As we race towards the Spring Festival holidays there is normally a dearth of news and new measures to report. This is somewhat still the case in 2008, but financial authorities have been a little more active than they usually are at this time of year. Two days after the NDRC announced national price controls on grain, food made of grain, edible oil, meat, milk, eggs and liquefied petroleum gas, they sent a circular requesting that local governments formulate their own price control plans in accordance with the new rules.
I am not sure how much leeway local governments will actually be giving in the fight against inflation, but I would hope that it is not too much. Local governments often go to excesses to show Beijing whatever they think Beijing wants to see, and I am afraid a not-very-good plan, price controls, can become a lot worse if enforced too eagerly and too aggressively. Local government officials are likely to be far more eager to prove to Beijing that nominal prices have not risen much than to ensure that local residents are protected from the consequences of inflation.
We are still waiting to see what the CPI numbers for December will look like and I guess we will get them around the middle of next week.
Michael Pettis is a professor at Peking University's Guanghua School of Management, where he specializes in Chinese financial markets. He has also taught, from 2002 to 2004, at Tsinghua University’s School of Economics and Management and, from 1992 to 2001, at Columbia University’s Graduate School of Business. He is a member of the board of directors of ABC-CA Fund Management Co., a Sino-French joint venture based in Shanghai.
Pettis has worked on Wall Street in trading, capital markets, and corporate finance since 1987, when he joined the Sovereign Debt trading team at Manufacturers Hanover (now JP Morgan). Most recently, from 1996 to 2001, Pettis worked at Bear Stearns, where he was Managing Director-Principal heading the Latin American Capital Markets and the Liability Management groups. He has also worked as a partner in a merchant banking boutique that specialized in securitizing Latin American assets and at Credit Suisse First Boston, where he headed the emerging markets trading team. Besides trading and capital markets, Pettis has been involved in sovereign advisory work, including for the Mexican government on the privatization of its banking system, the Republic of Macedonia on the restructuring of its international bank debt, and the South Korean Ministry of Finance on the restructuring of the country’s commercial bank debt.
Pettis is a member of the Institute of Latin American Studies Advisory Board at Columbia University as well as the Dean’s Advisory Board at the School of Public and International Affairs. He is the author of several books, including The Volatility Machine: Emerging Economies and the Threat of Financial Collapse (Oxford University Press, 2001). He received an MBA in Finance in 1984 and an MIA in Development Economics in 1981, both from Columbia University.
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November, 2007
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