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November 26, 2010

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Stocking up, cutting back and counting pennies

YOU don't need to be an economist to know the cost of living is going up and household budgets are being stretched. People of all walks of life are finding ways to cope with the pain, reports Yao Min-G.

Chen Hui, a 65-year-old retired high school mathematics teacher, bought 20 packs of toilet paper for the first time in his life on the evening of November 15, after the Shanghai Statistics Bureau announced that consumer prices in October rose 4.1 percent from a year earlier.

The surge, accelerating from an increase of 3.7 percent in September and 3.2 in August, was slightly less than the national average of 4.4 percent, a 25-month high announced four days earlier.

The increase largely reflected a 10.1-percent surge in food prices, which account for a third of the weight of the Consumer Price Index (CPI) basket.

Inflation rearing its ugly head has prompted endless discussion from economists, financial analysts, researchers, government officials and the media - and, of course, the public at large.

Some say the data indicate that inflation is out of control; others are more optimistic that government measures to tackle the problem will work.

Shoppers in Shanghai don't need government figures or market analysis to tell them the reality of their daily lives. Everything is costing more.

For 29-year-old secretary Lily Yan, it means she can't buy as many toys or snacks for her 2-year-old husky Bun.

For 22-year-old recent graduate Bobo Xu, it means he may exhaust his small savings faster than he can find a job, and he might have to leave the city where he once staked his dreams for the future.

For 29-year-old Zhou Liren, it means skipping the breakfasts he used to buy from a street vendor near his office.

The price for a carton of soy bean milk plus an egg pancake went up from 4 yuan (60 US cents) to 7.5 yuan almost overnight.

For retired teacher Chen, it means he has to spend more time figuring out how to save money on a monthly income of less than 2,000 yuan.

His daily spending at the grocery market went from less than 10 yuan in the September of 2009 to about 18 yuan now. The price for a package of three Chinese cabbage doubled to 4.5 yuan.

"The price of this pack of toilet paper went up from 2.4 yuan to 3.8 yuan in three months," Chen laments. "The absolute number may look small to some people, but that's an increase of more than 50 percent. And the worst of it is that toilet paper is something you can't live without."

He keeps a record of how much he spends every day and has found monthly costs going up quite rapidly in the past two years, especially since last spring.

"Paying for just necessities like food and utilities for my wife and me increased to 1,276.98 yuan in September from 774.56 yuan in April 2009," Chen tells Shanghai Daily.

Chen says he spends an hour or two every week poring over bills, trying to figure out which items have gone up in price the most, so he can stock up now before they go up even more.

In the parlance of economists, that's a phenomenon called "inflationary expectations," and it's a bad sign when it takes hold in for an economy.

It's not just food costs that concern consumers. Chen notes that water prices in Shanghai went up 22 percent recently, which would cost him about an extra 10 yuan a month.

The government is certainly aware of the concerns surging through the population. It has reacted quickly. On November 17, a new round of remedial measures was announced, including price controls and relief for poor households struggling to cope with mounting food prices.

Policies were also implemented to cut delivery costs, guarantee fuel supplies and crack down on rampant hoarding.

It's too early yet to gauge how well these measures will work, although food prices have shown some signs of moderating.

Chen, while no hoarder, is stocking up on items he and his wife consider basic to their everyday life.

At a neighborhood grocery store, he purchased extra coarse grains, especially Chinese sorghum that he uses everyday for breakfast congee.

The price of Chinese sorghum went up from less than 12 yuan to around 30 yuan in less than a year but has dropped by 4 yuan since the remedial policies were announced.

"I'm not confident on whether prices will keep dropping," Chen says. "I'm really afraid that they would go up again. So I just want to keep some more on hand."


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