Discontent in China mounts over ‘too high’ prices

An increasing number of Chinese residents are unhappy about inflation, with nearly half of them saying overall prices are ‘too high and unacceptable’, according to a quarterly survey by the People’s Bank of China.

Rising public discontent over inflation could put more pressure on Beijing to consider tightening monetary policy more quickly than is currently expected, even though the official measure of consumer prices only recently turned mildly positive. Consumer prices rose 0.6 per cent in November over a year earlier after nine straight months of declines.

The portion of residents giving that ‘unacceptable’ response in the fourth-quarter survey, 46.8 per cent, was up from 45.2 per cent last quarter, the central bank said yesterday.

Chinese residents are particularly upset about housing prices, with 67.2 per cent of them saying housing prices were too high, up from 65.1 per cent in the third quarter, according to a sampling of 20,000 residents in 50 cities.

As inflationary expectations build, 42.1 per cent of surveyed residents said they would increase investments in real estate, mutual funds and stocks.

In particular, as many as 13.9 per cent of surveyed residents said they would purchase cars in the coming three months – the highest on record since the survey was started in 1999.

Only 28.2 per cent of surveyed residents said they were content with current inflation, according to the survey. That was down from 29.5 per cent three months earlier.

Consumers in cities including Chengdu and Shanghai started hoarding cooking oil last week, state media reported. In an apparent move to soothe public fear of inflation, China’s economic planning agency said on Monday that serious inflation was unlikely to happen.

In another central bank survey of 2,900 bankers, 66 per cent of them said they expected monetary policy to remain the same in the first quarter of 2010.

Only 26.6 per cent of surveyed bankers said the current monetary policy stance was ‘too loose’ in the fourth quarter survey, down from the 39.3 per cent in the third quarter.

The survey also showed that demand for loans was falling.

Source: Business Times, 17 Dec 2009