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218 25 Stabilize Grain and Oil Prices and Steady the Market Supply1 December 25, 1993 Today, the State Council has convened an emergency meeting to make arrangements to stabilize grain and oil prices as well as market supply. Why must we hold this emergency meeting? Because there are several matters that require urgent attention. 1. Current Problems Since the last 10 days of November, there has been a large increase in grain and oil prices. This has spread from the coastal regions to the interior and from south to north, affecting the entire country. It has led to a buying frenzy for home appliances, gold and silver jewelry, and other goods. The buying frenzy has been taking place mainly in small and medium cities and so far has gone unchecked. We haven’t panicked, nor is there any need for us to panic. But I will say truthfully that this problem is becoming more serious. I’m talking about the country as a whole, not about parts of the country. Perhaps there has been no volatility in some provinces, or perhaps greater volatility in some and less volatility in others. But in terms of the whole country, matters have gotten quite serious and require our attention. 1. On December 25, 1993, the State Council convened a meeting in Beijing on stabilizing grain and oil prices and steadying the markets. Participants included the responsible members concerned from the governments of all the provinces, autonomous regions, and centrally administered municipalities, as well as responsible members of the State Council departments concerned. This is the main part of Zhu Rongji’s speech at the meeting. Since November 1993, domestic grain prices had shot up suddenly. At the time, there were ample stores of grain and no major changes in grain supply and demand. The main cause of the sudden increase in grain prices was the psychological anticipation of inflation, as well as opportunistic speculation in the markets. On December 18, during an investigation trip to Anhui, Zhu Rongji received an urgent report on stabilizing grain prices from related departments of the State Council. After discussions with the departments concerned, he decided to sell off national grain reserves in the markets and demanded that state-owned grain stores post lower prices, so as to bring grain prices down to a reasonable level as quickly as possible . Upon returning to Beijing, he convened and chaired this meeting, and made comprehensive arrangements to stabilize grain and oil prices. Stabilize Grain and Oil Prices and Steady the Market Supply 219 Had we anticipated this sort of situation? Not entirely, and we particularly did not expect that problems would occur with grain when our reserves were ample and nothing could basically go wrong. We hadn’t thought it possible, at least I didn’t think it possible, because in November I focused most of my energies on cash—I was afraid of a run on banks, not a run on stores. At the national conference on economic work not long ago, I said that I was most worried about the problem of markets, that the present problem was no longer one of funds. It now appears that no major problems occurred when money was put into circulation, but the market problem continues to exist. Almost 40 million tons of steel were imported these past two years, putting our iron and steel industry in its worst predicament and making it unable to sell its steel. I said at the national conference on economic work that we’ll just have to buy the steel. We can’t stop the blast furnaces and we can’t stop the openhearth furnaces, so what would we do if we didn’t buy the steel? We have to use Chinese methods to solve Chinese problems and can’t immediately act entirely according to “the principle of economic benefits.”2 Right now steel prices have rebounded a bit, but it’s still hard to sell, and sellers can’t get their payment in a timely way. The price is rebounding because of a mind-set that expects the scale of basic construction won’t be getting smaller. The market problem hasn’t been solved yet, and the sudden grain-buying frenzy has appeared. At the moment grain prices are at an all-time high, yet in fact there are ample grain reserves and no problem there at all. Generally speaking, higher grain prices are good for farmers. We already decided at the national conference on...


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