China's move to control the industrial use and exports of grain to curb domestic price increases will contribute to the stability of the world grain market, a Chinese analyst said.

Premier Wen Jiabao said on Wednesday the country "must strictly control industrial use of grain and grain exports". This was one of the nine measures to curb the overall price level from rising rapidly.

Last year, the country's consumer price index (CPI), the main gauge of inflation, rose 4.8 percent year-on-year, its fastest pace in 11 years. Food prices surged 12.3 percent, accounting for 4 points of the 4.8-point CPI rise.

Exports of wheat, corn and soybean rose by 206 percent, 85 percent and 24 percent, respectively, in the first 11 months last year, customs statistics showed.

"The rapid growth of grain exports led to the continuous rise of domestic grain prices last year, making it an important factor for driving the CPI," said Cheng Guoqiang, the Development Research Center's Market Economy Institute deputy director.

"The grain consumption in China is huge. The country's grain prices constitute an important index for the world grain market. If China's grain prices are unstable, the world grain market will also be affected," he said.

Grain prices in China were at high levels last year with the overall price level higher than 2006.

To control grain exports would help prevent the rise of commodity prices domestically and stabilize the world grain market, the analyst said.

China has been a net exporter of wheat, corn and rice over the past two years. In effort to curb grain exports, China scrapped a 13-percent export tax rebate on 84 categories of grain and grain products on Dec. 20. The rebates, together with high international grain prices, boosted the country's grain exports last year.

On Jan. 1, China started a temporary quota policy on the export of wheat, corn and rice powder. It also levied export taxes on wheat, corn, rice, soybeans and various processed grains.

Controlling exports will help reduce imports, contributing to world grain supply, said Xiong Xuehua, a manager of the South China Grain Market.

Global trade volume of rice ranges from 25 million to 30 million tons each year, while China consumes 180 million tons annually. "If China suddenly imports large amounts of rice, the global rice price will surely be affected," Xiong said.

"To properly handle domestic grain supply and demand is the biggest contribution to the stability of the world (grain) market, " Cheng said.

(Xinhua News Agency March 7, 2008)