A Shrinking Rice Bowl in China: Rising Food Prices Spur Unease

TIGHTENING her scarf against the chill winter wind, Wang Meizhu sifts through a mound of tomatoes at the Big Bell Temple Market in China's capital.

The factory worker looks over the bright-red tomatoes and selects six badly overripe ones. She then sets them in front of the vendor and asks for a discount.

``Prices have gone up so much, I have to find ways to save money,'' she says. ``I have to cut corners to feed my family.''

As Chinese prepare for their most important family festival at the Chinese New Year later this month, Beijing struggles to contain soaring food prices and growing public discontent.

With inflation at the highest rate since the Communists took power in 1949, authorities fear a rerun of 1988. Then, inflation ran at 18 percent, and nonstop price increases and an end to government handouts sent millions of citizens to protest in Tiananmen Square, culminating in the brutal military suppression in June 1989.

In 1994, the consumer price index jumped 24.2 percent and retail prices rose 21.7 percent, driven by a blazing economic growth rate of 11.8 percent. This year, government forecasters pledge to contain growth at about 9 percent and inflation at about 15 percent, although China far overshot both targets in 1994, when food prices accounted for almost 70 percent of the inflationary surge.

Emergency measures launched

Officials are worried about a looming food crisis. The government has launched emergency measures to control food costs. Last year, many major cities, including Beijing, began rolling back market-style price reforms and reimposing de facto controls on a range of foods.

Some cities have even reinstated food-ration coupons, a mainstay of socialist planning. In northeastern provinces where state-run enterprises are badly decayed and many workers face a dire New Year festival, coupons are back in use.

Noting citizen unease over their eroded purchasing power, Beijing authorities announced plans last week to tighten price controls this year and are also rumored to be considering a return to ration coupons. A report in the official New China News Agency admitted the Chinese capital recorded higher prices for grain, edible oils, meat, eggs, and vegetables last fall, ``arousing strong concern among local residents.''

The central government has ordered local authorities to control prices at all costs before the upcoming festival on Jan. 31. Major banks in Beijing, Shanghai, and Tianjin - the largest cities - have made emergency loans totaling $72.5 million to maintain store stocks and hold down prices.

``Agriculture is the weakest link in our national economy,'' said a recent commentary in People's Daily, the Communist Party mouthpiece. ``To halt inflation, we must first of all increase the effective supply of farm products.''

But that will prove difficult amid a bleak agricultural outlook and the government's failing effort to rein in inflation, Chinese and Western economists say. As paramount leader Deng Xiaoping's health fails and China appears on the brink of political volatility, the country is entering a critical period for the economy, analysts say.

Government deficits are rising. A fast-growing money supply to bail out troubled state-run industries fuels inflation. And China faces new difficulties in meeting its food needs as grain output slides, farm acreage drops, and fertilizer and irrigation facilities are in short supply.

In 1994, a summer of natural disasters depressed grain production to 444.6 million tons, a 2.6 percent drop from record output in 1993.

China, which has been a net grain exporter in recent years, was forced to impose a ban on grain exports in December and turn to imports to stave off disaster.

In October, the government said it would cap the price paid to farmers for most grain crops after prices in major cities jumped 70 percent. Local governments with grain requirements and profiteering private enterprises bought grain directly from farmers and caused prices to soar. Now, only central and provincial authorities are allowed to stockpile grain.

But enforcing price ceilings runs the risk of angering farmers who are squeezed by rising costs and could withhold land from production, Western analysts say. In recent years, farmland has dwindled amid breakneck economic growth and land development.

Farmers also suffer from a shortage of fertilizers and pesticides, major irrigation facilities, and an inefficient transport system that prevents crops from getting to key markets.

In December, the central government rushed 1 million tons of corn to southern China to meet an animal-feed shortfall and prevent a new outburst of urban inflation. Making farming a top priority

The government has made agriculture a top priority so China will have enough grain to feed its people through the turn of the century.

To avert a severe grain shortage of up to 64 million tons, Beijing says it will boost annual grain output to 500 million tons by the turn of the century and stabilize acreage planted in grain.

State planners say investment in new irrigation projects and other farm infrastructure will rise by almost 25 percent this year.

``China knows it faces a continuing crisis in agriculture,'' says a Western economist who follows the farm sector. ``But meeting its own grain needs without imports will become more difficult as time goes on.''