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The following article was published in our article directory on November 18, 2010.
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South Korea Response Price Rise Practice Worth Learning

Article Category: Business Management

Author Name: xia zihui

The recent rapid rise in food prices has caused great concern, the authorities have recently introduced policies to control food prices rising too fast. National Development and Reform Commission and other ministries and local governments may follow the introduction of a package of measures to control price increases, which may include specific limit, the "basket" mayor in charge of the system, such as price subsidies, and punish hoarding. Rapid and continuous rise in the price range of more than limit, the government may take administrative measures to limit prices continue to rise.

In recent months, China's price level continues to rise, especially food, vegetables and other daily consumer goods prices rose too fast, which has affected the normal life of urban residents, the Government is highly concerned about the introduction of control measures and management as it should be, but the "limit" and other direct administrative intervention as the first but people do not agree.

Grain, vegetables and other food prices rising rapidly for many reasons, but one of the most important reason is the cost of the promotion. In the context of inflation, with the industrialization and urbanization process accelerated, combined with resources such as oil prices rose sharply, agricultural production of three "basic cost" --- production, rigid labor and land prices rose gradually become the norm. Production costs, the price of natural follow up. In this case, the policy of taking direct limit, it is likely that vendors do not want to distribute agricultural products, the production will also affect the enthusiasm of farmers, which further exacerbated the shortage of food --- the result is likely to be: prices have come down But, it is very difficult to buy the.

So, how should the government do? Let us look at how South Korea is doing. October, South Korea, vegetables and other fresh food prices rose 49.6%, the highest since 1990, the highest on record. Two years, the Korean people's favorite food --- cabbage kimchi, the price of raw materials, 30 times, this "kimchi crisis" and even shocked the world. In this regard, the Korean government has taken two major steps: first, from November 1 onwards, the lower gas costs an average of 4.9%. Second, the increase than in previous years the high price of garlic, peppers, onions and other food imports and, at the end of November focus on the market. After mid-October, due to the Government to relax and increase imports of related products, fresh vegetables prices have begun to fall.

It is obvious: to reduce the price of gas either directly reduce the burden on the residents, but also inflation expectations. The increase in imports is to expand the supply, demand and supply through the market mechanism to stabilize prices. Many people may ask: South Korea is also lower gas costs without direct administrative intervention? Yes. But gas costs already in the price of government control within the Government to reduce gas prices is not market intervention. To sum up, the Korean experience is the "two-pronged approach": that is within the scope of government regulation in the use of administrative means, and in the markets is the use of market mechanisms. And we will do the opposite: to accelerate the rise in prices, inflation is expected to continue to enhance the situation, many local governments are gearing up for or holding natural gas and other resource prices increase the hearing, this is not the fire poured oil? Within the administrative control of public goods prices, the Government does not limit, has to go to the market "limit", what is truth?

Of course, the "limit" is still just a legend, a formal policy has not yet introduced. Hope that relevant departments in the study and formulation of policy control prices of thinking completely abandoned the planned economy, and fully respect the laws of the market and must not not help but add to the trouble that the introduction of the measures.

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