Is inflation a Party crasher?

My wife and I try to limit ourselves to a budget similar to what a Chinese family might earn. That’s about $400 a month for the two of us, which would be average for a Chinese teacher, and at the low-end for people working in my hospital (In China it’s not considered rude to talk about money, so I’m pretty open about it).

After a few months here in the city, our budget keeps feeling tighter, even though we are trying to eat less Western food, and we almost never go shopping.

So where is it going?

Every morning I eat a delicious crepe type thing with egg, cilantro, onions, chili paste, and a fried dough stick (youtiao). Typically this costs me 3rmb, but this week the price went up to 3.5rmb (about a 15% increase).

The man who makes my breakfast at a street stand was embarrassed to tell me that I hadn’t given him enough money, which the other customers found hilarious. The lady next to me summed up what everyone was laughing at in a single word, “涨(zhang),” which has come to mean inflation.

Prices have been rising for several months now, and “Zhang” was actually the 2010 word of the year, but the consumer price index (CPI) has been rising faster in these first few months of 2011.

There is another notable difference in the market. We used to get questions about where we are from and if we like Chinese food. Now each time we buy eggs or vegetables, the person wants to know how much it would cost in the US. When I tell them what we would pay in the States, it ripples through the stands of the hawkers followed by angry snorts. Groceries are often MORE expensive here in China than at home, especially meat.

When prices go up 15% suddenly our $400 feels like $340, and that makes our budget seem much tighter than it used to be.

China’s inflation is starting to be a big problem for the gov’t. Officially the CPI, which looks at the price of several different kinds of goods, rose 4.9% compared to what it was the previous year. Like all official statistics in China, those numbers are optimistic (it is probably closer to 8%). Food prices, which are just part of those statistics, increased over 10%, which means the poorest people feel it most.

Over the past few months the Gov’t has released countless statements on their epic battle against increasing prices, but so far their measures have had little effect. Now with the drought effecting China’s wheat crops, and rising oil prices (officially a “sensitive” topic), growing inflation seems inevitable.

For the Party, it couldn’t come at worse time, already set on edge by spreading protests throughout the Middle East.

My wife and I can always increase our budget (really, you don’t have to worry about us), but for the rest of the Chinese people, this isn’t an option. Inflation is the ultimate destroyer of wealth, and the Party’s legitimacy comes from growing the middle class.

When I came back to work after the holiday I was chatting with a Chinese co-worker about what had happened in Egypt. She asked what the causes were behind the protests, and I simplified it as “one person was in power too long, people couldn’t find good jobs, and the price of everything was going up.” She smiled and said, “Sounds like China.”

16 responses to “Is inflation a Party crasher?”

  1. Chopstik says:

    So perhaps China is more like Egypt than we thought?

    • Tom says:

      I think inflation would be a big part of unrest in China (My theory is inflation ->housing crash->big problems), but I don’t think it’s quite high enough yet.
      There were calls for protest last week, but nothing has really come of it as far as I can tell.

      • Chopstik says:

        And there are apparently more calls for protests this week – though I’d take those with a grain of salt. Also interesting was the actions of the US ambassador last weekend… Not very smart on his part (IMO), but I hope not to see the chaos in China that is happening in other parts of the world…

      • Tom says:

        I agree, all white people need to stay away from protests in general. Gov’ts would love nothing more than to be able to blame it on outside forces.
        I’ve read the call for protests, and they seem well organized and dedicated to peace.

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  3. […] My wife and I try to limit ourselves to a budget similar to what a Chinese family might earn. That’s about $ 400 a month for the two of us, which would be average for a Chinese teacher, and at the … Continue reading → […]

  4. Sara says:

    Extremely interesting to hear about your experiment. Actually this have been in my mind too but I’m not sure when would be the best time to try. I would like to try to live a month with migrant worker’s salary which is about 1500 yuan per month. This luckily doesn’t include rent, because migrant workers usually sleep free in the factory/worker’s dorm (of course can’t be compared to my apartment, even it’s small. And I’m not working 12 hours per day either.)

    I did have a smaller experiment last Autumn and used about 2200 yuan in one month (not including rent). But with a small budjet 700 yuan is quite a lot of money and this year I will definitely try that 1500 yuan’s month.

    The reason why I’m not sure when to try is that what happens to my social life during that. With that small budjet it could be hard to spend time with new exchange students that come here not just to study but also to experience Guangzhou. But if I gain enough courage I would have a chance to start next tuesday on March 1st.

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  8. Jessica Lee says:

    For your information, the crepe-like breakfast snack you enjoy every morning is ‘zi fan tuan’ (滋饭团).

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