George Chen

By George Chen
The opinions expressed are the author’s own.

How time flies. It’s already the end of August and speculations naturally arise about what China’s inflation reading will be for this month.

The most optimistic view these days is that the August Consumer Price Index (CPI) could decline to below 6 percent. The most pessimistic view I’ve heard is that growth has slowed down in August, but probably only to 6.2 percent or 6.3 percent.

But, why should we care about the August CPI so much? One month cannot tell the whole story.

The reason we care so much is because if the August CPI growth slows down (we will see the official release of August economic data in the coming weeks), it’s good news for the central bank as well as for the ordinary people in China who have been fighting with fast inflation for more than three years already. But, it’s not good enough.

Yesterday, amid market talks about August CPI, I heard something interesting from Mengniu, China’s top dairy product maker: “We are confident we can at least maintain (first-half) margin levels in the second half,” Mengniu Chief Financial Officer Wu Jingshui told reporters after the company’s first-half earnings release. He added the company might raise product prices and adjust its product mix to offset an estimated 3 to 5 percent rise in raw milk costs in 2011.

I shared the news on my Twitter-like Sina Weibo micro-blogging service. What was the response from my audience? Frustrated would be the accurate adjective to describe it. Mengniu is the industry leader and if Mengniu leads the next and latest round of product price hikes, you can imagine how rivals will react. Or might they have already coordinated a move on the prices?

Mengniu is not alone as price increases are not just happening in the dairy product business.

Chinese liquor maker Wuliangye also announced this week it will raise prices for its alcohol by 20-30 percent starting September 10 and industry analysts expect Wuliangye’s local rivals will follow the path to maintain their profit margins, too.

So will CPI rebound (if it does decline in August, thanks to the recent fall of pork prices as some economists said) by the end of 2011?

More investors are becoming increasingly convinced these days that in a choice between GDP or CPI, Beijing should fight to maintain GDP not CPI. That is to say Beijing may tolerate further inflation, although at a slower pace month on month, but it can’t afford to see economic growth fall sharply to 7 or 8 percent, as estimated by some economists.

As you can see from the decisions made by Mengniu and Wuliangye, Chinese enterprises certainly don’t want to bear increasing costs that will hurt their profit margins. So, at the end of the day, the victims of China’s rising CPI are the Chinese consumers.

George Chen is a Reuters editor and columnist based in Hong Kong.

Photo: Reuters file picture

By George Chen
The opinions expressed are the author’s own.

Let’s talk about properties, again. It’s time to rethink.

I  know some people in the capital market are concerned about Premier Wen Jiabao’s latest comments on rebounding property prices in second- and third-tier cities in mainland China, and that he’s asked local governments to keep tightening.

Please allow me to be frank — these comments are more an indication of a political attitude than a signal of new hardline moves.

Shares of property developers fell last week on Wen’s remarks, which made investors more pessimistic about the broader market as most believe a substantial rebound would have to be supported by property and financial stocks. They are the real and most important factors supporting not only the stock market but also overall economic growth. You know that. I know that. And I also know Beijing should be aware of this crystal clear point.

Days before Wen made his latest verbal attempt to bring property prices under control on the mainland, Yu Zhensheng, the top Communist Party boss in Shanghai, made an interesting comment when meeting some visiting Hong Kong businessmen.

Yu told the visitors that Shanghai also wanted to get the city’s property prices “under control,” but noted that didn’t mean the government wanted to “attack and cause a crash in the property business.”

Yu’s message was widely reported and considered a desperate effort by Shanghai to retain foreign investment in its property sector to support the city’s ambitions to become a true world-class financial centre by 2020.

Days after Wen’s comments, Hong Kong’s richest man Li Ka-shing also revealed his latest development plans in Shanghai. Li has made a fortune and invested a lot in Shanghai in the past two decades and continues to invest despite all the cold calls from officials in Beijing on property development across the vast country.

