Cooking oil: The powerful political lubricant in China

Posted: December 19th, 2010 | Tags: , , , , , , , | No Comments »

A public spat in China this week between a top government body and an important industry has shed some light on the Communist Party’s inner workings. The reason? Cooking oil. Bear with me on this one.

In early December, the National Development and Reform Commission, China’s state economic planner, convened cooking oil producers in Beijing. The commission requested that producers increase cooking oil supplies in the run-up to next year’s Chinese New Year holiday – without lifting prices.

Then the China Times newspaper reported on December 10 that Sanhe Hopefull Grain & Oil Group, a cooking oil producer, had halted production because of the price caps. The report went on to speculate that the caps might force other producers to stop or slow production, leading to shortages during the holiday.

The NDRC released a statement on its website defending its price freeze. It criticised the report as spurious and guaranteed a plentiful supply of cooking oil during the holiday.

What makes this interesting is that the China Times is a state-owned newspaper that is based in Beijing. Why would state media report criticism of government policy? Should it not meant to be self-serving?

Foreign media often portrays the Communist Party as one homogeneous organ that thinks and acts unanimously. It isn’t. Like governments elsewhere, the party is divided into factions with their own allegiances and ideologies. What happened between the NDRC and cooking oil producers is symptomatic of this. Inside the party is at least one pro-free market economy group that desires less state interference. This group evidently had sufficient influence to get the NDRC’s price caps covered by state media.

Opposing this group is another that favours regulation, perhaps for reasons of social stability. Rising food prices have alarmed the government because poor families spend up to half their income on food. In November, the average wholesale price for 18 staple vegetables across China rose by almost two-thirds year on year. Any further rises may spark unrest.

There is past evidence of these struggles between party factions. Premier Wen Jiabao spoke extensively about China’s need for political reform during a visit to Shenzhen in August this year, and again in a CNN interview with Fareed Zakaria (transcript here). A savvy politician, Wen knew he had the backing of pro-reformist colleagues. But the New York Times reported that the Ministry of Propaganda censored Wen’s remarks and his views even came under attack in the People’s Daily, the main state-owned newspaper (see the previous Times link). Wen clearly upset another group that wishes the current political system to remain in place.

One question is why the free market proponents chose to clash over this particular issue. The government, after all, distorts many industries with its influence. The answer is timing, and not just because of the forthcoming holiday. China’s 11th Five-Year Plan has guided the country’s development since 2006 but concludes at the end of this year. With the 12th plan still being proposed, spotlighting the government’s heavy-handed economic intervention will grant these market liberators a stronger platform to press their aims. With the issue out in the open, they will hold greater clout for swaying others to their ideals.

Who knew cooking oil would also turn out to be a powerful political lubricant?

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