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Inflation looms, food, property prices rise
By Jiang Xufeng |
January 25, 2010, Monday
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Print Edition
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LIU Qi, an advertising firm employee in Beijing for eight years, spent 80 yuan (US$11.70) at a supermarket last Thursday. About a half went on food and the rest on daily necessities.
However, the biggest financial pressure for the 29-year-old is not food, but her plan to buy an apartment in the city as home prices have risen through the roof.
China's Consumer Price Index (CPI), the main inflation gauge, climbed 1.9 percent year on year in December, mainly boosted by food, rent and related prices, Ma Jiantang, director of the National Bureau of Statistics (NBS), said on January 21.
The CPI in November and December was lifted by rising consumption on the back of faster economic expansion, and food price hikes caused by winter weather, said Xiong Peng, a senior researcher with Shanghai-based Bank of Communications (BoCom), China's fifth lawrgest lender, on the same day.
China's CPI fell 0.7 percent year on year in 2009. The CPI was up again in November by 0.6 percent from a year earlier, according to the NBS. The CPI was an important economic gauge, but it needed frequent modification in line with actual conditions to give a clearer and real-time picture of general living costs and financial pressures, said Ou Minggang, director of the international finance department of the Beijing-based China Foreign Affairs University.
"People's eating and consumption habits have changed greatly in recent years. Housing costs also occupy an increasingly bigger share of incomes, so corresponding modifications are necessary, as policy makers will read CPI and other metrics for judging economic performance," Ou said.
China's CPI basket includes seven other types of commodities: food; alcohol and cigarettes; clothing; home appliances and maintenance; medical care; transport and communication; education and entertainment.
Home purchase costs were excluded from the CPI calculation and food still accounted for the biggest proportion, said Ge Zhaoqiang, vice general manager of strategy and development department at China Merchants Bank.
Liu and her friends spent at least 20 percent of their income on rent and bills, more than the official calculation ratio.
For most young and middle-aged urban married people, one third or even more of their income went to repay mortgages or to rent a bigger home.
"As a third of the CPI basket, rising food prices might easily stoke inflation forecasts. The food weighting in the CPI is too high," said Ge. Food prices rose 5.3 percent in December from a year earlier nationwide, pushing up the CPI by 1.74 percentage points, while rental and related bills edged up 1.5 percent, pushing up the monthly CPI by 0.21 percentage points, NBS figures showed.
The government should also closely monitor property prices and bank credit to avoid bad inflation from affecting people's lives, Ou said.
"Inflation risk looms large and policy makers should take timely steps to curb a rapid CPI spike and better regulate the property market so people can live more comfortably and affordably," Xiong said.
(The author is a Xinhua writer.)
However, the biggest financial pressure for the 29-year-old is not food, but her plan to buy an apartment in the city as home prices have risen through the roof.
China's Consumer Price Index (CPI), the main inflation gauge, climbed 1.9 percent year on year in December, mainly boosted by food, rent and related prices, Ma Jiantang, director of the National Bureau of Statistics (NBS), said on January 21.
The CPI in November and December was lifted by rising consumption on the back of faster economic expansion, and food price hikes caused by winter weather, said Xiong Peng, a senior researcher with Shanghai-based Bank of Communications (BoCom), China's fifth lawrgest lender, on the same day.
China's CPI fell 0.7 percent year on year in 2009. The CPI was up again in November by 0.6 percent from a year earlier, according to the NBS. The CPI was an important economic gauge, but it needed frequent modification in line with actual conditions to give a clearer and real-time picture of general living costs and financial pressures, said Ou Minggang, director of the international finance department of the Beijing-based China Foreign Affairs University.
"People's eating and consumption habits have changed greatly in recent years. Housing costs also occupy an increasingly bigger share of incomes, so corresponding modifications are necessary, as policy makers will read CPI and other metrics for judging economic performance," Ou said.
China's CPI basket includes seven other types of commodities: food; alcohol and cigarettes; clothing; home appliances and maintenance; medical care; transport and communication; education and entertainment.
Home purchase costs were excluded from the CPI calculation and food still accounted for the biggest proportion, said Ge Zhaoqiang, vice general manager of strategy and development department at China Merchants Bank.
Liu and her friends spent at least 20 percent of their income on rent and bills, more than the official calculation ratio.
For most young and middle-aged urban married people, one third or even more of their income went to repay mortgages or to rent a bigger home.
"As a third of the CPI basket, rising food prices might easily stoke inflation forecasts. The food weighting in the CPI is too high," said Ge. Food prices rose 5.3 percent in December from a year earlier nationwide, pushing up the CPI by 1.74 percentage points, while rental and related bills edged up 1.5 percent, pushing up the monthly CPI by 0.21 percentage points, NBS figures showed.
The government should also closely monitor property prices and bank credit to avoid bad inflation from affecting people's lives, Ou said.
"Inflation risk looms large and policy makers should take timely steps to curb a rapid CPI spike and better regulate the property market so people can live more comfortably and affordably," Xiong said.
(The author is a Xinhua writer.)
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