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BEIJING -- Business is normally bustling at the sprawling Xinfandi produce market in southern Beijing, where stores, restaurants and thrifty shoppers buy their fruits and vegetables in bulk.

But more apple sellers were napping than hustling on one recent afternoon. The price of apples had nearly doubled, to about $1 per pound, and people were spending their money elsewhere.

"Whoever eats apples these days must be loaded," said Li Tao, who has been selling apples for more than 20 years.

Migrant workers used to be able to afford apples, he said. "Now it's too expensive," Li said.

Already grappling with a trade war with the United States, China now has to worry about the rising price of food. It is not just apples. Other fruits and vegetables are more expensive. The price of pork has jumped as the country deals with a swine fever epidemic. Chicken, beef and lamb prices have been creeping up, too.

Apart from food, China does not appear to have a broader inflation problem. But the rising food costs have become the talk of the country. Government officials are reassuring citizens that food supplies are plentiful, even as they take steps to stabilize prices.

"People and economists talk like ships in the night," said George Magnus, an associate at the China Center at Oxford University. While overall inflation may not be high, he added, rising prices for goods such as pork, fruit and vegetables can affect consumer spending -- a potential problem for China's economy.

Even Li Keqiang, China's premier, looked surprised on May 25 when he visited a fruit vendor in the eastern province of Shandong. "It has gone up so high?" Li said after the vendor told him that the price of his apples had more than doubled since last year.

Various forces are driving up food prices. Chinese officials are still trying to contain the outbreak of swine fever, which does not make people sick but can be fatal in pigs. More than 1 million pigs have been killed to stop the spread of the disease, though it appears to be continuing. For fruits and vegetables, Chinese authorities blame severe weather and say the price increases will be temporary.

"The prices of fruit and vegetables have caught everyone's attention," said Chenjun Pan, executive director of food and agriculture at RaboResearch. "Pork, as well."

Experts are also watching the spread of a pest called the fall armyworm, a type of caterpillar that likes to eat rice, sorghum and corn crops. More than 350 square miles of crops have been ravaged, according to official news media, though the full effect on crop prices may not be felt until later in the year.

Food prices are rising at a sensitive time. President Xi Jinping has signaled tough times ahead as tensions rise with the United States. Data released Friday suggest that a nascent economic uptick is beginning to wane and that China could slip back into a slowdown. In March, Li, the premier, acknowledged that the economy faced pressures as Beijing lowered its expectations for growth this year.

The government has long worried about inflation. It played a role in huge public protests in Tiananmen Square 30 years ago; the anniversary of the government's violent suppression of the protests is this week. And steep inflation in the 1990s threatened to derail efforts to open the Chinese economy.

For now, the price increases appear limited to food, partly because of China's uncertain economic situation. Rising rents have cooled to single-digit percentage growth this year. Wage increases have slowed, and unemployment is rising. At China's factories, prices for raw materials and other goods appear tame. China still has excess factory capacity in cars, steel and other industries, meaning production could quickly ramp up if prices rise.

"I don't think inflation is a big issue for China so far," said Yu Yongding, an economist at the Chinese Academy of Social Sciences, an elite government institution in Beijing.

Chinese workers also have little leverage in seeking higher wages, limiting another possible contributor to inflation. Job losses are already a problem among young white-collar workers as the country's tech sector has slowed during the winter and spring.

Still, food-price increases have captured the attention of Chinese households and leaders alike.

The price of pork jumped 14% in April compared with a year earlier, while broader food prices for consumers rose 6.1%, according to government statistics. Agriculture officials have warned that pork prices this year could go up by 70%. Just over a week ago, the average price of a group of seven types of fruit hit a nearly five-year high of 50 cents per pound, according to official statistics.

It is not clear whether higher food prices could ripple into other parts of the economy. Perceptions of inflation could drive workers at state-owned companies to demand higher wages, said Harry Broadman, a former chief of staff at the White House Council of Economic Advisers who is now the chairman of the emerging markets practice at the Berkeley Research Group, a global consulting firm.

"It's not a strictly economic issue," Broadman said. "It's a political economy issue."

Online, discontent is rising. A survey on China's biggest social media platform by Phoenix Finance asked people to pick an explanation for the sudden surge in fruit prices. The choices did not include a rise in overall inflation, so people added that in their comments.

"These four options are just trying to smooth things over," one person wrote. "It's obviously inflation."

Business on 06/05/2019

Print Headline: China contending with rapid rise in food prices


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