China's powerful price police have an antidote for inflation woes ailing the world's second-largest economy -- strike hard at an obscure herb used in traditional Chinese medicine.

China's top economic planner has ordered merchants to sell Pilose Asiabell root, a herb known as poor man's ginseng, at steep discounts to current market prices or face penalties.

With China's inflation hugging three-year highs, the move is characteristic of Beijing's heavy-handed ways and no-holds-barred attitude when it comes to controlling inflation on a number of fronts, ranging from instant noodles to liquor to real estate.

In the latest crackdown, the National Development and Reform Commission (NDRC) has told 10 merchants to sell their entire 200 tonne stock of Pilose Asiabell root at a maximum price of 60 yuan ($9.28) per kg before Thursday. That's 30 yuan per kg below the current market price.

Merchants were told to sell the herb, commonly used in Chinese medicine as an cheaper alternative to the prized ginseng plant, to pharmaceutical companies.

Another 44 merchants were separately told to sell their 800 tonne stock of the herb by December, without a specified price, the NDRC said in a statement.

It said the price of the herb had surged tenfold since August 2009, partly due to hoarding and speculation by some illegal merchants.

If they don't sell out before the deadline, they will be punished according to the law, the agency said, without providing specifics.

But some merchants are shrugging off the clampdown.

Price controls will be useless, as history has shown, said Chen Junming, a small herb merchant in the eastern province of Zhejiang. If I were told to sell, I would rather risk being fined than sell at a cheap price.

Chen, who has sold Chinese herbs for 10 years, said he owns about 10 tonnes of Pilose Asiabell and expects prices to keep rising.

I keep buying (the herb) as this year's harvest won't be good, Chen said. You have to respect market forces.

For Beijing, the chance that climbing inflation may stir social unrest and threaten its leadership means officials have no qualms about ignoring market forces, and stepping in to control prices.

In May, the agency fined consumer product giant Unilever 2 million yuan for saying it might increase prices for some household products in China.

The agency has since told makers of instant noodles, milk powder and even potent liquor not to raise prices, according to local media.

To cool record home prices, Beijing also moved last week to restrict home purchases in some second- and third-tier cities. ($1 = 6.463 yuan)

(Editing by Jonathan Hopfner and Ken Wills / Daniel Magnowski)

China Inflation