"How am I going to manage my money now? My income remains the
same but living expenses are up again," moaned a frustrated Beijing
taxi driver.
"Now, I'm going to have to pay an extra 100 yuan (13.2 US
dollars) a month to eat at the same restaurants," the cabbie
continued.
He said the Chinese fast food restaurants that he and many of
his friends frequented had raised the price of set meals by two to
ten yuan each on the back of rising food costs such as pork, eggs
and vegetables.
It is a significant sum for a Beijing taxi driver who often
works more than ten hours a day, seven days a week, for a monthly
salary of 2,500 to 3,000 yuan (330 to 396 US dollars).
Prices of farm produce in China continued to rise in the week
from July 23 to 29, the Ministry of Commerce announced on
Wednesday.
Compared with the previous week, meat prices were up 1.8
percent, with pork up two percent and beef up 1.4 percent.
Chinese low-income families have felt the strongest punch as an
increasing number of sectors closely related to people's everyday
living, ranging from fast food restaurants to instant noodles and
even bean product manufacturers announced plans to raise
prices.
"The meat price is going up and up. So does the price of instant
noodles. Now even the price of bean curd is higher! What should we
expect next?" a housewife implored as she surveyed the shelves
displaying marked-up prices at a Beijing supermarket.
According to a survey conducted by the National Bureau of
Statistics during the second quarter, about 82 percent of those
interviewed in Shanghai, where residents have the highest average
income in China, said prices of daily necessities were too
high.
Some residents have taken a pragmatic approach, diversifying
their diet to eat less pork and more seafood, which has hardly been
affected by recent price hikes.
"If the pork price rises, you just eat less pork. I read that
some health experts believe it is good for your health to eat less
meat," said a 70-year-old lady at a grocery market.
A visit to a couple of major supermarkets in Beijing showed that
young customers, especially males, accepted the news of a 20 to
40-percent price rise for instant noodles.
Elderly couples, relying on a joint pension of 1,000 yuan, were
not as forgiving. Many said they had made special trips to the
supermarket to stock up on noodles in the days between the
announcement of the price change and its implementation, even
though each packet only went up by 0.2 to 0.4 yuan.
Many people fear that these small price rises are the just the
start of a larger problem in which they will be forced to deal with
higher prices across the board.
Economists are divided as to whether the rising food prices will
lead to large-scale inflation in China.
The country's inflation rate came under the global spotlight in
mid July when the government announced its consumer price index
(CPI) had risen 3.2 percent in the first half of the year, and had
recorded a 28-month high of 4.4 percent in June alone, largely
driven by price hikes for foodstuffs such as grain, meat and
eggs.
Xie Fuzhan, head of the National Bureau of Statistics, argued
the CPI was not the only indicator of inflation and that he saw no
inflation in China at the present stage. He stressed that inflation
occurred only when there was too much demand against a weak supply,
which is not the current situation in China.
Xie, an economist by profession, said prices of many other items
such as clothes, cell phone bills and automobiles were actually
declining, though prices of pork and eggs had continued to climb in
recent months.
Both Xie and Lu Zhongyuan, an economist with the Macroeconomic
Research Institute of the Development Research Center of the State
Council, pointed out that the positive side of the food price hikes
was that Chinese farmers could benefit from increased income.
A pig breeder named Wang Zhagen in Henan Province said he had
been able to earn more than 400 yuan from the sale of each pig
since the Labor Holiday - he could only earn less than 100 yuan
from each pig a year earlier.
The village where he lived wes raising nearly 2,000 pigs at
present, half of which were born after the pork prices surged, Wang
said.
Zuo Xiaolei, an analyst with Galaxy Securities, however, is
concerned that the price hikes are only evident in the distribution
process of goods, instead of when grain and meat are procured from
farmers, and that, in actual fact, farmers would see no benefits at
all.
Zuo also said that the price mark-up in the process after
production before it reaches the end user would definitely lead to
inflation.
Liang Hong, chief economist with the Goldman Sachs (Asia) China,
predicted that China's CPI would be pushed to 4 percent or even
higher in a few months on the back of food price hikes alone, well
beyond the country's target of 3 percent set for the whole
year.
The price hikes of more and more businesses were also widely
disputed and suspected of having constituted a price monopoly.
A Beijing lawyer has asked the country's pricing authority - the
National Development and Reform Commission (NDRC) - to investigate
the legitimacy of the recent price jump of instant noodles, saying
the collective decision made by producers may have breached China's
Price Law and infringed upon the rights of consumers.
Business insiders said some fast food enterprises may have
increased their prices by as much as 30 percent while the jack-up
in raw material prices was only three percent on average.
China's top economic planner ruled out any form of united
pricing or price hikes by businesses or industry associations, and
pledged to strike hard at price irregularities such as price
monopolies in a recently published notice.
It urged local governments to stabilize the overall price level
and at the same time be prudent in price intervention, adding that
local governments should continue to allow the market to play the
major role in fixing prices.
Local governments are prohibited from intervening directly in
the price of goods and services that are not subject to government
control, except in cases of emergency when an apparent price hike
occurred due to a spate of accidents or natural disasters,
according to the commission.
The commission said the governments should not issue any further
price control measures except those related to energy conservation
and environmental protection within the year, even if the average
price hike went beyond the macro control target.
Xie said the Chinese government had already been directly
subsidizing pig breeders and providing insurance for female pigs
against illness and natural disasters in a bid to tether the pork
price with increased supply.
It would be around half a year or more before the price of pork,
the major factor behind the rising CPI, would fall to a normal
level, as the production of pigs could not be increased overnight
due to its half-year-long breeding cycle, Xie added.
(Xinhua News Agency August 3, 2007)
