There is no question that rising food prices are a source of great concern for China. Officials in Beijing are being to implement price controls according to the following article:
Peaple, Andrew, 2010. Inflated risks to economy in china. The Wall Street Journal, Nov. 19.
I think this is an important quote:
"Steps are under way to tighten policy, with the People's Bank of China raising interest rates and forcing banks to hold more reserves. Tighter control of new bank lending, and faster yuan appreciation—to help keep import prices down—would also help in the inflation battle. But they would also hit at key drivers of China's economic growth: loan-fueled investment and exports." bold added
It is extremely hard for me to understand why China does not scrap its currency pegging policy as a means of fighting domestic inflation. It is the best approach.
The text in bold above would indicate there is intent to maintain the pegging exchange policy even at the expense of rising food prices. The export interests are extremely powerful and appear almost to be a shadow government.
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