Earlier in the week Beijing announced that it was going to start imposing price controls on key commodities in advance of Chinese New Year. Today, they laid down the law. According to Xinhua, it goes something like this: feel free to raise your prices, but make sure to send us an application for the price hike after you hike it. After that:
The government should notify the enterprises within seven work days after it gets the applications from the enterprises whether to approve or reject the schemes on the basis of whether the price rise range is reasonable, noted the circular.
Then, after seven days, the business may be required to roll-back the price-hike, either partially, or totally. In other words, Chinese wholesalers and retailers now have nothing but incentives to run up their prices, testing whether Beijing will approve the hikes (how many people are reviewing these applications at the NDRC?), and then running them up some more. The madness will stop, I believe, only after the lifting of the price controls. And, in a Shanghai Scrap worldwide exclusive, I have definitive proof that this is exactly what is happening. Exhibit #1:
Yesterday, this innocuous bag of “American Classic Flavor” potato chips cost me RMB 3.2 (or US$.44, by today’s declining exhange rate) at the neighborhood chain convenience store where I typically buy this sort of thing
This evening, while at the chain convenience store for something else (I don’t indulge that often), I couldn’t help but notice that the price had risen to RMB3.6 (US$.49). That’s right: in my neighborhood, at least, the price of potato chips went up 11% overnight (I double-checked with the cashiers). By the current government circular, this convenience store (actually, its home office) must file an application explaining this price hike within 24 hours. I would dearly like to see that application, and I’ll gladly offer a reward – something of value – to anyone who can produce it. In the meantime, it’s time to start hording (potato chips).