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Living in Beijing more expensive than New York?

By Lin Lili (People's Daily)

15:27, September 14, 2011

Edited and Translated by People's Daily Online

Recently, an online post of a comparison between commodity prices in Beijing and New York has been followed and forwarded thousands of times on Chinese microblogs.

To make an accurate comparison of the prices in China and in the United States, reporters interviewed an American named Patrick living in New York and a Chinese person named Huang Xin who works in Beijing. The comparison is made according to the data provided by Patrick and Huang.

Foreign brands, particularly high-end consumer goods, are extremely expensive in Beijing

The comparison shows that foreign brand consumer goods cost more in Beijing than in New York.

It is noteworthy that the prices for some "Made in China" consumer goods are higher in China than in the United States. Gao Peiyong, head of the Finance and Trade Economics Institute under the Chinese Academy of Social Sciences said, "The higher prices in China are caused by the tax structure. China's tax is largely made up of turnover taxes, such as value-added tax, sales tax and consumption tax, while Western countries' taxes mainly consist of direct taxes, such as personal income tax, property tax and inheritance tax." Thus, after foreign goods are imported to China, various types of taxes will be levied on them. Furthermore, China's logistics costs are relatively higher, which further pushes up the prices.

Foreign goods that are regarded by Chinese as "luxury goods" are exceptionally expensive in China. They are priced differently at home and abroad.

"The 'reputation pricing' and 'differential pricing' strategies adopted by foreign luxury goods producers are one of the major reasons behind the sharp differences at home and abroad," said Zhu Mingxia, a professor at University of International Business and Economics.

"Reputation pricing" means that producers set high prices for products that are highly recognized by consumers and enjoy a relatively high reputation in order to satisfy consumers’ sense that high price is reflective of the goods' high quality.

"Differential pricing," means that producers set different prices for the same goods in different markets according to consumers' willingness to pay. Foreign distributors are well aware that Chinese consumers favor foreign high-quality goods, so they have deliberately raised the retail prices of their products in the Chinese market.

The costs of urban public transportation as well as costs of products and services heavily involving labor or intellectual property rights in New York are much more expensive.

The tickets for urban public transportation, such as the bus and subway in New York, are 10 times more expensive than those in Beijing.

The products and services involving labor or intellectual property rights in New York are all more expensive compared to those in Beijing. Patrick said that a haircut usually costs him between 20 U.S. dollars and 40 U.S. dollars in New York, but when he was studying in the university in Beijing, a few yuan would do it.

Without the medical insurance, medical services are more expensive in New York than in Beijing. For example, treating a cold is usually twice as expensive in New York than in Beijing. Huang said, "It usually takes about 200 yuan to receive a treatment for a severe cold in the hospital in Beijing, and if you have an injection, the cost will be about 500 yuan." Patrick said that it will take him about 150 U.S. dollar (about 960 yuan) in New York to see a doctor when catching a cold.

The price for express delivery services is even more expensive in New York than in Beijing. It will usually take you 15 yuan to deliver a commodity weighing 1 kilogram or less from Beijing to any other cities in China, said Patrick, but you will pay 10 U.S. dollars to 20 U.S. dollars to deliver a commodity from New York to other cities in the United States.

Intellectual property-related products and services, such as books, audio and video products and photocopying services are also much more expensive in the United States than in China. It is common to see books reused in the United States because they are relatively expensive. As a former exchange student to the United States, Huang recalled, "The copying cost is one dollar per page, and you cannot photocopy an entire book."

The minimum hourly wages in different states of the United States range from 4.1 U.S. dollars to 8.7 U.S. dollars, according to data published on the website of the U.S. Department of Labor. According to statistics from China's Ministry of Human Resources and Social Security, the minimum hourly wage in Beijing reached 13 yuan in the first quarter of 2011, higher than the rest of China but lower than the lowest minimum hourly wage in the United States. This is explainable. In the United States, products made by U.S. workers are normally twice the prices of the same model products made by foreign workers.

Simple comparison of prices not objective

Experts believe that given the huge gap between Beijing and New York in the economic structure, income level and other aspects, the price structures of products and services in the two cities vary greatly. A simple comparison of prices is unconvincing, and it will easily lead to misunderstandings.

Experts noted that when comparing the costs of living between China and the United States, people often compare the prices of consumer goods, such as clothing, suitcases and electronic products.

Admittedly, most consumer goods are more expensive in China than in the United States, but people seem to forget to compare the costs of education, books, audio and video products and labor. In fact, the prices of these products and services are much higher in the United States than in China. Although many Chinese tourists may have overseas shopping experiences, they do not live in the United States and are thus unlikely to get a full picture of the cost of living there.

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