Wen will remain in power for about one more year before his scheduled retirement. When we get a new administration, things could be very different, and if you are an executive, you know you can’t just wait until things get different. Investment has a cycle, just like Rome wasn’t built in a day.

Remember probably one of the most popular political slogans in the U.S. in recent times? “It’s the economy, stupid!” Bill Clinton promoted this idea successfully in his 1992 presidential campaign against George H. W. Bush and you know who won the game in the end.

To Beijing, my sincere suggestion is to refrain from making economic matters, in particular the property business, too political in the future.

The People’s Government should not see the property business as an enemy. If you want more people to be able to afford to buy apartments, do something else to help them become rich. Otherwise, even if property prices fall 50 percent, the young generation will still tell you the sad truth — sorry, I can’t afford it.

George Chen is a Reuters editor and columnist based in Hong Kong.

Photo: A cleaner wipes a window as he abseils down the front of a building in the financial district of Beijing May 5, 2011 REUTERS/David Gray

By George Chen
The opinions expressed are the author’s own.

It’s been a month since my last column on Reuters.com as I have been on the road for a while.

When I travel in New York and London, my identity is more like that of a consumer with a dash of journalistic observation. People usually say Hong Kong is a shopping paradise but in my view, Hong Kong is no longer my favorite city for shopping. For U.S. fashion brands such as Cole Haan or Banana Republic, prices are much cheaper in New York. It’s the same for London if you’re a big fan of Burberry or Paul Smith.

The American people I know complain far less about the financial crisis than two or three years ago. Instead, some of them say they actually enjoy some of the benefits. Rents are cheaper. Food is cheaper. Transport companies are unable to raise ticket prices.

Prices for some nice homes in the historic Embassy Row, Washington D.C., look attractive to me. How much can you buy if you have $1 million? You can probably buy a nice house in downtown Washington or a tiny flat in Asia’s financial centre Hong Kong. $1 million is no longer a dream for many Chinese people thanks to the yuan’s appreciation. Let’s face it — America is cheaper and the Chinese are getting richer.

But the Chinese have their own problems; they don’t feel that rich at home.

The inflation reading for June hit a three-year high of 6.4 percent year on year, and Goldman Sachs said we may see further highs in July or even August. During his recent trip to Britain, Chinese Premier Wen Jiabao, often known as “Grandpa Wen” in China for his kind and down-to-the-earth image, claimed the inflation problem had been solved. He may need to think twice after seeing the angry public reaction in China on the rapid rise in consumer prices, especially food.

You may also want to hear what China’s central banker governor Zhou Xiaochuan said about inflation: he asked the media and public not to “overreact” to the June figure and apparently tried to prove he was doing a good job.

The central bank had many things to deal with, not only inflation, for example international payments, he said at a recent meeting. Mr. Zhou, I respect you as an intelligent and influential central banker, however, to ordinary Chinese such as my parents in Shanghai, your comments on inflation simply make them feel almost hopeless about the outlook for their purchasing power.

Perhaps the Chinese Communist Party, which is celebrating its 90th anniversary, wants to send this message — it’s not that bad to be Chinese. Go abroad and buy whatever you want and you will be proud of holding yuan and being Chinese.

Perhaps I’m too simple and naïve?

George Chen is a Reuters editor and columnist based in Hong Kong.

File photo: Shoppers walk up Fifth Avenue in front of the Cartier jewellery building in New York, December 7, 2008. REUTERS/Chip East

By George Chen
The opinions expressed are the author’s own.

There’s a new problem with the “one country, two systems” policy for Hong Kong and mainland China — the appreciation of the yuan can ease inflation in mainland China but not in Hong Kong.

In Hong Kong, the former British colony that returned to Beijing’s hands in 1997, things unfortunately work the other way round.

Peter Wong, HSBC’s Asia-Pacific top boss (and widely considered the most handsome banker in Hong Kong) said at a forum in Shanghai last week that because the Hong Kong dollar is pegged to the U.S. dollar, whose value is falling almost every day, food prices in Hong Kong are set to increase as Hong Kong needs to pay more to import food products from the mainland.

