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LCQ6: Food price

     Following is a question by the Hon Frederick Fung and a reply by the Secretary for Food and Health, Dr York Chow, in the Legislative Council today (December 8):


     The Census and Statistics Department announced that the year-on-year increase in the Composite Consumer Price Index in October this year was 2.3%, which was the highest in 19 months.  Such increase included a 5.7% rise in food prices, excluding prices for meals out.  It has been reported that as food accounts for a relatively high proportion in the overall daily expenditure of the middle and lower classes, the increase in inflation has obviously exerted greater pressure on their livelihood.  Moreover, with the devaluation of Hong Kong dollar along with the United States dollar and the continuous rise in prices on the Mainland, many basic foodstuffs have been hoarded for speculation.  Even the prices of garlic, chili and ginger have surged.  This has caused additional hardship to the middle and lower classes, who rely mainly on the cheap food imported from the Mainland to maintain their quality of living.  In this connection, will the Government inform this Council:

(a) whether the authorities have conducted any study on the impact of the recent surge in food prices on the livelihood of the middle and lower classes; whether they have tried to find out the situation of speculation in basic foodstuffs on the Mainland, the corresponding actions taken by the authorities concerned, the impact of such speculation on the Mainland on the prices of food imported to Hong Kong, and whether such speculation has spread to Hong Kong and even resulted in hoarding to jack up prices; if they have, of the details;  

(b) given that it was reported earlier that the retail prices of Chinese rice in supermarkets had not reduced correspondingly with import prices, the price difference between the two had widened to 16%, which is far bigger than that with Thai rice, whether it has tried to find out why the retail prices of Chinese rice have not dropped along with the reduction in import prices but have gone up instead; if it has, of the details; whether it has uncovered any wholesalers or retailers jacking up prices indiscriminately for profiteering; whether it has assessed if such situation is a reflection of inadequate competition in the Mainland rice market; what counter measures the authorities have to make retailers correspondingly reduce prices of rice imported from the Mainland as quickly as possible so that the general public need not suffer from the impact of high rice prices amidst escalating inflation; and

(c) of the changes in the difference between the wholesale/import prices and retail prices of fresh pork and chilled pork imported from the Mainland in the past 12 months; whether the difference in such prices is widening; whether it had uncovered situations in which market practitioners jacked up the prices; what measures the authorities have at present to prevent market practitioners from profiteering through jacking up prices, so as to enable the public to buy pork at a reasonable price that reflects the cost?



     The policy objective of the Government is to maintain a stable supply of various foodstuffs and to ensure food safety.  We will continue to liaise with our imported food sources, in particular the relevant Mainland authorities, to ensure a stable supply of food in order to meet the demands of Hong Kong people.

     Food price has always been determined by the free market.  It is the Government's responsibility to improve market transparency and enhance market efficiency so as to help consumers make a considered choice.  My reply to the three different parts of the question is as follows:

(a) According to data from the Census and Statistics Department (C&SD), expenditure on food is an important part of total expenditure for middle- to lower-income households.  Therefore we have been monitoring closely the impact of food price movements on the middle- to lower-income households.  We note that in the Consumer Price Index (A) (CPI(A)), which can best reflect the impact of consumer price movements on the lower-income households, the year-on-year increase in prices of food excluding meals away from home was 5.6% in October.  Including meals away from home, the overall food component within the CPI(A), which has a weighting of about 32%, recorded a year-on-year price increase of 3.6% in October.  In other words, households in the lower expenditure ranges would have to increase their household budget by around 1.2% compared with a year ago if they were to maintain the same level and mix of food consumption.   

     The rise of food prices was mainly caused by a number of factors.  On the one hand, the pricing power of restaurants and food retailers has increased amid the improving consumption markets.  There was also a notable rebound in international food prices since last year.  In addition, food prices in the Mainland have picked up recently.  This, coupled with pressure on the Renminbi to appreciate, will inevitably impact on Hong Kong, given the fact that the Mainland is our major food supplier.

     Managing inflation expectations and preventing escalating inflation is a major macroeconomic policy target for the Mainland.  Since the beginning of this year, the Mainland has begun to tighten its monetary policy, including raising the required reserve ratio for banks on five occasions and increasing the interest rate in October.  On stabilising food prices, the State Council announced a series of measures in August and again in November to support production, safeguard supply, curb illegal pricing practices, rationalise the relationship between prices, with a view to stabilising market prices.
(b) The second part of the question concerns the supply and prices of rice.  The Administration has been monitoring closely the supply and prices of rice in Hong Kong.  We are also aware of the press reports on rice prices referred to in the question. The import and retail prices of rice are affected by many factors including exchange rate fluctuations, market demand and supply, change of climate in rice supply countries, operating costs and marketing strategies of rice traders, etc.  On the other hand, as there is a time lag between rice import and its retail selling, the changes in import price generally cannot be reflected instantly and directly in the retail price.  If we compare the figures of the first three quarters in this year, the import price of Chinese Long Grain rice (i.e. See Mew) has risen by 1.4%, while the retail price has increased by 1.9%.  

     Hong Kong has liberalised the rice trade in 2003, which seeks to create an open market environment to attract new entrants, promote competition within the trade and enhance market efficiency, with a view to benefiting consumers and the community as a whole.  Since the liberalisation, the number of rice stockholders has increased from around 50 in 2003 to around 130 at present. This demonstrates a significant increase in competition.  

     The Trade and Industry Department has been liaising regularly with rice stockholders and monitoring rice imports, storage and sales situation closely through the Rice Control Scheme. We have not detected any unusual fluctuations in the import and retail prices of rice in Hong Kong recently.

(c) The third part of the question concerns pork price.  According to the data provided by the C&SD, the difference between the wholesale price/import price and the retail price of pork had narrowed down in the past 12 months.  Please refer to Tables 1 and 2 for details.

     We have been communicating with the trade via different channels to understand their operational needs and to encourage and facilitate them to widen food sources and increase our food diversity so as to maintain a stable overall food supply.  The announcement of importation arrangements of chilled beef from the Mainland when I was in Beijing two days ago was a case in point.

Ends/Wednesday, December 8, 2010
Issued at HKT 15:32


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