Inflation control here to stay - Andrew Leung

Andrew Leung

China's tools to curb inflations are here to stay with us for a long time, because inflation is going to stay with us, tells Andrew Leung at CNBC. An unprecedented urbanization and the growing consumption of China's middle class will keep pressure on commodities.

Andrew Leung is a speaker at the China Speakers Bureau. When you need him at your meeting or conference, do get in touch.

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Inflation pushes business and workers out of big cities - Marc van der Chijs

Many do not return after CNY via Wikipedia

Tudou.com founder Marc van der Chijs warns in his weblog that higher prices and wages is forcing businesses and people out of Shanghai and other larger cities in China, getting critical after Chinese New Year:

For years prices have been rising steadily in China. The price of fuel is about 3 times as high as 10 years ago for example, but also daily necessities such as rice keep on going up in price. That is the same all over China, but especially in the big cities the housing prices are also going through the roof. They are now at such a high level that even white-collar workers cannot afford to buy apartments anymore.
I realized this for the first time about 2 years ago, when an employee came to me with a salary increase request. He wanted to buy a house and could not afford it without a higher salary. I did not grant him the higher pay so he left the company, but it made me contemplate about the relation between the level of salaries and the housing prices. They were getting out of sync fast. But housing prices only kept on rising after that, and at a much faster pace than the average salary increase.

Now the increases have reached a critical level, Van der Chijs writes:

There are signs that this may happen sooner rather than later: in Saturday’s English-language newspaper the Shanghai Daily a reporter wrote that so far 90% of the domestic staff did not return from their hometowns to Shanghai after Chinese New Year. Last year the figure was around 30% at this time. And the staff that come back are asking for wage increases of up to 30%, meaning that a full-time cleaning lady now earns around USD 500 per month. If these people are now all staying in their home towns because of better economic conditions very soon their white-collar colleagues will follow their paths.

More in his weblog.

Marc van der Chijs 

Marc van der Chijs is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Food price controls temporary - Shaun Rein

Shaun Rein by Fantake via Flickr

Shaun Rein goes on air in CNBC to explain the confines of the recent food controls imposed by the Chinese authorities to control inflation. Controlling the food prices and lowering the production costs - by killing the toll fees for food trucks - are only temporary measures to bring back confidence of the people, he says. He expects the controls to be limited in time for perhaps one or two months.
And meanwhile he has to address persisting myths on the importance of export for China's economy in the debate: percentage of export in GDP has dropped from 40 percent ten years ago to 20 percent now.

Commercial
Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch.

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Raising the prices

Inflation is hitting the country and much of the debate focuses on price-hikes. China moved from the last period of stiff inflation in the 1990s into a situation that might sometimes more or less resemble those in a market economy. But how to deal with rising prices is an art that still dates from the planned economy, as Shanghai Scrap points out.
Time for some re-education of the officials who have to discover that price-fixing is not done in the open, but like in the West in secretive and illegal meetings that will be prosecuted when discovered by the government.
Meanwhile, prices are really going up. This week I saw the price of my breakfast, mostly a set of baozi's, go up from 0.8 rmb per piece to 1.0 rmb: more than twenty percent.

Update: And the government is starting to investigate price-fixing cartels. As they should.

Inflation triggers off alarm

Rising food prices have triggered off alarms and according to the official news agency Xinhua and local authorities have till Thurday to provide news for an increase of the minumum wages. In an AP dispatch:

Chinese leaders have been alarmed by a spike in inflation that saw the price of eggs rise 37.1 percent in May from their price in the same month last year. Meat and poultry were 26.5 percent more expensive in May compared to a year ago.
The increase "would have a great impact on low-income families," the Xinhua News Agency said.

It is unclear what the effect could be. Minimum wages tend to be rather low anyway and compliance is another problem. The figures for the inflation seem pretty high, compared to what I have seen in Shanghai. Just like the minimum wages, figures for inflation might vary greatly between regions.

Inflation hits my lunchbox: 10% up

pork

Not only the stock market is (again) going up, also food prices. Today my lunch box (both pork and chicken) went up ten precent in price. A potentially dangerous move, since the competition among lunch box providers is very competitive in this part of Shanghai. For the time being we put up with it, too busy to be bothered by one Renminbi extra.
The Wall Street Journal looks at the ups and downs of the pig cycle in China:

"It's just like the stock market," says Guo Qiurong at her farm outside Beijing, which houses its pigs in long, low-slung concrete buildings. "If you can take the risk, you get in. If you can't, you get out. Once they start losing money, farmers just stop raising pigs."
China's pork prices generally tend to rise and fall in major cycles of three to four years; the last big surge came in 2004. (That this year's price spike comes during the Chinese zodiac's year of the pig appears to be a coincidence.) The pattern is now well enough established that farmers should, in theory, be able to smooth out the fluctuations. The main problem: bad information and poor planning that leads too many farmers to pull out of the market, or jump in, at the wrong time.

China is again heading for an oversupply of pork and dropping prices next year.

Update: The delivery boy only charged the old prices the the lunch box. Perhaps too much negative feedback.

Lunch: up 20 percent

On Saturday China's financial regulators told they would act fast on inflation. Unfortunately, my regular provider of lunch boxes was not reached in time, so I ended up paying 20 percent more for my food. On top of that he announced he would no longer serve single meals: two meals would be a minimum.
He tried to camouflage his evil deeds by first skipping the cheapest dishes and adding more expensive ones. On top of that he added two prawns. Tomorrow I will check some new suppliers, but it looks that the inflation rate for my lunch box this quarter will be 20 percent.
The damage for me is limited, the price went up from 10 to 12 yuan and a gin tonic tomorrow at the Cotton's bar might cause more financial damage, but on a macro-level, with millions of white-collar workers paying 20 percent more, the central bank should start to worry.