable world. Since the government does not permit competition for its road monopoly, this is the equivalent of a tax cut – always welcome.

The other noticeable measure taken was to minimize harassment of street vendors. The ‘city guard’ (城管) is otherwise always lurking somewhere, waiting to extract bribes or goods from the ubiquitous street vendors. Since at least 6 weeks they are no-where to be seen. I dare say few will miss them.

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One Response to Inflation Jiujitsu in Shanghai

  1. Pingback: Electronic Currency Trading in China | Aha Moments

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