Thursday 3 February 2011

Inflation makes Beijing more expensive than Hong Kong

Rising prices have made daily necessities in big mainland cities even more costly than in Hong Kong, which consistently rates as one of the most expensive cities in the world.

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Guanyu said...

Inflation makes Beijing more expensive than Hong Kong

Celine Sun in Beijing
02 February 2011

A humble dish of stir-fried noodles and a cup of coffee is likely to set you back more in Beijing than Hong Kong as vigorous inflation hits home in the capital.

Rising prices have made daily necessities in big mainland cities even more costly than in Hong Kong, which consistently rates as one of the most expensive cities in the world.

Hongkonger William Wong knows full well how prices rises are hitting the pocketbook.

Wong, who started work in Beijing for a Hong Kong-based trading company last year, is finding he needs to pay more in Beijing if he wants to maintain a similar quality of life to his home city.

Wong likes to shop in supermarkets near home for basic items like apples but also regularly dines at, or orders takeaways from, Cantonese-style tea restaurants.

He is also a regular taker of taxis to his office and back home.

“Apart from the taxi expenses, almost all other things are more expensive in Beijing than in Hong Kong,” said Wong, who is in his 50s.

One example is stir-fried noodles with beef from a tea restaurant he often visits.

In Beijing it costs 35 yuan (HK$41) while the same dish costs only HK$30 to HK$35 in Hong Kong.

A box of fresh pork chops sells for over 30 yuan in the Hualian supermarket near his apartment, at least 10 per cent higher than in Wellcome or ParknShop.

A pack of 10 imported Gala apples costs as much as 70 to 80 yuan in Hualian, yet are no more than HK$20 in Hong Kong.

“I have compared my living expenses with that of a friend in Hong Kong. I spend more money than him on food and fruit, yet the quality of what I purchase is lower than his,” he said.

The National Bureau of Statistics announced earlier this month that the mainland’s consumer price index rose 3.3 per cent last year. The government’s target is to hold inflation below 3 per cent.

Food prices, the major driver of inflation for the year, rose 9.6 per cent in December compared to 11.7 per cent in November.

Many economists believe real inflation could be higher than the official figure as the government calculation does not include rent and mortgage payments.

The mainland is likely to report even higher CPI increases for last month and this month, pushed up by food price rises ahead of the Lunar New Year. The South China Morning Post surveyed a Wal-Mart supermarket in Beijing’s Dawanglu district and a Wellcome store in Causeway Bay last week.

Around one-third of the food products and groceries we selected randomly were more expensive in Beijing.

For example, bananas imported from the Philippines sell for HK$5.32 per 500 grams in Beijing compared to HK$4.18 in Hong Kong.

It is not only in supermarkets that Beijing consumers are having to dig deeper into their pockets.

Guanyu said...

A Big Mac at McDonald’s costs HK$16.50 in the city compared to HK$15.10 in Hong Kong, while a tall cappuccino or caffe latte in Starbucks is HK$33 in Beijing compared to HK$28 in Hong Kong.

Yi Xianrong , a researcher at the Chinese Academy of Social Sciences’ Finance Research Centre, said the majority of customers shopping at big supermarkets like Wal-Mart are from middle-class families while lower-income people purchase their daily necessities at farm markets or small shops on the street.

“Besides inflation, taxes and retailers’ manipulation of prices are part of the reason some products are more expensive on the mainland than in Hong Kong,” said Yi.

“Some retailers take advantage of people’s inflation expectations, raising prices to a higher level to seek more profits.”

Soaring living expenses in big mainland cities mean people are increasingly hurting because of their relatively low incomes.

Figures from the Beijing Municipal Bureau of Statistics show the monthly per capita disposable income in the city was 2,422 yuan (HK$2,867) last year, around two fifths of the average monthly pay in Hong Kong. The figures in Shanghai and Guangzhou are 2,655 yuan and 2,554 yuan respectively.

Shanghai, Beijing and Guangzhou are the three richest cities on the mainland in terms of gross domestic product.

In Guangdong, rocketing prices are encouraging more people to go to Hong Kong to purchase groceries and food.

Families have also started to store edible oil, rice and even toilet paper because of expectations of higher inflation.

Beijing resident Zhou Pengying, a retired high school teacher, and his wife live on a monthly pension of 4,500 yuan.

To prepare for family gatherings during this Lunar New Year, the couple have spent more than 4,000 yuan on fruits, nuts, tea and clothes. They plan to purchase fresh meat and vegetables over the next few days.

“Everything is more expensive this year. I am sure that our total spending [for the festival] will exceed 10,000 yuan,” said Zhou, 73. “Our pension has not increased for five years, but the prices for daily necessities have doubled during that time.”

Yi Xianrong expected consumer inflation this year will be even higher than last year, despite a series of price controlling measures and credit and property tightening policies.

Essence Securities chief economist Gao Shanwen said China’s CPI is likely to exceed 4 per cent this year as increasing labour costs buoy prices of agricultural products and services.

“Consumer price rises are expected to remain at a high level, especially in the first and second quarters due to rising imported inflationary pressures and expectations of price increases,” Gao told the First Financial Daily.

William Wong plans to bring more food products from Hong Kong on his next trip home.

“Many of my Hong Kong friends working here have the same idea. We often complain of the prices yet we still choose to stay. It’s because there are more job opportunities here than Hong Kong,” he said.