Former Hong Kong central banker Joseph Yam, now a senior representative of a Beijing-backed financial academy, added that he believed the Chinese government would let the yuan rise further and relax some policy restrictions.

So, a stronger yuan is in no doubt, and food prices in Hong Kong are certain to rise.

You may not care much about Hong Kong. When big investors are keen to trade stocks and make deals in mainland China, they of course pay more attention to Beijing’s monetary policy. Hong Kong? It’s more like the naughty child of Uncle Beijing these days.

But the naughty child can be a challenging problem and it’s becoming more rebellious. One of the world’s leading financial centers, these days it is also known as a city of protests, especially at weekends. In 2012, we will see a transfer of power in Beijing as well as in Hong Kong. And we will see elections in Taiwan and the United States. What a year!

Some investors think the potential for H-shares is much greater than A-shares, but political risks for H-shares could be greater if Hong Kong loses its political stability and thereby financial stability, thanks to a stronger yuan.

And if Hong Kong becomes unstable, Beijing will become naturally nervous.

George Chen is a Reuters editor and columnist based in Hong Kong.

By George Chen
The opinions expressed are the author’s own.

First, we were worried about inflation in mainland China. Now it seems Hong Kong’s inflation situation in coming months looks no better. I blame the worsening problem partly on the city’s first-ever minimum wage law, effective May 1.

As I study international political economy at the University of Hong Kong, my professor and classmates do know I am a free market fan and don’t believe a minimum wage will help Hong Kong’s economy and boost employment, as some Hong Kong lawmakers assert.

The sad truth is I went to buy my favorite Pearl Milk Tea on May 1 and found it was 2 Hong Kong dollars (about US$0.26) more expensive. Then I went to check out McDonald’s — prices for some of its burgers and drinks have also risen about 2-3 percent. And last night, local media said taxi and tram fares were going to rise in the former British colony too!

A friend of mine reported that the property management fee for his apartment building was going to increase about 30 percent, mainly because of the minimum wage law. Otherwise, the tenants may have to decide whether to lay off some staff to keep the management costs unchanged.

Local media said some small and medium-sized enterprises also planned to reduce headcounts in response to the minimum wage law. If so, Hong Kong’s economic growth may also take a hit.

Before the minimum wage law went into effect, some pro-democracy Hong Kong lawmakers insisted it would protect grassroots workers and help them fight inflations, but they may have forgotten that workers are also consumers.

Today they work and are slightly better paid, at least HK$28 per hour now. Tomorrow, they are going to buy food, ride the subway, and so on, and the price levels of all these services and products are apparently going to rise even faster than before, partly thanks to the rising human cost.

Why do I care about this? In short, I believe that what is happening in Hong Kong could happen in mainland China.

We’ve learned that several state-owned enterprises plan to increase staff wages in response to a call by Beijing for “redistribution and balance of social wealth” and to help the working class become more prosperous. Will people actually feel poorer in terms of individual purchasing power even though they are better paid?

About 450,000 people working for local restaurants in Wuhan, a second-tier Chinese city, now expect to see pay rises after recent tough negotiations between the local government and the city’s workers’ union, the official China Daily reported. If successful, those restaurant workers will earn at least 1,170 yuan (about US$180) a month. I hope the food prices on the restaurant menus won’t change too much.

If mainland inflation really climbs to 6 percent or more in the coming months, as some analysts have warned, I don’t think a national pay rise can match the pace of inflation growth. Meanwhile, we face the risk of seeing retail prices rise because of rising costs, including staff pay.

If consumers offer the final solution for companies to cope with the pressure from pay rises, will you be happy to see such pay increases take place? The dilemma between pay raises and worse inflation may be worth some serious consideration for investors’ money-making decisions.

George Chen is a Reuters editor and columnist based in Hong Kong.

