China Focus: Inflation with Chinese characteristics

BEIJING, Feb. 21 (Xinhua) -- Disruptions caused by severe weather have sparked anticipation of further price hikes in China, but retired teacher Li Xitian, who lives on a monthly pension equivalent to about 206 U.S. dollars, says he thinks the problem will pass -- and he's seen worse.

Eyeing prices of pork and edible oil at a Merry Mart in southern Beijing, the 77-year-old wasn't in a rush to buy. "I do feel it's more expensive to live these days. But hasn't there been unusually bad weather in the south? The price hikes will be only temporary, I think," he said.

China's consumer price index (CPI) retouched an 11-year monthly high with a 7.1-percent rise in January. The CPI rose 4.8 percent in 2007, also the highest since at least 1997. In 1988, however, retail prices, the official measure for inflation before 1994, rocketed by 18.8 percent year-on-year.

Current inflation figures should be put into perspective when making longer-term historical comparisons or looking at 'record' levels. Since 1978, when modern economic reform began, China has measured inflation in different ways and at different intervals.

Before 1994, for example, retail prices were the same as inflation for statistical purposes, and they were calculated by using three categories: state-listed prices, negotiated prices and prices at country fairs. These fairs were an early step in the de-control of farm prices. They allowed farmers to sell directly to the public at rural markets.

Today, retail prices include many items that aren't in the CPI, such as publications, office products and cosmetics. Prices are also calculated monthly, which can make inflation figures more volatile in the short term than when they were measured quarterly, which was the case during much of the 1970s, 80s and 90s. And fewer prices are set officially and directly by the state, although 'guidance' to industries hasn't disappeared.