Inflation continues to accelerate, and China's answer = Price Controls?

China to Cap Energy, Utility Prices to Cool Inflation
By Li Yanping
Jan. 9 (Bloomberg) -- China will freeze price increases of oil products, natural gas and electricity in the ``near term,'' Premier Wen Jiabao said, as the government tries to curb inflation at an 11-year high.
The government will cap costs of daily goods when necessary, stop increases of fees for public transportation and school tuition and step up a crackdown on price manipulation, Wen said at a State Council meeting today, according to a statement posted on the government's Web site.
``Prices of crude oil, grains and other primary products are still rising on the international market, and China faces relatively large pressures of further price increases,'' Wen said, without specifying how long the controls will last.
Inflation in the world's fastest-growing major economy surged to 6.9 percent in November, the fastest since 1996, and was named by policy makers as one of the two major economic risks for 2008, along with overheating. The central bank pledged a ``tight'' monetary policy this year after six interest-rate increases in 2007 failed to rein in price surges.
``China is facing greater risks of import-induced inflation in 2008 even after factors attributed to last year's price rise, such as pork and grain shortages, dissipate,'' said Zhu Baoliang, chief economist at the State Information Center in Beijing. Crude oil topped $100 a barrel for the first time last week.