China premier: ‘Critical period’ due to inflation

Coal price could double
Consumer prices rose 7.1 percent in January, the highest rate in 11 years, led by even higher costs for food and housing. Prices for coal, which feeds two-thirds of the boisterous economy's energy demand, are projected by some economists to double this year.

"The new collective economic leadership team will also be seriously tested in the months and years to come," said Cheng Li, an expert on elite Chinese politics at the Brookings Institute in Washington. "This can be anything but 'smooth.'"

Another signature policy the congress is slated to adopt — a restructuring of government ministries — shows signs of being watered down. Wen told the congress Wednesday the streamlining to create a few enlarged ministries and cut down waste would go ahead, though he provided few details.

Already, an influential lawmaker, Cheng Siwei, was quoted on a local Web site as saying the Finance Ministry would not be part of the reorganization. A new Environment Ministry will not be given authority over provincial environmental bureaus.

The worry among policy watchers is that while leaders quibble, inflation may persist and with it the likelihood of social unrest.

"In the past 30 years, every time inflation was high, social protests, political protests were likely to emerge. That's why this issue is the most pressing issue for the Cabinet," said Ding Xueliang of the Carnegie Endowment for International Peace in Beijing.

Discontent over soaring food costs fueled the Tiananmen democracy protests that nearly toppled the party in 1989. Wen, who was a senior party official in 1989, on Wednesday called for extending price controls on food and basic goods and for curbing investment to tamp down the demand driving prices higher. He also promised subsidies to encourage farmers to grow more food and protect the poor and pensioners.

"Only by appropriately spreading the fruits of economic development among the people can we win their support and maintain social harmony and stability," Wen told the congress.

More from msnbc.com Decking the hall? Watch out for dangers Palin draws hundreds at Iowa book signing Images: Picturing climate change   Slideshow: The making of SpaceShipTwo Giving back for the holiday season? Tell us how On Twitter: Breaking news updates | Weird and wild

MORE FROM ASIA-PACIFIC

Asia-Pacific Section Front

Chinese dissident held without charges   Obama sending envoy to North Korea Philippines declares martial law in province Swedish store removes N. Korean jeans Smuggled kangaroos freed; man arrested Asia-Pacific Section Front   Add Asia-Pacific headlines to your news reader: