Boom times have sour taste for China’s poor
October 25th, 2007CHINA’S economy grew 11.5 per cent in the September quarter, officials say. But that all-conquering export juggernaut is a world away from the rust belts of north-east China.
Outside A’cheng, a one-time imperial capital, a 35-year-old woman named Li is scavenging through slashed corn stalks in somebody else’s field, hoping to find stray grains to feed her chickens.
Smoke is billowing in the distance from the state-owned factory that sacked her five years ago. Her 200 yuan monthly redundancy pension ($A30) is about to be cut.
Li’s been raking through the corn stalks with a sickle for half an hour. But she has only found half a cob’s worth of grain.
“I think someone has been here already,” she says.
Like almost every urban resident in this district, it seems, she is particularly agitated by rapidly rising food prices. The consumer price index, also released yesterday, showed inflation at 6.2 per cent in the year to September, down slightly from the 6.5 per cent peak in August. Prices are rising fastest for the things poor people need most, such as corn.
Authorities have blamed higher food prices on supply disruptions.
But many experts believe China has entered a new inflationary era because its pool of surplus labour, which once seemed limitless, is drying up in large tracts of the country.
Li Xiaochao, a spokesman for China’s statistics bureau, said average urban incomes rose 13.2 per cent to 10,346 yuan in the first nine months of this year, compared with last year, while rural incomes grew 14.8 per cent to 3321 yuan.
Rising incomes are boosting demand, particularly for protein-rich food, and simultaneously reducing supply by making peasants less willing to perform dirty, menial work such as raising backyard animals. “Every penny of this increase in income will be spent on food,” said Cai Fang, director of the Institute of Population Labour Market Economics at the influential Chinese Academy of Social Sciences. “And with the labour shortage in rural areas many farmers don’t raise pigs any more,” he said.
This structural demand and supply shift helps explain why food prices rose 10.6 per cent from January to September, well above the 4.1 per cent overall inflation reading for that period.
The price of eggs is up 26.2 per cent so far this year and meat 29.1 per cent. And yesterday’s data shows the food inflation is spreading.
Rapidly falling Chinese export prices have made it easier for central bankers to manage the world economy. But rising labour costs mean this deflationary assistance to the world is now faltering.
Central bankers are also watching to see whether China can drive the world economy through an American downturn. Whether China succeeds depends on how its politicians manage the three contradictory objectives of slowing growth to reduce inflation, keeping growth sufficiently strong to soak up redundant state enterprise workers in depressed areas such as A’cheng, and holding food prices high enough to improve peasant incomes.
The central bank has raised interest rates five times this year and banks’ required reserves eight times. They have also used non-market tools to control the money supply and prices, including pig subsidies and, according to Goldman Sachs, strict credit restrictions that will freeze lending from many banks until year’s end.
But authorities remain anxious that unemployment and inflation are causing hardship and social disquiet.
In A’cheng, the first snow of the year has melted into roadside puddles and the fearsome Siberian wind is howling. Men are huddled on the town’s main street corner, hands stuffed in the pockets of their ragged jackets, hoping that some construction team leader will wander over and pick out a few for a day’s menial labour.
On a very good day they might earn 100 yuan but usually they settle for 10 or 20 yuan for carrying odd loads of coal, bricks or cement. At least it’s enough for a feed.
Like Li in the corn fields, most of these workers have been retrenched from A’cheng’s state-owned electricity transmission equipment factory, which once boasted 10,000 workers.
“Look at our clothes, our shoes have holes all through them,” says one weathered man in his late 30s. “It’s OK now, but by December it will be minus 20 and we’ll still be wearing these clothes.”
It will be a miserable winter, he says, because of the rising cost of heating coal.
Rising food prices have divided China between those who consume food and those who produce it. For once, China’s peasants are on the right side of the equation.
Gu Jiacun, a 61-year-old corn farmer, is standing in front of the corn he recently harvested from his small plot of land.
“I’ll earn 600 or 700 yuan more than last year,” he says, struggling to suppress a full-faced smile.
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