Photo: A cabbage seller smokes a cigarette as he waits for customers at a fruit and vegetable market in Beijing in this December 17, 2010 picture. REUTERS/David Gray

By George Chen
The opinions expressed are the author’s own.

We’ve been talking about accelerating inflation for some time, and it has resulted in another tough issue for the government to address — with much care — the growing income gap between rich and poor.

Income disparities in some affluent cities such as Hong Kong have apparently reached a critical point, with frequent protests in the former British colony. Last weekend, a group of the so-called post-1980 generation of young people went to Central to protest the wealth imbalance. They even attempted to break into Cheung Kong Centre before the police arrived and stopped them.

They viewed Cheung Kong Centre, home to many large banks like Barclays Plc and BNP Paribas, as well as the offices of Li Ka-shing, Asia’s richest and also the city’s most powerful man, as a symbol of the imbalance. I was told by friends in mainland China that a similar anti-rich atmosphere is also brewing fast in big cities like Beijing and Shanghai, where relatively poorer people are complaining about inflation, especially rising property prices and rents.

When investors feel more confident about returning to the Shanghai and Hong Kong markets as the economic impact of the Japan earthquake and nuclear crisis eases, some people predict the income gap issue may change the whole game if the central and local governments fail to address the increasing social unrest.

Does this make sense? Income gap is considered by some political scientists as one of the key causes to the recent popular revolt in the Middle East, the “Jasmine Revolution”, which already made Egypt a difference.

Local media reported that some Hong Kong lawmakers and businessmen joked that Hong Kong was “a city of protests” — in addition to the unexpected protest at Cheung Kong Centre, there were at least two other high-profile public protests in the city last weekend, potentially damaging Hong Kong’s image as a stable global business and financial centre.

If global investors lose confidence in Hong Kong, it would be certainly a lose-lose result for both the rich and the poor. Last night, former U.S. Treasury Secretary and ex-Chairman and CEO of Goldman Sachs Henry Paulson gave a talk at the University of Hong Kong. In response to a HKU student’s question, Paulson acknowledged that the income gap in the United States was also something the government needed to focus on.

Income gaps in different regions may need different solutions, said Paulson, adding that skills training and education were needed in the U.S.

However, he didn’t offer any specific advice for China. I wonder if Paulson just wanted to be diplomatic, or he may not really have an answer. He did say China’s economy was a very complicated matter and was becoming more complicated as it expanded.

The bigger the economy, the larger income gap? That doesn’t sound like a win-win deal for anyone.

George Chen is a Reuters editor and columnist based in Hong Kong. He’s also a part-time post-graduate student, studying international relations at the University of Hong Kong.

Photo: A protest sticker seen on the poster of Henry Paulson’s talk about global economy and U.S.-China relations at the University of Hong Kong on April 11, 2011 Reuters/George Chen

By George Chen
The opinions expressed are the author’s own.

These days I’m increasingly convinced that inflation is not just a China issue but a global problem and one that is becoming worse.

Yesterday when I posted a photo of rice noodles on my Chinese Twitter-like mini blogging account, I didn’t expect it would lead to quite such an active online discussion. I paid HK$16 (about US$2) for the bowl of noodles in the canteen of the University of Hong Kong (HKU). My friends from Geneva to New York to Shanghai “complained” that the price was way too cheap.

Well, the University Canteen is intended for students and I am indeed a HKU post-graduate student, part-time.

My friends in Shanghai told me a bowl of beef noodles costs about 30 yuan (US$4.6). In New York’s Chinatown, you might be charged US$4, according to a colleague, who is trying to break her daily Starbucks coffee addiction to save money in the Big Apple. Let’s face it — In many cases, a pay rise you receive won’t keep up with inflation these days. To address the problem, central bankers around the world — except the U.S. Fed — are apparently coming to a common understanding: that increasing interest rates is becoming a more realistic option.

