Economy

China battling against inflation

(Xinhua)
Updated: 2011-02-28 09:18

CHONGQING - When mentioning the rise in food prices over the past six months, 55-year-old retiree Xu Mingying in West China's Chongqing seemed quite upset.

"The cost of food increased over 30 percent in six months while income barely increased", said Xu.

The average monthly spending on food for her four-person family had reached 2,000 yuan ($300), accounting for over 45 percent of their total income.

She hoped that the country's legislators and political advisors could work out something to stabilize food prices during their annual session in March.

Her proposal was to set up an inflation-related special allowance to subsidize low-income families in every day living.

Besides consumers like Xu, Chinese companies also felt the pressure of surging prices.

Qiutian Gear, a Chongqing-based private company producing gears for motorcycles, has had difficulties in profiting when the cost of raw materials, energy and labor soared.

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"Downstream manufactures are demanding discounts while we have to raise our employees' salaries by 10 percent", said He Yonglin, secretary of the company's Communist Party branch.

He also suggested that the government introduce more measures to curb inflation, especially on rising food prices which contributed greatly to their workers' living costs.

Xu and He's calls were echoed by many netizens when posting questions during Premier Wen Jiabao's online chat on Sunday.

When answering questions concerning rising prices, Wen said that he would not allow consumer prices to surge unchecked.

Maintaining price stability had always been a priority of China's economic development as excessive increases in consumer prices would not only affect people's lives, but also disrupt social stability, he said.

China's consumer price index (CPI), a major gauge of inflation, rose 4.9 percent in January from one year earlier as food prices increased 10.3 percent because of rising demand and the drought in key grain-growing regions. The CPI rose by 4.6 percent in December and 5.1 percent in November.

The Chinese government has undertaken a set of measures to keep prices in check, including programs to boost grain output, reductions in circulation costs and drought relief assistance.

Wen believed that the country's adequate grain reserves would help the country fight inflation.

Zuo Xiaolei, chief economist of China Galaxy Securities, said that the government should also try to increase people's incomes and, in the process, narrow down the income gap.

Zhang Liqun, a researcher at the Development Research Center under the State Council, suggested improving basic public services, including social security, education and health care, in order to safeguard the basic living of low-income groups.