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Chinese consumers blame US as prices spiral up

by Staff Writers
Beijing (AFP) Nov 18, 2010
At a bustling outdoor fruit and vegetable market in Beijing, Zhan Tiehui grumbles about rising prices for garlic, ginger and cabbage and points a stubby finger in the direction of the United States.

"The source of China's inflation is America, they are printing too much money," Zhan, 50, told AFP as she clutched plastic bags full of vegetables.

"Everything is definitely more expensive than last year."

Chinese consumer fears are rising along with prices after October inflation grew at the fastest pace in two years. The problem is fuelled by soaring food costs after severe summer flooding and more recent cold snaps hit crop yields.

But Zhan was echoing Chinese government criticisms of the US move to pump 600 billion dollars into the American economy, which Beijing warns could cause damaging fund flows into emerging economies such as China and fuel inflation.

Wen Xingping, 50, said green vegetables and winter melons were more expensive than last year and had forced her and friends to cut spending on clothes and other non-essentials.

"It is really serious," Wen told AFP as she braved chilly weather to buy dried fruit and nuts from a stall.

"Prices have increased by 20-30 percent in the past year. My friends are really worried."

In the first 10 days of November, average wholesale prices of key vegetables such as potatoes and cucumbers in 36 Chinese cities were 62.4 percent higher than a year earlier, official data showed.

In October, the nation's consumer price index rose 4.4 percent year-on-year, beyond the official full-year target of three percent and the fastest rate since September 2008.

Consumers are not the only ones worried.

The government said Wednesday it may intervene to control spiralling inflation as it announced guidelines aimed at ensuring stable prices and supplies of key products such as vegetables, grain, coal and other energy sources.

High inflation has a history of sparking unrest in China and the nation's stability-obsessed leaders have already taken a range of steps, including hiking interest rates last month for the first time since 2007.

Inflation features so prominently in the public mind today that the Chinese character "zhang", which refers to price rises, has the most votes so far in a poll to choose the character of the year on popular online forum Tianya.cn.

Even McDonald's has been hit by spikes in meat, egg, and oil prices, with the US fast-food giant raising the price of its hamburgers, fries and chicken nuggets by up to one yuan (15 cents), business news website Hexun reported.

A survey last month found about half of urban families plan to reduce spending next year due to worries over inflation, the China Daily reported.

More than 60 percent of those surveyed in rural areas said they planned to tighten purse strings.

Another survey by Nielsen said Chinese consumer confidence fell in the third quarter for the first time since early 2009 due to concerns over rising food prices.

Economic analysts said China's government faces a quandary.

It wants to tame inflation but fears aggressive steps could stall rural income increases, as well as the government's plans to reduce the economy's dependence on foreign demand for China's exports and rely more on domestic consumption.

But many feel another rate hike is probably overdue.

"You really need to tighten monetary policy. They really have to do it because they are already a little bit behind the curve," said Jianguang Shen, analyst at Mizuho Securities Asia Limited.

The struggle to afford daily necessities like food compounds the anguish of prospective home-buyers and renters who have watched real estate prices soar.

The government has enacted a range of steps to curb property values but they are still climbing in major cities, albeit at a slower pace, since surging 12.8 percent in April. That was the biggest year-on-year rise in five years.

"Housing prices are really serious, it is really terrible," Zhang Ming, 25, told AFP after buying a small bag of vegetables.

"Problems in the American economy ... and hot money inflows have some impact on China," she added.



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