Inflation rate exceeds target

13:51, November 11, 2010      

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A woman walks by a sale advertising poster in Beijing, capital of China.Photo:Xinhua

Concerns are growing among some Chinese consumers that their pay raises have failed to keep up with the country's commodity price hikes, as the inflation rate appears to be outpacing the government's target.

High-ranking officials and prominent economists have hinted that this year's annual inflation rate will exceed the government's 3 percent target. Authorities are set to announce the Consumer Price Index (CPI) for October today.

Zhang Ping, head of the National Development and Reform Commission (NDRC), acknowledged at a work conference Tuesday that annual inflation is on track to "hover slightly over 3 percent," the Beijing News reported. It was the first such speculation by an NDRC official.

The prices of goods will continue to rise in the fourth quarter due to natural disasters, the depreciation of the US dollar, and abundant liquidity that has boosted speculative investments in various commodities such as grain and cotton, Zhang said.

The CPI hit a 23-month high of 3.6 percent in the year to September, and a Reuters poll this week forecasts that inflation in October hit 4 percent.

However, Xu Qiyuan, a research fellow with the Chinese Academy of Social Sciences (CASS), a government think tank, released a report Wednesday suggesting that the National Bureau of Statistics underestimated inflation by a total of 7 percent between January 2006 and May 2010, or by more than 1 percent a year.

A recent poll by the central bank found that eight out of 10 people in urban areas were unhappy with com-modity prices.

Last week, the NDRC announced that retail prices for 24 out of 31 food products in urban areas jumped by various degrees in October from a month earlier, heightening public fears that the rising cost of living could be hitting people harder.

Yang Weiming, a 45-year-old cleaner at a State-owned enterprise in Kaili, southwestern Guizhou Province, told the Global Times that despite getting a 200-yuan ($30.10) raise in October, increasing her salary to 1,500, the living conditions for her family haven't improved because food prices continue to soar.

"Prices on things such as edible oil, rice and vegetable increased 30 to 50 percent (over the last three months) while my wage grew less than 15 percent. Price hikes always outpace my pay increase," she said.

But unlike Yang, about 25 percent of workers in the country have not received a pay raise in more than five years, according to a survey conducted by the All-China Federation of Trade Unions in the first half of this year.

Tao Dong, chief economist at Credit Suisse, compared the soaring CPI figure to an invisible tax that strikes hardest on low-income groups and reduces their purchasing power.

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