Iron Rice Bowl?

31 December 2007



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China to Tax Food Exports

The People's Republic of China is an improvement over every previous Chinese regime in that there are no people in the PRC dying of hunger. At least, that's what the official statistics say. At the same time, food prices are soaring as a result of declining supply thanks to exports. To address this, the communists in Beijing are imposing export taxes on food.

The Chi-Coms take inflation very seriously. They have raised taxes six times in the past 12 months to address the problem. They are also hesitant to let their currency float freely for fear of, among other things, importation of inflation. Nevertheless, food prices in the PRC rose 18.2% in November, year over year.

This is odd since China is the world's largest grain producer. If the grain didn't leave the country, the result would be, at least, stable prices if not falling prices. So, the country has scrapped a 13% rebate on major grain exports in an effort to increase domestic supply Moreover, the Financial Times says, “Starting on January 1, exporters of wheat, rye, barley and oats will be required to pay a 20 per cent tax, while exporters of corn, rice and soya beans will have to pay 5 per cent.”

China has grown richer by the export method of growth. However, that inevitably results in a relatively wealth middle-class consumer who expects pork instead of tofu, bread rather than rice, and three meals a day with some kind of choice.

Of course, this also means that prices elsewhere will rise. In America, the Bush administration has decided to subsidize corn farmers who sell their wares to energy companies rather than to bakeries, in an odd attempt to reduce obesity through driving. One can't eat calories that go into the gas tank. More importantly, with fewer Chinese grains in the global market, the price will rise for those least able to pay for it. Hunger will increase, and that is never good for political stability.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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