07/19/2007, 00.00
CHINA
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Inflation rises even faster than the economy

The consumer price index jumps 4.4 per cent in June, a 33-month high. Food like meat and grain are the main culprit. Wages rise but at a slower pace. Experts warn of a growing gap between the rich and the hundreds of million of poor.

Beijing (AsiaNews/Agencies) – China’s annual economic growth reached 11.9 per cent in the second quarter of 2007, surging ahead of the 11.1 per cent in the first quarter, partly fuelled by investments in fixed assets like factories and real estate (+ 25.9 in six months) and a record trade surplus, China’s National Bureau of Statistics announced today. On the down side, the annual consumer price inflation in June quickened to a 33-month high of 4.4 per cent up from 3.4 per cent in May.

Food was the main culprit, rising 7.6 per cent in the first half of the year from a year earlier, especially meat and poultry (+20.74 per cent), eggs (+27.9 per cent) and grain (+6.4 per cent).

Wholesale prices for pork, a main staple in the Chinese diet, soared as a result of outbreaks of the blue ear disease and lower than usual supplies. At a retail level, speculation also played a role. The price of pork in fact rose a whopping 74.6 per cent in June compared with the same month last year, the Ministry of Agriculture (MOA) announced on Monday.

Wholesale prices polled by the Ministry of Commerce in 36 large and medium-sized cities were up nearly 30 per cent from May 11 to July 11.

In Hong Kong a row between pork traders and suppliers escalated after the Territory’s major supplier of live pigs raised prices by 10 per cent yesterday, just two days after traders threatened to break the supply duopoly.

Pork price will continue to rise in the second half of the year as the supply shortfall can hardly be eased in a short period of time, said Huang Hai, Assistant Minister of Commerce.

Zhuang Jian, a senior economist with the China office of Asian Development Bank, told the South China Morning Post that such spikes in inflation have little influence on rich people, but affect low-income earners.

The central government has taken strong measures like raising interest rates to maintain economic and social stability, but so far results have proven elusive.

And continued high levels of investment are accentuating pollution and feeding energy demands.

For its part, Beijing is very concerned that low wages might pushed many workers into poverty and widen the social divide.

Qiu Xiaoping , the director of the Ministry of Labour and Social Security's Wages Department, said on the government’s website, said that “cheap labour has long been an economic advantage for our country” because it attracted massive foreign investment. “However, if average pay levels remain low or increase only slowly over a long period, the economy will be damaged by the widening income gap, which will stifle consumption.”

Similarly, Qiu expressed concern that the wage gap across different parts of the country and within different industries was widening, despite recent figures suggesting average annual salaries had risen.

He said statistics that pointed to rapid pay growth were misleading since they hid the fact that some low-income groups had received no increments, and in some cases had actually seen their wages slide.

For example, workers in the security, banking, legal services, shipping, civil aviation, oil and natural gas industries had the highest average annual salaries of around 100,000 yuan (,217) and above, while those in the garment and textile industries received an average of just 16,000 yuan (,114).

Even where wages did rise, increases in the price of housing, medical services and education over recent years put extra pressure on families' finances and cancelled out pay rises. For instance in Shenzhen, the minimum monthly wage was increased to 810 yuan (US$ 107), the highest in the country, but the cost of housing rose by about 50 per cent in six months.

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