China’s rising prices, driven by pork crisis, leaving a bad taste in the mouths of Chinese consumers, businesses

He Huifeng

In what is becoming a daily scene in markets, restaurants and office buildings across China, ordinary citizens cannot help but share their worries about the sharp rise in the cost of living, and discuss how to save money.

This trend comes in response to a new environment of rising prices and slower economic growth, which is leading to growing discontent among the public.

Pork is China’s favourite meat, especially among middle and low-income groups, but rising meat prices are also dampening consumer sentiment and undermining Beijing’s attempts to convince the population of the country’s bright economic future.

Driven by the doubling of the price of pork from a year earlier, and the resulting increase in the cost of other meats as people seek alternatives, China’s consumer price index jumped to 3.8 per cent in October, the highest since January 2012.

Internet posts complaining about skyrocketing meat prices and sharing practical ways to save are becoming increasingly popular.

A post on November 8 by a migrant worker in the Yangtze River Delta sharing her recipes for three affordable meals per day attracted more than 50,000 views and replies. Another post showing rising prices at fast food shops across the country had over 30,000 views and replies in a few days.

Smaller shops and restaurants are also struggling to survive amid the rising prices, which have followed since the outbreak of African swine fever destroyed China’s pig population.

The main driving force of China’s consumer spending comes from the country’s middle class, but with the slowdown of China’s economy, their income growth and the value of real estate assets, actually, have been stagnant and even sliding

Simon Zhao

“I’m going to have to shut down the business,” said Li Jie, who runs three dim sum cafes in Guangzhou with his friends.

Li’s wholesale supplier has raised the price of pork five times between August and October, from 58 yuan (US$8.3) to 90 yuan (US$12.8) per kilogram intestines used in fried chitterlings, a favourite local dish.

“What we can do is either increase the price [of a meal] or reduce the amount of meat in each dish. If few customers order the dish due to the higher price, we have to take it off the menu,” added Li.

Rising prices and the slowing of the economy are having a negative impact on the overall economic picture in China.

“The main driving force of China’s consumer spending comes from the country’s middle class, but with the slowdown of China’s economy, their income growth and the value of real estate assets, actually, have been stagnant and even sliding,” said Simon Zhao, a professor at the United International College, a joint school created by Beijing Normal University and Hong Kong Baptist University in Zhuhai.

“As result, there is likely to be a trend that ordinary Chinese consumers continue to shrink their consumption demand in at least the coming couple of years. [If the economy continues to slow in the next year] it will absolutely weaken further the income and spending power of working class and middle class workers.

“[If consumer prices remain high] there will be significant pressure on ordinary Chinese people, while both Chinese families and local governments are deeply trapped in a high level of debt.”

But, despite their current difficulties, Chinese consumers in general are better off than they have ever been, according to Zhao.

“To be fair, the consumption power of the ordinary Chinese is still at a historical high level compared with where it was a decade or two ago,” he said.

China’s per capita gross domestic product (GDP) at purchasing power parity, which tries to compare the cost of a basket of goods and services on a common currency basis, grew more than seven-fold over the 20 years from 1998, from US$2,464 to US$18,210 in 2018, according to the World Bank.

According to a quarterly survey of 20,000 people nationwide conducted by the People’s Bank of China, which was released at the end of September, 27.7 per cent of the people surveyed said they tended to consume more in the third quarter, down 1.3 percentage points from the previous quarter. Most recently, the level reached a peak of 28.9 per cent in the fourth quarter of 2018.

In Guangzhou, higher food prices are prompting people to stay at home rather than eat out, despite government efforts to promote the night-time economy.

“Local consumer spending has got worse and worse this year. In recent weeks, it’s very quiet on both workday nights and weekends, and we have only one or two tables of guests at around midnight,” added Li, who runs the three Guangzhou dim sum cafes

And like Li, some small fast food restaurant owners are also considering the reality of closing their businesses.

“Because pork was so expensive, I had to raise the price from 10 yuan (US$1.4) to 12, and then 15 within about a month,” said a shop owner in Guangdong who sells rougamo, a kind of pork burger. “But after the price increase, only a few customers come in [to the shop].”

Rising consumer prices have forced many Chinese consumers to cut back on eating out. Photo: EPA-EFE

The ongoing food inflation has also forced families to cut back or even give up dishes that have been staples for ordinary Chinese citizens.

“Chicken and pork are soaring in price. It’s changing my habit of making soup twice a week to once a week, and I may need to cut it to twice a month if food prices continue to rise,” said Zhang Jiehong, a Guangzhou resident.

Pork dumplings are one such dish for most families in central and northern China, particularly during the winter.

“It has already been two months since my family had dumplings at home. We used to cook and eat dumplings once a week,” said Kou Lian, a resident in Dalian in the northern province of Liaoning.

I feel that living costs have risen sharply in the past couple years, but my wage has not risen for a year and a half

Eli Mai, salesman

“My mother is even going to drop her decades-long habit of making sauerkraut this winter because the Chinese love to cook sauerkraut with pork, and pork is now becoming unaffordable.”

Higher food prices have added to the stress of middle-class families with large property loans.

“I feel that living costs have risen sharply in the past couple years, but my wage has not risen for a year and a half,” said Eli Mai, who works in Dongguan as a salesman.

“I earn 18,000 yuan (US$2,600) a month and I pay all that income out on my mortgage loan. We usually use my wife’s salary of about 8,000 yuan (US$1,100) to pay the daily expenses of our family of four, including meals, clothes, transport, entertainment and tuition fees for our child.”

Mai’s mother, who retired in her 50s a few years ago, is now thinking of looking for a part-time job to help out with the costs of supporting the family.

“Given the current price of meat, we can only ensure that the children can eat meat, while we adults all eat less.” he added. “Expenses for clothes, restaurants, tourism and other non-essential expenses definitely have to be reduced.”

October’s rise in China’s consumer price index was larger than the increase to 3.4 per cent expected in a Bloomberg survey of analysts and up from 3.0 per cent in September.

“We are now beginning to worry about possible higher inflation to come, as well as changes in the domestic business, political and social climate,” said Lin Xiao, a media manager of a Shanghai-based advertising company. “But those of us in the middle class don’t have a proper platform to discuss and find answers to know why [the changes are happening].”

For wealthier families, plans to buy property overseas are continuing to heat up, according to Tan Xiaotong, who runs a consulting firm in Guangzhou that helps wealthy Chinese citizens to buy property abroad before emigrating.

“More higher middle-class families and private entrepreneurs are beginning to feel the political and social changes. Many of those who took a wait and see view last year are now beginning to take action to let their children go abroad to study this year,” she said.

“The general practice is to cash in by selling their one or two properties [in China], and in turn purchase one or two houses in an overseas city where their children are planning to study.”

“So children studying abroad are an important part of their overseas allocation of assets.”

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