The European Union is joining China to become the latest member of the international community to fight inflation via rate increases. The European Central Bank raised interest rates for the first time since the 2008 financial crisis on Thursday, signaling it is ready to tighten policy further if needed to help balance rising prices.

Given the big picture for globalization nowadays, the rate rise in Europe will certainly have an impact on a variety of domestic sectors in China. I believe your inbox will soon be full of research notes from investment banks helping you analyze the impact, so I won’t elaborate here.

But I do have a question for China, and maybe for Europe, too. Can rate increases really help China and the world solve the inflation problem? What we learned from the G20 meetings is that a key problem to solve  is global imbalances and there are some “imbalance indicators” that China already rejected. From a microeconomic perspective, such imbalances refer to the income gap, which rate increases don’t really help.

According to a Reuters poll of leading economists and analysts in China this week, the country is expected to see at least one more rate increase and the central bank is likely to raise banks’ required reserve ratio three times this year, possibly as soon as this month. Nevertheless, most analysts polled said it would still be a challenge for Beijing to keep its pledge and stop inflation rising above 4 percent.

This week is certainly a very busy week for China and the global market. Just one day after China’s central bank increased its benchmark lending and deposit rate on Wednesday to help curb inflation, the government announced it will raise gasoline prices by 500 yuan per tonne and diesel by 400 yuan per tonne from Thursday.

According to some research notes, after the newest gasoline price hike, retail prices for No.93 gasoline, the most commonly used type in China, is 7.79 yuan/liter, and the price level is expected to rise over 8 yuan in the coming months and may hit 10 yuan or exceed 10 yuan by the end of this year.

That is to say Chinese drivers will soon pay more for gasoline than their counterparts in the United States. Is that the price must China pay to be the world’s No.2 economy, and the price that Chinese consumers should pay for?

The news has not gone down well with everyone. One Chinese netizen on Sina Weibo, the Twitter-like mini blogging service, which is very popular in China, joked: “My feeling is that I just happened to pick up 1 yuan on the street, like a beggar, and then I was robbed 100 yuan by a policeman.”

Some analysts are starting to wonder if China’s inflation is starting to get out of control and many banks like Goldman Sachs now estimate China’s March Consumer Price Index readings will exceed 5 percent. And considering that the government felt the need to hike the gasoline price tax, April’s data may look even uglier, possibly heading toward 6 percent in terms of growth on year.

The rate hike won’t cool off growing public angers on rising property prices in China either. Most ordinary Chinese have to face the reality — if you’re not rich, you just can’t afford to buy, even if the central bank raises interest rates 10 times a year. And those who are rich don’t care how much mortgage rates are raised, they can pay in cash.

Don’t just blame China — almost the same thing is happening in the West. A friend in Paris told me prices had risen more than 50 percent from last year for some downtown properties — even faster than in Shanghai and Hong Kong.

Let’s talk about noodles again, which are certainly far more affordable to buy than a flat. If such day-to-day products are cheaper in Hong Kong than most places in mainland China, what about traveling to Hong Kong to buy your necessities if you earn Chinese currency yuan, which is growing stronger than the Hong Kong dollar, which is pegged to the U.S. dollar? If you live in the nearby southern Chinese boomtown of Shenzhen, this is already happening.

In the global battle with inflation, everybody has their own way of dealing with the situation. So I will keep going to my university for the cheap (and delicious) noodles. What about you?

George Chen is a Reuters editor and columnist based in Hong Kong. He’s also a part-time post-graduate student, studying international relations at the University of Hong Kong.

Photo: Chinese spicy rice noodles I bought in the canteen of the University of Hong Kong on April 7, 2011. Reuters/George Chen

By George Chen
The opinions expressed are the author’s own.

What might you do in the next 48 hours in China? A number of things — how about rushing to nearby supermarkets to stock up on soap and shampoo if you are a price-sensitive consumer?

No kidding!

