Retro: Inflation in China

Matt | Inflation in China | Thursday, March 13th, 2008

January 15

Inflation in China

Inflation has been a rampant topic of discussion here in China this past year. People have mentioned that pork prices have gone up 25-50%. Which is huge considering for most Chinese (1,500,000,000) people, pork is the preferred meat choice. Additionally, housing prices have skyrocketed these past few years – each year increasing by about 50-100% in the major cities like Beijing, Shanghai and Shenzhen. A 2 bedroom apartment in Beijing will now cost about 18,500 RMB per square metre. In ’06/07 this same place cost about 10,000 RMb per sq m. Now, for a 100sq M apartment (about 1000 sq ft) it’ll cost 1,850,000 Rmb. This equates to about $250,000 Canadian (about 7 to 1). So, I can buy a place in Beijing for about the same price as buying a place on the waterfront (Lakeshore) in downtown Toronto. This does not make sense to me. I also do not understand how people in China can afford to buy an apartment (or 2 or 3) on their salaries. But, I’m digressing down to a housing discussion, when I really wanted to talk about inflation. Back to inflation, workers salaries for professionals seem to be going up to – as it is not uncommon to hear about people getting 10-50% salary increases annually. Mind you the base salary usually is quite low. As an English teacher my salary has not increased in the 2 years I’ve been here. The avg rate for private teaching is about 150-200 Rmb/hr. In order to increase my salary, I’ve had to jump to new jobs or companies. Back to inflation, it is tough to get realistic numbers on inflation, but the most recent figures stated by the National Bank of China quotes an inflation figure of about 6-7%. From my purchases, I see higher numbers, and this is likely some inflation due to commodity cost increases as well as companies taking some additional profits. For example

A small Snickers candy bar (35g) used to cost 2.50 RMB – now it’s 3.50 RMB =+40% increase

A muffin from Paris Baguette (a premium bakery in Beijing) used to cost 5 rmb – now it costs 7 Rmb = again +40%

If you buy in bulk the 2 pk muffin used to be 9rmb – now it’s 12 rmb – only a 33% increase

A 6pk NVGB almond from Ole supermarket in Guo Mao used to be 28 rmb – now it’s 40 rmb = +43% increase

McDs last year ’06/07 did a sneaky price increase, on their pancakes:

used to get 3 pancakes for 13.5 in a meal deal – now they give only 2 cakes for 14.5 = +61% increase per cake

Mind you price increases are not on all products.

A small bottle of water (500ml) was 1.5 RMB – now 1.5 RMb = 0% increase or flat

A 6pk NVGB almond from Jenny Lou’s (the expat store of choice) was 28rmb – now 28 rmb = also flat

A Starbucks medium (tall) black coffee was 15rmb – now 15 rmb = again flat

So I guess with inflation going rampant I now have to shop wiser, compare prices more and, I know, choose healthier foods.

For a more detailed review of inflation in China check out ATimes recent report at:

www.atimes.com/atimes/China_Business/JA19Cb01.html

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