People Try to Make Ends Meet As China Aims to Curb Inflation

By , Staff writer of The Christian Science Monitor

WANG ZHENGWEN usually buys a box of chewy mooncakes for each of her three sisters for this week's Mid-Autumn Festival in China.

But this year, the Beijing housewife says her sisters will have to share a single box of mooncakes. The price has almost doubled to $5 a box since last year. ``How can you celebrate properly when prices are so high?'' Ms. Wang asks as she shopped in a crowded Beijing market.

As the government tries to rein in accelerating inflation, many Chinese are struggling to make ends meet.

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Consumer prices, including food and services, moved up at a 27.1 percent annual rate in August in China's 35 main cities, the State Statistical Bureau reported last week. That rate, the highest in five years, topped the 24.2 percent rate in July.

Spooked by the inflationary spiral and growing joblessness, the government has unveiled, in recent days, a series of measures to combat China's mounting economic troubles:

* A ceiling on prices of grain, cotton, and chemical fertilizers, which the State Statistical Bureau blames for being ``the main catalysts of current spiraling inflation.''

* A renewed campaign to end unsanctioned price increases in grain, edible oils, meat, eggs, and vegetables.

* A two-year program of job training, unemployment insurance, and labor services, amid predictions that the current official jobless rate of 2.6 percent could almost double by 1999.

* An increase in interest rates on long-term savings deposits and Treasury bonds to block possible fund withdrawals and panic buying of goods that would further fuel inflation.

* A redoubled effort to collect unpaid taxes to bolster sagging tax revenues.

Due to the price surge, government officials no longer talk about keeping inflation within the original 1994 target of 10 percent. Indeed, they have raised the inflation projection to 15 percent, according to the China Daily, the official English-language newspaper.

In effect, the government's 15-month anti-inflation drive has failed. This stirs deep fears among Beijing's ruling Communists of a rerun of 1989 anti-government protests, which were, in part, fueled by sharp price increases and consumer panic buying.

Already this year, grain prices in the cities are up more than 50 percent. Retail sales rose 34 percent in August. Chinese economists blame higher food costs on lower agricultural output, a flood of uncontrolled investment in construction projects, and market disorders caused by liberalization of state-set prices, transport inefficiencies, and price-gouging by some monopolies and local authorities.

AFTER posting back-to-back years of 13 percent economic growth, this year the Chinese government is trying to gradually slow the breakneck pace to a more-controlled rate.

``Macroeconomics in China continued to stay on a fast track and tends to be on the verge of the red-light economic-warning area,'' the State Statistical Bureau told the China Daily.

With the government planning a major celebration Oct. 1 of the 45th anniversary of Communist China's founding, many Chinese anticipate even higher prices in the flurry of shopping expected to precede the holiday.

``Everybody will be buying, so, of course, prices will be up,'' Wang says.

While the government tries to boost the confidence of many Chinese by creating jobs, imposing price ceilings, and raising interest rates, it is also confronting a worsening fiscal crisis.

In the first eight months of this year, under a new tax regime, the government took in only 64 percent of the total taxes normally collected from the industrial and commercial sectors - the principle sources of tax income, a top tax official noted.

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