Retail prices for those products are set to rise sharply in China from next month. At least two industry leaders — Procter & Gamble and Unilever — were reported by Chinese media to have decided to lift detergent and soap prices by up to 15 percent next month.

State television on Monday showed images of empty store shelves in some cities as residents raced to hoard P&G and Unilever products before the price rises went into effect.

However, officials and statisticians in Beijing seemed less worried about rising inflation. Last month, we heard that the spokesman of powerful economic the planner, National Development and Reform Commission, said inflation should peak in February. Then Yi Gang, deputy governor of People’s Bank of China, the central bank, assured investors that the government was confident that inflation would not to exceed the 4 percent target for the year.

It’s easy to speak but difficult to act. We know your target but the question is, of course, how will you make it happen? I mean in the market, for Chinese consumers, and not just for the sake of the statistics that are rapidly losing credibility among ordinary Chinese people as real life fails to improve.

In Hong Kong, things are no easier.

We were told by the subway operator last weekend that ticket prices are going to rise soon, again. And properties, always a concern of local residents? A new project up for sale in West Kowloon is asking more than HK$15,000 per sq ft.

I was told there is a brand new segment of potential buyers these days — rich Japanese families who have fled Japan and are now seriously considering living in Hong Kong for a while.

In Shanghai, just another financial centre, the city government yesterday finally announced a plan to control property prices. It said property price rises should not exceed the city’s economic growth this year. That still means a roughly 8-10 percent increase, despite the tough measures by the cabinet and local government.

It may be too early to say whether the inflation problem in China and Hong Kong is out of control but it is certainly approaching a sensitive level that has already affected the lives of ordinary people, and will thereby cause social unrest to some extent.

What’s your say? If you live in China, let us know how inflation has affected your life.

Update on March 30: I saw an interesting report on China’s news portal Sina.com last night — economic planner the NDRC finally commented on how some multinational corporations such as P&G and Unilever are raising retail prices for daily consumer products by up to 15 percent without notifying the NDRC.

Apparently, the NDRC feels miffed. It said the government would “investigate” such price increases. Oops! Sounds like the beginning of an interesting new drama about doing business in China.

George Chen is a Reuters editor and columnist based in Hong Kong.

By George Chen
The opinions expressed are the author’s own.

While the rest of the world is trying to help Japan deal with the aftermath of its earthquake and tsunami, some parents in China and Hong Kong are on a single-minded quest to buy up as much made-in-Japan baby formula as they can.

On my way to work on Monday morning, I saw a long queue of anxious-looking people in front of a grocery store. Over the following three days, the queue got longer and longer and more and more anxious.

They were all after the same thing – baby formula from Japan. This is simply because some Chinese parents believe their babies are accustomed to drinking Japanese milk and they are concerned that radiation may affect the quality of exports from Japan in the coming months.

Hong Kong media reported that retail prices for some Japanese baby formula have risen more than 30 percent this week. At present, the market price is about HK$250 (US$32) for a standard container (200g / 7oz) and some retailers are reportedly limiting purchases to six per person to avoid angering latecomers.

In this case, parents called on relatives, even elderly grandparents, to join the queue on their behalf (which works if you have many relatives and friends who are willing to help). Of course, Hong Kong parents are not alone in this concern. A fast-growing number of parents in mainland China are on a similar quest and they don’t mind paying HK$2,000 (US$256) for a round-trip ticket from major mainland cities to Hong Kong to buy made-in-Japan products.

Meanwhile, people in Hong Kong, may have to face an even bigger disappointment soon as a result of Japan’s earthquake – the possibility of property prices rising even further and faster.

Local property agents say they have noticed some landlords want to increase rents, especially in downtown areas such as Admiralty and the Mid-levels, which are within minutes of Hong Kong’s Central financial and business district, where many international banks have their regional headquarters.

Global financial firms including Blackstone, BNP Paribas and Royal Bank of Scotland are relocating foreign staff, especially senior executives, from Tokyo to neighboring bases to avoid the possibility of radiation exposure. These executives are typically asked to head to Singapore, Hong Kong and Beijing, with most apparently happier to choose Hong Kong, if not Singapore.

