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Govt pledges to erase illegal charges

01-11-2012 09:59 BJT

By Li Woke (China Daily)

BEIJING - Five ministries on Tuesday reiterated a pledge to stabilize commodity prices by cracking down on illegal charges foisted on suppliers.

"Maintaining price stability is an important step of the 2012 economic policies," Peng Sen, deputy chief of the National Development and Reform Commission, told a national teleconference on Tuesday.

"Excessive intermediaries and high costs are major factors pushing up the prices of goods," Peng said.

The five departments, including the Ministry of Commerce and National Development and Reform Commission, previously pledged to stabilize commodity prices in December by issuing a work plan to crack down on illegal charges levied by retailers on suppliers.

"Part of the problem between suppliers and retail giants is caused by market imbalance," the Commerce Ministry said. "As the country has too many suppliers and a limited number of large retailers, the latter have gained tremendous leverage over suppliers."

In 2010, French retail giant Carrefour was involved in several disputes with suppliers, including Master Kong, a Taiwan-based instant noodles supplier, and China National Cereals, Oils and Foodstuffs Corp, after the retailer allegedly refused to lower its high entrance fees and sales commissions.

The disputes started when Kraft Foods, the world's second biggest food and confectionery maker, halted shipments of its Oreo line of products to Chinese retailer Lianhua Supermarket Holdings after talks broke down over profit sharing.

According to management consultant McKinsey, suppliers in China typically pay retailers a "commission" or "rebate" of 10 to 15 percent, but for some retailers, that number is more than 20 percent. And that's not including some form of under-the-table commission.

"So the suppliers have to raise their product prices to offset all the charges demanded by retailers," said a Fujian-based retailer, who declined to be identified.

In July last year, the consumer price index surged to a three-year record high of 6.5 percent, putting pressure on the government to tame inflation.

Editor:Wang Chuhan |Source: China Daily

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