Tackling Inflation Is China's Top Priority

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There is growing concern about inflation in China. Last month, overall inflation was up 5.3 percent compared to the year before. Food prices were up 11.5 percent. Chinese consumers are angry, and the government fears that could lead to social instability.


Now as you just heard, rising costs in China can hurt the American economy. In a moment, we'll talk to David Wessel about this. But first, we go to China, where for the fifth time this year, the government has ordered banks to keep more money in reserve, hoping that will keep prices down.

As NPR's Louisa Lim tells us, inflation is well above the government's target of four percent.

(Soundbite of crowd chatter)

LOUISA LIM: Here in Beijing, shoppers are really feeling the pinch. I'm in a wholesale market, surrounded by stalls piled high with fruit and veg. Last month, inflation was up by 5.3 percent, compared to a year before. But a large component of that was rising food prices, with food prices up by 11.5 percent from a year before, and shoppers aren't happy.

Mr. LU: (Foreign language spoken)

LIM: Everybody's complaining that food's too expensive, says a stall owner who gives his name as Mr. Lu. He sells pork, but says business is slow.

(Soundbite of scooping nuts)

LIM: Across the way, Wang Limei is buying nuts for snacks for customers at his bar.

Mr. WANG LIMEI (Bar Owner): (Foreign language spoken)

LIM: Inflation has a huge influence on me personally, he says. We can hardly afford to eat anymore. We don't want to have kids because we're scared they'll starve to death. We'll all be bachelors forever.

Actually, so far, nobody is starving, but given the implications for social stability, tackling inflation is China's top priority.

Here's Vice Premier Wang Qishan, speaking last week on "The Charlie Rose Show."

Vice Premier WANG QISHAN (China): (Foreign language spoken)

LIM: The most pressing problem we are faced right now is the problem of inflation. We have to use monetary to a policy, fiscal policy, and at the same time economic restructuring.

Unidentified Man: (Foreign language spoken)

LIM: A newspaper hawker shouts out his wares. Beijing's four interest rate increases since October have made headlines. But it's a measure of China's nervousness about inflation that the company Unilever was fined $300,000 for just talking about possible price hikes.

Louisa Lim, NPR News, Beijing.

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