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Worried about inflation, China strikes hard at Unilever

China fined Unilever more than $300,000 after the Anglo-Dutch firm said it might raise prices on toiletries and other products. The blunt response was designed to 'break ugly habits,' that distorted market prices, officials stated.

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Hair shampoos made by Unilever are displayed for sale at a supermarket in Beijing, China Friday, May 6. China has fined the consumer products maker for talking to Chinese media about possible price hikes that triggered a rush to buy while Beijing is trying to rein in surging inflation.

Andy Wong/AP

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The Chinese government is getting tough in its fight to tame inflation, fining a foreign company more than $300,000 just for talking about its plans to raise prices.

Such administrative measures may be eye-catching, economic analysts say, but they are unlikely to have much impact because they do not attack the real root of inflation, now at its highest rate for nearly three years.

“This is like sticking your finger in a dike” to stop a massive leak, says Arthur Kroeber, head of the Dragonomics economic consultancy in Beijing. “There is no way it can be effective.”

The Anglo-Dutch company Unilever was fined because its spokesman announced in March that rising costs of materials might lead the firm to increase the prices of its toiletries and other products by as much as 15 percent.

The news sparked a run on Unilever products and hoarding that “disrupted market prices,” said the National Development and Reform Commission, China’s top economic planning agency, on its website. “Severe punishment was meted out this time to break ugly habits and build new rules,” the NDRC said, warning other firms to “absorb the lesson.”

Unilever, which recently said it hoped to boost its sales of $2 billion a year in China fivefold by 2020, accepted its costly punishment. “As a company with a long-term commitment to China, we continue to be sensitive to the local environment,” the company said in a statement.

Taming social discontent

Consumer prices rose by 5.4 percent in March, the fastest pace for nearly three years. The government is afraid of rising social discontent over high prices, especially for food, and it has made the battle against inflation its top economic priority this year.

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