Vol. 74/No. 47      December 13, 2010

The inflation rate jumped to 4.4 percent in October, the government announced, and food price inflation reached an annual level of 10.1 percent. Workers in China spend as much as 50 percent of their income on food, compared to between 10 percent and 20 percent in working-class households in advanced industrial countries.

The Ministry of Civil Affairs estimates 81 million Chinese will need food rations this year. Inflation is hitting the population in a differentiated manner. Food prices went up at an annual rate of 5 percent in Beijing in September, while they soared nearly 12 percent in Urumqi in the far northwest of the country.

Inflation was an issue in two recent strikes in the industrial city of Shenzhen in the Pearl River Delta, where prices are relatively high. Workers at Brother Industries walked out for four days until the company agreed to a 100-yuan monthly raise and a reduction in the line speed (1 yuan = US 15 cents). At a Sanyo plant a strike erupted in early November after the company quadrupled prices in the cafeteria. The workers, mostly women, also drew attention to their wages being half to two-thirds of what male workers make.

Fearing social unrest, the Chinese government announced November 17 it would provide food subsidies for those with the lowest incomes, release stockpiles of food and fuel, and aggressively pursue merchants hoarding food.

Premier Wen Jiabao also threatened price controls, and officials in some local areas placed caps on some vegetable prices. When the government imposed price controls in 2008, however, wholesale food prices still went up 17 percent.

When the Chinese government began turning away from a planned economy in the late 1970s in favor of employing capitalist market methods it achieved what some considered a “miracle” in rapid economic growth, based on exports and foreign investment.

A drop in exports as a result of the U.S. financial crisis and worldwide capitalist depression led to the layoffs of millions of workers in China in 2008 and early 2009. While China’s growth rate rapidly recovered, the “miracle” is waning. An op-ed column on Bloomberg News Service October 20 said, “Awash in luxury cars, condos and expensive jewelry, the Chinese are enjoying what looks to be an unstoppable boom. But inflation figures … should give pause to those who assume China’s economy is on sound footing.  
 
 
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