A Zero Hedge reader writes from the ground in China, and shares his first person perspective on just how real inflation has become in the world's most populous and thus most price margin sensitive, country.
Inflation is HUGE. In every way and is so noticeable in daily life that we talk about it, well, everyday as everything we buy is rapidly increasing in price. The thing is, is that it doesn't affect my life that badly, except for my rent that increased 10% (which was low, compared to the city-wide 20% increase in 2010), because I'm in a high income level, for local Chinese standards. For example, a bowl of dumplings I typically get for lunch has gone from 3rmb ($0.44) to 4rmb ($0.59). That's a 25% increase and happened in one day. Again, clearly in USD terms you can see that doesn't bother me, but for the average Chinese, it kills them. Veggies have gone up 60% in some cases. In such drastic instances, portion sizes are decreasing rapidly to keep prices level. Got a salad the other day from a western restaurant I got to a lot and my friends and I agreed it was about 1/2 the normal size. As I'm sure you've heard, the gov is putting out price controls and subsidies, which is dumb because it will only delay inflation and the subsidies are only encouraging more inflation. At the same time, without some sort of price relief, the income gap is just going to widen. Perhaps if the gov hadn't been handing out free money to people for the last 10 years to boost growth and raise living standards at such a lightening speed pace, inflation wouldn't be quite as bad as it is today.
So that's my report on inflation from on the ground in China.