NO.1 Issued Date 2012.Oct.18
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Real costs: A frank look at inflation in Beijing

2012-10-16 10:12:01 GMT2012-10-16 18:12:01(Beijing Time)  City Weekend

By Brian Hutson

The funny thing about the rising cost of living in China, and Beijing in particular, is that it is very skewed. Like seemingly everything in the Middle Kingdom, there are extremes and little actual middle ground. Food inflation is leading the way: eight years ago, a can of tuna was RMB5.8. Now it’s RMB16.5. That’s an inflation rate of 14 percent! The inflation rate of prices at local wet markets like Sanyuanli has been about 16.5 percent over the last five years.

But last year when inflation, especially food inflation, was threatening to spin out of control, the central government began to subsidize food costs. There have also been increases in rental prices, but these are largely anecdotal, without enough real statistics to know the true increase.

But there are other areas of life where inflation is very low, if there is any at all. The subway has actually gone down in price. When I arrived in Beijing, Line 13 was RMB5, while Lines 1 and 2 were RMB3. Now it is RMB2 for access to the whole system.

Taxis have had a rather modest increase in charges, from RMB1.2/km to RMB2. Add in the fuel surcharge, and that’s an increase of about 7.5 percent per year. The electricity rate was cranked up about a year and a half ago, but it’s still heavily subsidized, so we can’t complain. Water is also cheap—too cheap for such a sparse commodity.

Finally, let’s look at one of the basic commodities of life for many expats: beer. When I came to Beijing, the local xiaomaibu charged RMB1.5 plus RMB0.5 for deposit on a bottle of Yanjing or Tsingtao. We’re now at RMB3 plus deposit. That’s a 9 percent increase, which is fairly commensurate with general expat life in Beijing over the last decade.

But the trouble with measuring inflation and increasing costs is that it also depends on lifestyle—for example, the ticket price to see a show at Yugong Yishan has been RMB50 for the last six or seven years. The official Beijing inflation rate, which has been listed at only 4-6 percent over the last decade, should be taken with a healthy dose of skepticism.

But so, too, should the annual survey of the “most expensive cities in the world.” This report is based on the cost of a multinational company’s senior executive’s expat package.While paying for a family to live in the expansive and expensive Shunyi villas, plus full tuition for children to attend international school, may be a necessary offer to lure the kind of talent necessary to lead MNCs in China, that lifestyle is hardly representative of the remaining 20 million who live in Beijing.

Based on my rough calculations, inflation has been about 6-8 percent over the past decade, but has ramped up to about 10-11 percent in the last three years. Still, Beijing is not the 17th most expensive city in the world to live in, and while the cost of living is going up, it’s still cheap... relative to back home.


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