Published Monday, August 27, 2007 by Dean Peng
This year banana producers in China suffered a disastrous loss, writes Dean Peng. Banana prices plummeted in Canton and Hainan, the two tropical provinces that provide almost all the domestic bananas. Tons of ripe bananas rotted in their plantations. Almost all planters lost money; some went bankrupt. It soon became clear that the real cause for the fall in banana prices was overproduction.
Bananas had been selling well in recent years, and many new producers moved to Hainan to open new plantations. The result was a serious over-supply. Thus arose calls for new regulations. For many people, the only reasonable resolution to imperfections in the market is more government regulation. In fact, the only problem with the market results from regulation against information sharing between producers.
(Original Text)
Government Regulation Goes Bananas (1,022.00 KB)