Rents in Hong Kong are already make the city one of the most expensive places in the world in which to live. The government has been trying to cool prices since late last year. With more rich but timorous bankers being relocating to Hong Kong from Tokyo and so far no indication of when they might return to Japan, the outlook for the property market in Hong Kong looks bullish.

I’m not saying this isn’t a positive  trend, but given what is happening to the lives of ordinary people in Hong Kong and China, the crisis in Japan is becoming a crisis for Asia, if not the rest of the world.

If the nuclear crisis cannot be contained and people lose confidence in crisis management and post-crisis protection, a chain reaction may be seen in many areas beyond dairy and property prices.

George Chen is a Reuters editor and columnist based in Hong Kong.

Photo: Policemen maintain order as customers wait outside a store called “Japanese Milk Powder” before it opens in Hong Kong March 16, 2011. REUTERS/Bobby Yip

By George Chen
The opinions expressed are the author’s own.

While Chinese lawmakers gathered in Beijing for the annual parliamentary meeting, I returned to my hometown Shanghai for a holiday.

The  lawmakers are keen to discuss China’s macroeconomic matters these days, but I am more interested in being a microeconomic observer. For example, how much does an apple cost in Shanghai these days?

During my holiday, I brought my girlfriend, a Hong Kongner, to Shanghai No.1 Food Store on the historic Nanjing Road. The store is a favorite place from my childhood as I felt I could buy food items from all over the world under one roof.

But, today a shock lay in store.

Apples imported from Japan sell for 198 yuan (about US$30) each. My girlfriend was also shocked: “I think it’s even more expensive than those in SOGO in Causeway Bay (Hong Kong).” I believe her.

I shared the expensive apple story at a family dinner. To my shock again, my Shanghai relatives didn’t seem particularly surprised to hear this. “It’s normal. You have supply and you have demand, so I say it’s normal,” my uncle said.

Now you might want to challenge my uncle with a simple question — are Shanghai people so rich these days that they eat 198 yuan apples? We know the sad but true answer. No. You can clearly see the rapidly enlarging income gap between the super-rich, the middle class and the poor.

Speaking of income gaps and how to solve them, I wrote a column before my holiday and I took the property market as a case study. Read it here.

My 198 yuan apple story may sound too extreme. A “normal” apple is not that expensive in Shanghai. Fifty yuan (US$7.6) will buy you a pack of apples that you can probably eat for a week. To me, it seems cheap enough but to my father, who’s been observing microeconomic changes in China for the last five years since his retirement, still found cause for complaint.

“The price of apples shot up too fast. Last year, 50 yuan would buy a large basket that you wouldn’t be able to finish in a month,” he said.

The spokesman for China’s top economic planner, the National Development and Reform Commission, told the media this week that China’s February CPI would start to decline. Investment bank Nomura also issued an updated estimate on March 9 that the February CPI reading could be 4.8 percent on year because of a fall in food prices.

To meet the official goal of keeping inflation to a 4 percent average this year, the government has raised interest rates three times and banks’ reserve requirements five times since October, while also using a series of direct controls to cap price rises.

China’s top leaders have declared that their priority this year is to control inflation. So far, complaints about rising prices have amounted to little more than grumbles, but serious inflation has sparked social unrest in China in the past.

I sent a short message to my father in Shanghai to tell him the Nomura estimate and he quickly replied: “Can you invite the analyst to visit Shanghai and I’ll treat him to some apples.”

One of my social science professors once warned me: “Remember, politicians are all liars, in the West and in China.” So, I guess as a microeconomic observer, my Shanghai holiday should make more sense than the ongoing meetings in the Great Hall of the People in Beijing, for a realistic indication of what’s going on in China.

Photo: A man buys vegetables at a local food market in Shanghai December 11, 2010. REUTERS/Carlos Barria