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240 41 A Few Comments about Economic Hot Spots1 December 30, 1988 Three issues are of wide concern in Shanghai at the moment: market stability , daily necessities, and the future of urban and infrastructure construction. 1. Will We Be Able to Keep Shanghai’s Markets Stable? Many are worried about next year’s prices. Shanghai’s price index rose 21% this year. If prices rise another 16% next year, will Shanghai be able to cope? As I see it, the price increase might be a bit on the high side, but it’s still not so scary because of that 16%, 8–9% is due to a year-end spike. That is to say, some prices were already raised this year, or they were raised in March or in the latter half of the year. In calculating this year’s price index, we only calculated for three quarters or for half a year, whereas next year it will be for the full year. Public reaction to [last year’s price increases] will be totally different from reaction to the new increases. Measures to be unveiled by the central government will cause prices in Shanghai to rise by 2–3% next year. We are afraid we won’t be able to stay within that range because the measures for next year will have to go a little further—it won’t do for them not to go further. If raw materials increase in price but finished products do not at all, enterprises won’t be able to absorb [these increases] and production will shrink. That’s why we estimate we will have to raise prices by another 3–4%, for a total of 16%. The actual reaction probably won’t be as strong as one might expect from another 16% increase. Furthermore, although the methods for calculating price indexes are relatively scientific, the results of calculations are not the same as the reactions of individuals. The key to stabilizing the markets is to keep a firm grip on the prices of people’s daily necessities. We don’t have to keep such a firm grip on overall prices, because that would be disadvantageous for Shanghai. 1. This is part of a speech by Zhu Rongji at a major conference of Shanghai Party members who were cadres in positions of responsibility. Zhu_Shanghai Years_1987-1991_hc_9780815731399_i-xii_1-620.indd 240 12/26/17 12:00 PM A Few Comments about Economic Hot Spots 241 How would it be disadvantageous? Production would stagnate and shrink, and even small commodities would disappear. If raw materials go up in price and you don’t let enterprises follow the market, they won’t be able to produce, and in the end Shanghai’s fiscal revenues will drop and local finance will no longer be able to subsidize those necessities. This is a vicious cycle. That’s why we are still in favor of keeping the prices of basic consumer goods stable—we absolutely must not raise them at will. If there are losses, the city government will just have to increase subsidies. As for other goods, especially small commodities , even though we must control them strictly and not allow arbitrary price increases, we should still let them be a bit more flexible—this will benefit the overall growth of production in Shanghai. That’s why even though next year’s price index will rise by 16%, if we control [the prices of] those daily necessities that account for 70% of people’s expenses, they won’t find this 16% so difficult to cope with. 2. What Things Count as Daily Necessities? First are grain, oil, and non-staple foods. If we keep these stable, at least half of Shanghai’s prices will remain stable. Inventories for grain, meat, sugar, and salt are adequate and their prices won’t go up, so there is no need to worry about them. As for non-staple foods, despite the recent once-in-a-century drought, because we were prepared and had taken remedial measures, the supply of vegetables is still ample. Poultry sales have also increased considerably this year. There have been some recent problems with animal feed—we have only two months’ worth of inventory—but the city’s Finance Office, the grain departments , the Transportation Office, and the Maritime Shipping Bureau have already organized rush shipments of corn from Jilin. Arrangements for next year have already been made for the supply and production of poultry and eggs. Second, industrial...


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