The Relationship between Grain Prices and Inflation

In the period from 1993 to 1994, inflation became a major topic of discussion in China. At the time, a widely held view was that the rise in grain prices was the source of inflation. It was thus argued that controlling inflation in the first place required turning off the source by restricting the rise in grain prices. The basis for this view was the 24.1 per cent rise in national urban consumer prices, within which food consumer prices rose by 31.8 per cent. Within food prices, grain consumer prices rose by 50.7 per cent. The issue is whether these figures provide the evidence that the rise in grain prices was the source of inflation and whether the 1994 rise in agricultural product prices was the major factor that influenced inflation in that year. This requires objective and practical analysis.