Raising the prices

Inflation is hitting the country and much of the debate focuses on price-hikes. China moved from the last period of stiff inflation in the 1990s into a situation that might sometimes more or less resemble those in a market economy. But how to deal with rising prices is an art that still dates from the planned economy, as Shanghai Scrap points out.
Time for some re-education of the officials who have to discover that price-fixing is not done in the open, but like in the West in secretive and illegal meetings that will be prosecuted when discovered by the government.
Meanwhile, prices are really going up. This week I saw the price of my breakfast, mostly a set of baozi's, go up from 0.8 rmb per piece to 1.0 rmb: more than twenty percent.

Update: And the government is starting to investigate price-fixing cartels. As they should.

Inflation triggers off alarm

Rising food prices have triggered off alarms and according to the official news agency Xinhua and local authorities have till Thurday to provide news for an increase of the minumum wages. In an AP dispatch:

Chinese leaders have been alarmed by a spike in inflation that saw the price of eggs rise 37.1 percent in May from their price in the same month last year. Meat and poultry were 26.5 percent more expensive in May compared to a year ago.
The increase "would have a great impact on low-income families," the Xinhua News Agency said.

It is unclear what the effect could be. Minimum wages tend to be rather low anyway and compliance is another problem. The figures for the inflation seem pretty high, compared to what I have seen in Shanghai. Just like the minimum wages, figures for inflation might vary greatly between regions.

Inflation hits my lunchbox: 10% up

pork

Not only the stock market is (again) going up, also food prices. Today my lunch box (both pork and chicken) went up ten precent in price. A potentially dangerous move, since the competition among lunch box providers is very competitive in this part of Shanghai. For the time being we put up with it, too busy to be bothered by one Renminbi extra.
The Wall Street Journal looks at the ups and downs of the pig cycle in China:

"It's just like the stock market," says Guo Qiurong at her farm outside Beijing, which houses its pigs in long, low-slung concrete buildings. "If you can take the risk, you get in. If you can't, you get out. Once they start losing money, farmers just stop raising pigs."
China's pork prices generally tend to rise and fall in major cycles of three to four years; the last big surge came in 2004. (That this year's price spike comes during the Chinese zodiac's year of the pig appears to be a coincidence.) The pattern is now well enough established that farmers should, in theory, be able to smooth out the fluctuations. The main problem: bad information and poor planning that leads too many farmers to pull out of the market, or jump in, at the wrong time.

China is again heading for an oversupply of pork and dropping prices next year.

Update: The delivery boy only charged the old prices the the lunch box. Perhaps too much negative feedback.

Lunch: up 20 percent

On Saturday China's financial regulators told they would act fast on inflation. Unfortunately, my regular provider of lunch boxes was not reached in time, so I ended up paying 20 percent more for my food. On top of that he announced he would no longer serve single meals: two meals would be a minimum.
He tried to camouflage his evil deeds by first skipping the cheapest dishes and adding more expensive ones. On top of that he added two prawns. Tomorrow I will check some new suppliers, but it looks that the inflation rate for my lunch box this quarter will be 20 percent.
The damage for me is limited, the price went up from 10 to 12 yuan and a gin tonic tomorrow at the Cotton's bar might cause more financial damage, but on a macro-level, with millions of white-collar workers paying 20 percent more, the central bank should start to worry.