Price control on beef noodles sparks debate across China

Source: Xinhuanet | 07-13-2007 10:08

LANZHOU, July 12 (Xinhua) -- An official order has helped stabilize beef noodle prices in Lanzhou, the capital city of northwestern Gansu Province, but embroiled noodle lovers and free market theorists in a controversy about its necessity and legitimacy.

The prices of big and small bowls of beef noodles -- a specialty in Lanzhou and very popular with local residents – have risen to 3 yuan (0.39 U.S. dollars) and 2.8 yuan (0.37 U.S. dollars) from 2.3 yuan and 2 yuan since the end of 2006 due to alleged cost increases.

The city's Price Control Bureau, along with four other administrations in charge of industry and commerce, food, quality and sanitation, issued a circular on June 26, fixing a ceiling price of 2.5 yuan for big bowls of noodles and 2.3 yuan for small bowls sold in ordinary eateries.

Higher-grade and deluxe restaurants can add an 8 percent surcharge or decide the price according to existing rules for price hikes.

The price ceiling is based on a survey carried out by the Price Control Bureau of 12 popular restaurants, which found that the average cost for a big bowl of beef noodles is about 2.19 yuan.

"The 0.3 yuan profit per bowl can fully support the operation and development of a restaurant" said Li Fating, deputy director of the price authority, adding that beef noodle services are a low profit sector.

The joint circular came in response to widespread complaints from local people, who frequently eat beef noodles, also known as Lanzhou hand-pulled noodles, for breakfast and lunch. Many residents suspected that local restaurants had jointly masterminded the price hikes.

Statistics from the price control bureau show that about 800,000 people living in four districts of the city eat the palatable noodles every day.

Local noodle eaters warmly welcomed the price control effort, saying that the government is concerned about people's lives. But many experts and netizens across China criticized the action, questioning whether the five administrations had overstepped their functions and saying that the price controls are a denial of market economy laws.

The price of noodles is easily fixed in a free market, said Song Chaoying, economic administration professor with Lanzhou University.

Beef noodles do not figure in the national list of price controlled goods. Moreover, the city abolished ceiling prices for beef noodles in 2001. "So the latest price control is a step backwards," said Song.

Even if the restaurants had tried to form a price alliance, it could be broken by Chinese law and the ceiling price is unnecessary, many experts say.

Fixing a unified price will not contribute to the improvement of food quality and the sound development of the sector, according to Song, who has been studying the issue for a long time.

Just a couple of days after the order was issued, reports were coming in of restaurants cutting back on the amount of noodles and beef they serve.

"It doesn't fill me up anymore. Before, a big bowl of beef noodles really made me feel full," said Miao Huihui, a Lanzhou native who always eats noodles in the morning before going to the office.

There has been no backlash in well-known restaurants, but similar complaints have been heard in many small-sized eateries.

A boss of a restaurant in downtown Lanzhou, who refused to provide his name, pledged that he would not cheat customers and reduce portions despite having to face rising costs.

"There are only two solutions: either close down or find ways to absorb the extra cost," said the boss.

Some restaurants might be tempted to play tricks with the quantity and quality of food, transferring the cost to customers, Song warned.

A netizen dubbed "Hedao" called on the government to find out the real causes of the price hike and take appropriate measures, pointing out that using the market to guide the development of a sector is more effective and positive than tightly controlling it.

Another internet surfer questioned why the government didn't take any tough measures to curb rocketing house prices, which are a far more serious problem than noodles.

Prices of apartments in some big Chinese cities have risen very fast, despite measures taken by the central and some local governments to cool down the sector.

However, the five administrations involved in the issue said in a press conference held here Wednesday that noodles could not be compared with real estate, especially in Lanzhou.

Trusting in the market and ruling out macro control just doesn't suit the local situation, they argued, claiming that those who have never lived in Lanzhou cannot understand the overriding importance of noodles to local people.

Editor:Du Xiaodan