China PM vows to keep prices stable despite drought

BEIJING: Chinese Premier Wen Jiabao said Thursday his government was confident it could maintain grain supplies and keep prices stable as a severe dry spell in wheat-growing regions imperils the winter crop.

Light snow brought some relief to northern China's wheat heartland but the welcome respite was thought unlikely to signal the end of a drought that has sparked a UN warning about the impact on crops.

The government has earmarked 13 billion yuan ($2 billion) to combat the drought and "raise agricultural production" by supporting farmers and strengthening farm management, state broadcaster China Central Television (CCTV) quoted Wen as saying.

The anti-drought funding was double the amount announced by the government on Wednesday.

"We are confident that we have the ability to promote stable development of agricultural products, ensure the effective supply of agricultural products, especially grain, and maintain the overall basic stability of goods prices," Wen said.

He spoke during a teleconference with officials around the country on the grain situation, CCTV said.

Snow began falling late Wednesday over parched Henan, Hebei, Shandong, Shanxi, Jiangsu and Anhui provinces -- all key grain-producing areas.

That came after authorities ordered weather manipulation techniques such as cloud-seeding to induce the precipitation, the China Daily reported.

"The snow won't ease the unusual drought that has lasted for more than 100 days, nor end the impact the aridity has had on farming," the paper quoted an engineer at the Beijing Meteorological Station, Sun Jisong, as saying.

Light snow was forecast to continue until the weekend in many areas.

The snow in the Beijing region was the first precipitation in the capital since rain fell on October 25, and marked the longest wait for the first winter snowfall in six decades, the paper said.

China's government had already been struggling for months to contain rising inflation in prices of food and other key goods.

On Tuesday, the UN's Food and Agriculture Organisation said the dry spell could pose "very serious" problems to China's winter wheat crop, a key harvest for the world's biggest producer of the grain.

The government decided on Wednesday to allocate funds to pay rice growers higher prices for their grain in a bid to spur production, according to a statement from the State Council, or cabinet.

Beijing has also announced anti-drought measures including diverting water to affected areas, constructing emergency wells and irrigation facilities, and steps to address the drinking water shortages of up to three million people.

The State Council warned, however, that the situation could worsen, saying rainfall across northern China for the foreseeable future would remain "persistently below normal levels."

China has a state policy of grain self-sufficiency and any move to purchase wheat overseas -- which some see as increasingly likely -- could drive up prices on world commodity markets.

The agriculture ministry says more than 7.7 million hectares (19 million acres) of winter wheat crops had been affected by the drought, according to state media.