Inflation: Perception and Reality at the Market

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Premier Wen Jiabao opened the National People’s Congress on Wednesday with the usual “work report” to the delegates. t took two and half hours but there was no question then and in subsequent comments by senior officials that inflation is very much on their minds. Wen said their target for the year is 4.8 per cent, which seems optimistic given that its currently running at 7.1 per cent (January) and rising. With inflation, as with everything else, perception is just as important as reality. And that’s where the problems lies for Beijing. With most of the rise coming from food (80 plus per cent according to the government) these jumps really hit hard. If it was the prices of Rolls Royces or whatever, no one except a few Shanxi coal mining millionaires would be concerned. But as my colleague Jodi Xu discovered on a recent trip to Beijing’s biggest food market, when prices for staples such as pork double, life can become pretty hellish:

Wang Litian, a 67 year old retired worker from Beijing Bus Factory, recently faced an impossible choice: cut her medical expenses by not taking painkillers or cut down on her food spending. Wang lives with her husband, son and daughter-in-law and a granddaughter The family’s income is mostly spent on food and medicine. But with the food prices continuing to soar, they now have a choice between food or medicine. “Last year, our food expense was a little over one thousand yuan a month. It has risen to over two thousand now,” Wang says, waving her hands in agitation. “My salary has just been increased by 200 yuan a month, but the food prices rise much faster.” Wang suffers from diabetes and chronic back pain. “I stopped taking pain relievers because I need the money for life-saving drugs for the diabetes. I have to live with the pain.”

Within the last year, say stallholders and shoppers in Beijing’s largest wholesale food market Xinfadi Primary Product Market, the price of pork has doubled, with beef and lamb following close behind. (Official figures are lower, but the perception that they are paying twice as much as a year or so ago is pretty widespread among ordinary Chinese; again, perception trumps official Consumer Price Figures when it comes to a full belly.) Even white cabbage, usually a cheap staple in north China, has seen its price rise by about 50 per cent within the last two months from 0.8 to 1.2 Yuan per kilogram. Wang Litian doesn’t think the price will go down anytime soon either. “With the winter snow storms, the effect will show in various products in the months to come.” Wang says “the family will have to undergo a serious change in diet if prices go up further.”

Wang isn’t alone in suffering from a recent bout of inflation that hit the food sector hardest. A retired factory director who gives his name only as Old Ma grumbles about the price of lamb. “Our quality of life is steadily declining. Last year, my family could afford to have meat twice a week. Now we only eat meat once every month.” Ma, says his family of seven budget 1,500 yuan a month for food. But now that means most meals consist of cabbage and potatoes. To get cheaper prices, Old Ma delays his daily visit to the food market until four o’clock in the afternoon. “The later I go, the cheaper the price is. I exchanged the quality for the quantity. If the price doesn’t stop going up, it won’t be long before people start to protest.”

Protest. Not a popular word at Zhongnanhai, the Communist Party Headquarters, which is located just off Tiananmen Square, a place where another protest started sometime back in large part over …… inflation.