2011-09-18

Crushing the Chinese consumer

China's economic policy favors investment and exports to an extreme degree. Most developing nations have a consumer sector that's well above 50% of GDP, but China's is below 40%. Chinese complain about the prices and it's one reason, I believe, why so many Chinese would like to immigrate to the U.S. As this story shows, prices for U.S. consumer goods are actually LOWER than in China, which is amazing when you consider that the average income in the U.S. is about 2 to 3 times that in Beijing and Shanghai, and closer to 6 times or more in the countryside. Furthermore, not a few of these consumer goods are made in Chinese factories. Are mainland prices higher than in U.S?
A respondent wrote that a monthly salary of US$2,000 could afford him all the necessary home appliances in the US, but it was enough for just an LED television on the mainland. Another respondent cited a US-based Chinese friend as saying that US$100 could buy three pairs of Levi's jeans in the US, while it cost 700 yuan, or about US$110, to buy just one pair in Guangzhou. Most respondents' shopping lists focused on daily necessities such as food, clothing and transport. And there was rife debate about rising food prices, which account for a third of the consumer price index. Soaring prices of pork, a mainland food staple, was of particular interest. A respondent said 3kg of pork costs 90 yuan, while 5kg of soy bean oil cost 100 yuan, which would have bought 10kg just two years ago. Another said 100 yuan, which was enough to last him half a month in 2004, lasts just four days now. He said inflation has far outpaced his salary since 2004. The survey found that 100 yuan was enough to buy food for five people in Guangdong for a day, but it was barely enough to buy a piece of clothing for a Shanghai resident.
What's the solution? Rapid inflation of wages or general deflation? It may be for Europe and the U.S. to decide...

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