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Surge in consumer prices puts China on guard
(Xinhua)
Updated: 2004-04-22 10:35
China's consumer price index (CPI) rose 2.8 percent year-on-year in the first
quarter, 2.3 percentage points higher than in the same period last year, which
experts consider a result of expanding investment that will further influence
the country's economic performance.
Last January witnessed an end to a 14-month downslide of China's CPI, but the
index had kept rising with growth rates under 1 percent until the third quarter
last year. It was the rise in prices of grain and other farm produce last
September and October that drove an overall hike of food prices.
Liu Wenhua, an official with the National Bureau of Statistics (NBS), said
the price increase in farm produce was no doubt good news to farmers who
suffered falling output and creeping income growth.
Analysts with the Development Research Center of the State Council consider
the rise in both production prices and consumer prices since last year shows
China is stepping out of the deflation shadow and is likely to trigger further
economic growth.
They deem the current price increase still moderate, saying it will help
promote healthy economic development by leading enterprises to more marketable
and profitable trades and products to balance supply and demand.
Though the markets remain calm, the rapid CPI increase is showing its
pressure on catering, auto-making, electrical household appliance manufacturing
and clothing, which may be forced to lower prices due to insufficient demand or
oversupply.
Cui Huachang, boss of a private hotel in Qianjiang City, central China's
Hubei Province, complained of swelling expenditure on employees' daily
consumption.
"The rice price has risen from 1.4 yuan per kg last year to the current 3
yuan per kg. I have to pay 1,500 yuan (US$181) more each month for my employees
who consume over 30 kg of rice every day," Cui said.
"Business has become more difficult for us, as prices for hotels and catering
services have seen no growth," he said.
The price surge of steel and other raw materials have also slashed profits in
related industries, as witnessed by the falling prices of automobiles and
household appliances.
Experts regard it necessary for China to tighten macro-economic control to
curb overheated investment in steel, cement, electrolytic aluminum and electric
power, which will help reduce the prices of materials and equipment needed in
these industries.
Meanwhile, statistics from the NBS show that urban CPI rose 2.1 percent in
the first three months, a sharp contrast to the 4 percent rise in rural areas,
which is attributed to the slack supervision over rural markets.
Resulting from the fast increase in investment since the end of 2002, the
price surge hasn't spread to the labor market. In addition, the income gap
between urban dwellers and rural residents is also broadening, discouraging
consumption demands of the low and middle income strata who compose most of
China's population.
Xu Lianzhong, an official with the State Development and Reform Commission
(SDRC), suggested the government improve subsidies to help needy families
through continuous food price rises and intensify supervision of rural markets,
especially medical charges and education fees.
"While restraining investment, the country should also take measures to
stimulate the public's consumption of products to alleviate oversupply," he
said.
Liu Wenhua reminded governments at various levels to be cautious in carrying
out any decision to regulate prices, saying it might cause social panic when
prices of farm produce and major production means remain high.
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