When will we learn? China announced earlier this month that they would impose price controls on commodity prices and provide some subsidies to stem their increasing inflation. Inflation has moved to 4.4 percent most on the back of higher food and energy costs. The inflation rate is up only 1.3 percent when food and energy are taken out of the equation.
There has been a clear price shock on food and this has a greater impact on living standards for poorer countries that spend that spend more income on food. However, the textbook response to price controls is clear. There will be shortages and hoarding. This is less likely in a controlled economy but it will still occur. There is a clear reason for why food exports to China have increased.
There has been a clear price shock on food and this has a greater impact on living standards for poorer countries that spend that spend more income on food. However, the textbook response to price controls is clear. There will be shortages and hoarding. This is less likely in a controlled economy but it will still occur. There is a clear reason for why food exports to China have increased.
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