Business Notes

For the past five years, Chinese Leader Deng Xiaoping has instituted sweeping economic reforms, moving away from rigid state controls and closer to the free-market system. Capitalism advanced a step further last week when the government announced that price controls in Peking would be lifted on more than 1,800 food items, effectively raising their costs by some 50%. The price reforms had already been introduced in 22 other cities and autonomous regions.

Peking's 5.5 million residents will receive a subsidy of 7.5 yuan a month (l5% of per capita income) for a year to help pay the higher prices, but that will only partly cover them. Some kinds of fish will now be 200% more expensive. Pork, the country's most popular meat, will cost 35% more. The prices of staples like rice and flour, however, will remain unaffected.

Severe price hikes scare the Chinese, who recall the hyperinflation of the late 1940s, when in three years Shanghai wholesale prices rose 7 1/2 million times. That disaster helped bring the Communists to power. To stop shopkeepers from using the government plan as an excuse for additional increases, 11,000 inspectors will tour Peking in search of price gouging.