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P&G: Price hike 'last option'

P&G: Price hike 'last option'

Write: Wahida [2011-05-20]


Procter & Gamble Co products on display. An announcement by Unilever Plc regarding price increases triggered a rush on purchases of soap, toothpaste and detergent in some Chinese cities. [Photo/Provided to China Daily]

Remark follows Unilever fine for fanning 'inflationary expectations'

BEIJING - Procter & Gamble Co will not rule out the possibility of raising product prices even though the Chinese government has vowed to control soaring inflation.

"Raising prices is the last option," the business news website 21cbh.com quoted Procter & Gamble CEO Bob McDonald as saying. "We do not rule out price increases if there is no other choice, but before that, we will try every other way."

On Friday, the National Development and Reform Commission (NDRC), China's top economic planner, fined Unilever Plc 2 million yuan ($308,000) for comments it made in late March about price hikes planned for its products.

The NDRC criticized Unilever for "intensifying inflationary expectations among consumers" and "seriously disturbing market order".

In March, the Anglo-Dutch company said that the rising cost of materials might lead it to increase its product prices by up to 15 percent. That announcement triggered a rush on purchases of soap, toothpaste and detergent in some Chinese cities.

Unilever declined to comment on Tuesday about the Procter & Gamble CEO's remarks.

The fine imposed on Unilever sent a clear signal that the government is making price control a top priority.

China's consumer price index surged to 5.4 percent in March, the biggest jump in nearly three years, outpacing the 4.9 percent recorded in January and February.

Earlier this year, Premier Wen Jiabao set the 2011 inflation target at 4 percent and said "excessive increases in consumer prices would not only affect people's lives but could also even undermine social stability".

The media reported in March and April that the NDRC price department met more than a dozen industry associations in sectors including agricultural products, pharmaceuticals, textiles and kitchen appliances, and ordered them to press their members to delay or cancel planned price increases.

At the same time, the planning agency also talked to foreign companies, including those in the dairy and cooking oil sectors, about delaying price hikes.

The People's Bank of China, the central bank, said earlier that "stabilizing prices and managing inflation expectations are critical" to government policy.

Analysts have blamed China's rising inflation mainly on the rapid increase in liquidity in the past two years.

To rein in surging inflation, the central bank has raised interest rates four times since October and required banks to keep more of their capital in reserve. It has also implemented a series of measures to rein in property speculation.