Food Prices Escalate Amid Inflationary Pressures

In the National People’s Congress session, the government set a target of 3.5% inflation for 2013, but leaders have acknowledged that keeping consumer prices in check in a major challenge confronting the incoming Xi administration. Food prices, in particular, are escalating. From the BBC:

Consumer prices rose 3.2% from a year earlier, with food prices up by 6%.

Inflation has been a hot political issue in China. There have been concerns that if consumer prices rise too much, it may prompt Beijing to tighten monetary policies, which in turn may hurt China’s growth.

However, analysts said the latest data was unlikely to prompt any such moves.

They argued that the price growth was driven mainly by the Lunar New Year celebrations, which are traditionally associated with an increase in consumer spending.

But a report from Reuters argues that prices have stayed high even after the end of the Spring Festival holiday season and that urbanization is largely to blame:

Retail beef prices in Beijing city markets are higher compared with supermarkets in the Boston area. Pork, China’s staple meat, is only about 50 cents per kilogram, or 23 cents a pound, below the U.S. price, a Reuters comparison of standard retail prices show. Those prices represent a direct hit on the spending power of Chinese, whose average income is about a 10th the size of Americans’ salaries.

Contributing to food production costs are the loss of farmland and farm labor to urbanization — Chinese cities are swelling as they absorb hundreds of millions of people.

Grazing restrictions because of land degradation are also causing costs to rise across the country.

“The more the economy develops, the harder it is to raise calves,” said Wang Jimin, who tracks cattle trends for the Chinese Academy of Agricultural Science’s Rural Economic Development Institute. “In the short term, I don’t see meat prices falling unless there are a lot of imports.”


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