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Most say inflation bearable

By Xin Zhiming (China Daily)
Updated: 2008-06-26 08:59

Shoppers browse vegetables at a supermarket in Yichang, Hubei province.  [China Daily]

Fewer urban consumers think prices are unacceptably high compared with three months ago but most people still believe prices will continue to rise, according to a quarterly central bank survey released yesterday.

The survey, which was based on nearly 20,000 questionnaires collected in cities in late May, also found people are becoming more reluctant to buy stocks and houses and are more willing to keep their money in the bank.

Some 45 percent of the respondents said current prices were too high to bear, up from 29.5 percent a year ago but down from a record 49.2 percent for the previous quarter.

"Almost all prices are rising too fast while my salary remains largely unchanged," said Song Fei, a middle school teacher in Beijing. "The State is trying to control prices, but it is hard to stop them from rising."

China has attached more importance to prevent rapid inflation since last year, but the consumer price index (CPI), the gauge of inflation, had not significantly reduced until May, when CPI rose by 7.7 percent year-on-year, down from 8.5 percent in April.

Some 51.6 percent of the respondents, however, thought although the prices were very high, they were acceptable. The proportion is 4.1 percentage points higher than a year ago.

"I can, at least so far, afford the high prices, but if prices continue to rise, it would be hard for me," said Cui Meiting, an auto parts company employee in Beijing.

Many people have a gloomy outlook on prices in the coming quarters. More than half of the respondents thought prices would continue to rise in the third quarter, 0.3 percentage point higher than a year earlier.

Last week China started to raise prices of its oil products by more than 10 percent, which, analysts said, may kick off a cycle of energy price rises. Many economists forecast the move will push up the country's inflation level by about half a percentage point for the whole year.

"Inflation, obviously, is a thorny issue," Fan Gang, senior economist and member of the monetary policy committee of the central bank, said yesterday at a forum on China's economic prospects, which was organized by the China Business Journal. "We should pay special attention to preventing prices from rising continually. It's dangerous."

World Bank economist Hans Timmer also held that China must prevent oil-induced inflation from spreading to other sectors and triggering new bouts of price rises - the so-called "second-round effect".

Cold to stocks

The central bank survey shows people are no longer eager to invest in stocks. Only 16.8 percent of respondents thought it was better to invest in stocks or mutual funds, down from 27.6 percent in the previous poll in March and 36.1 percent in December.

Some 15.1 percent of the respondents planned to buy houses in the coming three months, slightly up from the all-time low of 14.6 percent in March. In Beijing, however, more people planned to buy houses than in the previous quarter, the central bank said without elaborating.

Meanwhile, 38.1 percent of the people surveyed believed they needed to save more, up from 35.4 percent in the first quarter.