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China inflation coming to U.S. price tags

Scott Tong Sep 19, 2007

China inflation coming to U.S. price tags

Scott Tong Sep 19, 2007


KAI RYSSDAL: If you’re looking for someone to thank for those low inflation numbers we told you about at the top of the program, a quick Chinese lesson might be in order.

“Xie xie” is Mandarin for thanks — a handy phrase, when you consider that cheap Chinese imports have helped keep American consumer prices low for years.

Now, China’s having inflation worries of its own. Today, Beijing imposed price controls on almost everything from oil and electricity to water and even the cost of parking fees.

The rising cost of food is the most worrisome in a country that has 1.3 billion people to feed. But Marketplace’s Scott Tong reports it won’t only be the Chinese who pay the price.

Scott Tong: Food has always occupied a central place in Chinese discourse — many a conversation starts with the question “Did you eat yet?” But lately the chatter has turned to angst over food prices. Especially in the countryside.

Stroll through an outdoor market in Huai An, about 250 miles north of Shanghai. Everything here seems pricier. Ask these chive growers.

Chive Grower 1: We old people can’t afford pork — it’s already more than $1 a pound.

Chive Grower 2: The pork price has pushed up other prices. Everything costs more now. Do we have enough to eat? Yes. But we don’t eat well anymore.

Rural China has felt the effects of rising prices of oil, feed and fertilizer worldwide. Chinese food prices rose 18 percent this past year. Eggs have gone up 24 percent more. And meat has skyrocketed 49 percent.

Chive Grower 3: We hardly ever eat meat — we go long stretches without it. But if we have guests, then we’ll buy it.

Russell Moses: Meat is seen as a standard by which people think they’re lives are in fact improving.

Russell Moses is dean of the Beijing Center for Chinese Studies.

Moses: And so when you get shortage of pork, people then ask themselves, “Do I have to make the sort of difficult choices that I thought I left behind 20 or 30 years back?

Chinese retirees remember the horrific famines of the late ’50s and early ’60s — 30 million people starved to death. And when they talk meat, they mean pork. It is not the “other white meat” out here. In fact, it’s so vital that China maintains a strategic pork reserve for supply crises, sort of like the U.S. strategic oil reserve.

Hog supplies cratered earlier this year, in part because of a mysterious pig ear disease. Now breeders are scrambling to raise new pigs, often subsidized by the government. But in this village, many grumble that Beijing has let them down.

It’s been a bad rice-growing season, because of floods. And there’s no social safety net in the countryside when things go bad.

Chive Grower 4: We have no pension! We farmed when we were young, now we can’t do it anymore. Who takes care of us? Farmers have no guarantees like other workers do.

Russell Moses of the Beijing Center thinks rising food prices add to a level of discontent that many country folk already have. He says they feel left behind in fast-moving China.

Moses: They see individuals in urban areas who can buy cars, more than one apartment — and resentment is in fact growing. Inflation is one of those areas in ’88 and ’89 that triggered this outburst.

That “outburst” refers to widespread protests in 1989, culminating in what the government calls the “Tiananmen incident.” To prevent a repeat scenario, Moses says authorities are trying to moderate prices: They’ve capped the price of beef noodle soup in western China, at 33 cents a bowl, and they’ve banned Beijing universities from raising cafeteria prices.

A big question is, will rising prices at food markets in China jack up prices for everything else? It’s debatable, but independent economist Andy Xie sees broader inflation coming.

Andy Xie: The world needs to be aware this big China sale that has been going on over the last 10 years is over — Chinese products are going to become more expensive.

He forecasts double-digit inflation next year — that could show up in export prices, and eventually the price tags at Wal-Mart.

In Jiangsu Province, eastern China, I’m Scott Tong for Marketplace.

(Staff researcher Linda Lin contributed to this report)

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