- The Washington Times - Saturday, August 18, 2007

BEIJING (AP) — The government slammed Chinese instant-noodle makers yesterday as being partly to blame for a surge in inflation, saying they illegally colluded to boost prices by up to 40 percent in a scheme that has prompted public outcry.

The report came amid a nationwide probe into whether price-fixing or hoarding by producers is to blame for a 15.4 percent jump in food prices in July over the year-earlier period. The government accused the companies of damaging social stability.

Managers of China’s major noodle companies met three times since December to illegally set prices, the Cabinet’s National Development and Reform Commission announced.

Their collusion “seriously disturbed market-price order, harmed normal competition among managers and injured consumers’ legal rights,” the agency said on its Web site.

The NDRC cited no individual companies or managers and gave no indication of what penalties they might face. Phone calls to the agency were not answered.

Chinese law allows for companies to be fined up to five times the illegal income from price-fixing, and possible confiscation of business licenses in serious cases.

Noodles are a staple of the Chinese diet, and the price increase prompted public complaints on Internet bulletin boards and appeals for a government investigation.

An official of China’s branch of the International Ramen Manufacturers Association, quoted by the official Xinhua News Agency, defended the price increases as a response to soaring raw-material costs.

The price of palm oil, which accounts for 18 percent of the cost of noodles, has more than doubled to 8,200 yuan ($1,100) over the past year, said the official, Meng Hesu.

He said profit margins were cut to just 1 percent to 2 percent.

“If we don’t lift the prices, there will be no profit,” Mr. Meng was quoted as saying.

Among other food items, pork prices have risen the fastest, jumping by 86 percent in July over the same month last year. Authorities blamed the rise on a shortage of pork caused by farmers’ reluctance to raise pigs when prices were low earlier. A virus that resulted in the deaths of more than 100,000 pigs in China also boosted prices.

Premier Wen Jiabao promised to increase pork production by offering farmers free vaccinations and other aid. Local authorities were ordered to pay subsidies to the poor.

The cost of eggs was up 30.6 percent in July, and that of edible oil up 30.1 percent, according to government figures.

Food processors are squeezed by intense price competition in China’s crowded grocery industry, which blocks them from passing on rising raw-material costs.

The NDRC said earlier its investigators also will look into why prices of grain, vegetable oil, pork, beef, mutton and poultry are rising so fast.

“Some industry groups have organized coordinated price rises,” the agency said in an Aug. 3 statement. It said the collusion “influences social stability.”

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