As food prices rise in China, so does consumer angst

BEIJING — Inflation is inching up in China, mostly in key food prices, causing heartburn for low-income shoppers.

Twice in just over two weeks, stampedes have broken out in urban supermarkets that offered discounts on cooking oil, leading to at least three deaths and dozens of injuries.

On Tuesday, the government said that the annual consumer price index rose 6.5 percent in the 12 months through October, rebounding to its highest level in 11 years. The announcement came a day after Premier Wen Jiabao made a high-profile walking tour of working-class Beijing alleyways and pledged to stabilize prices of basic foods.

"Prices have been on the rise these days, and I'm aware that even a one-yuan (13-cent) increase in prices will affect people's lives," Wen said, according to the state Xinhua news agency.

Inflation, fairly stable during the first five months of the year, has risen steadily since June, reflecting agricultural, economic and trade issues that are bedeviling China, including a rising tide of savings with few places to go for positive returns.

The National Bureau of Statistics said that year-over-year food prices rose 17.6 percent in October, pushed up largely by a 54.9 percent jump in the price of pork, a staple meat in China, and a 34 percent rise for cooking oil. Vegetable prices have shot up 29.9 percent in the last 12 months, but non-food items rose only 1.1 percent.

An outbreak of blue-ear disease, an often-fatal respiratory ailment, has hit China's pig population, sparking the price rise. China produced 53 percent of the world's pork last year.

Frustration over rising food prices is surging.

"The price of pork is rising drastically. I get only a small piece this year when I paid the same amount as I did last year for a large piece," said Zhou Long, a 26-year-old shopper at a small market.

In the southwestern city of Chongqing last Saturday, three people were trampled to death and 31 were injured in a mad scramble to buy discount cooking oil at a branch of the French retailer Carrefour. The store, marking its 10th anniversary, offered a discount of about $1.50 on 5-liter bottles of cooking oil, drawing mobs of shoppers.

Carrefour, the world's second biggest retailer, has 103 stores in 37 cities in China.

A similar stampede occurred on Oct. 26 at a Hymall supermarket in Shanghai, state media reported, leaving 15 people injured.

It's unclear whether the spike in food prices, which make up a third of the prices measured by China's consumer price index, will add to the pressure on wages and ripple through the rest of the economy, which is likely to post double-digit growth in 2007 for the fourth straight year.

China's trade surplus jumped to an all-time high of $27.05 billion in October, an increase of 13.5 percent from a year earlier, according to official data released Monday. The surplus shows that a series of recent recalls of faulty or tainted Chinese-made products hasn't dented demand for its exports.

Rising inflation, however, already has had some effects. China's banks pay a one-year savings rate of 3.87 percent — far less than the inflation rate — and some savers have withdrawn money from banks to buy real estate and invest in the stock market, which has almost doubled so far this year, despite a major correction recently.

"People aren't going to leave money in the bank if they get a negative return," said Michael Pettis, a finance expert at Peking University's Guanghua School of Management.

Arthur Kroeber, the director of the Beijing-based research consultancy Dragonomics, said he's less concerned about increases in food prices than he is about the prospect that the rising mass of savings in China's economy that may soon boost housing and other costs.

"You've got just a huge amount of cash sloshing around the economy, and it's looking for a home," he said.