Highlights from the last week of China business news: Inflation’s hitting new highs, and the price of everything from instant noodles to electricity and sugar is on the rise, while the EU’s Consumer Commissioner pays a visit to Chinese factories and comes away distinctly unimpressed.
The EU joins the product safety blame game
The European Union’s Consumer Commissioner, Meglena Kuneva, had her 15 minutes of fame this week, as the international press covered her China visit extensively. She joined the US in escalating the EU’s product safety rhetoric, saying that she was prepared to block Chinese goods if they continued to fail safety tests. Since the EU is China’s top trading partner, such a move would be disastrous.
Kuneva qualified her statement, of course, saying that partnership was her preferred mode of engagement. A day earlier, she had complained to the press that China wasn’t giving the EU enough details about its product safety measures. According to her, Chinese goods represented half of all unsafe products sold in the EU.
But Beijing did enough to appease her for now. “I can see political commitment at the highest level and I will watch how this political commitment will be translated into practice,” she told the Financial Times after meeting with Li Changjiang, head of China’s General Administration of Quality Supervision, Inspection and Quarantine.
The government did show its commitment in several instances this week. It closed three companies responsible for high-profile tainted exports, namely those involved in manufacturing ‘antifreeze toothpaste’ and lethal pet food that was responsible for deaths in the Americas. The cabinet also set up a new taskforce, the Quality and Food Safety Steering Group, and set the wheels in motion for a food and product safety draft law.
Fans of Chinese exports everywhere can also take heart with this final bit of news: White Rabbit candy, which was banned in the Philippines, has been declared safe for consumption after an independent review.
Pumped up prices
Goods and services are getting dearer in China as inflation continues to creep up. The latest GDP figures are sky-high, but so are the inflation numbers. Inflation hit a three-year high of 4.4%, breaking the central bank’s target of 3% for the fourth consecutive month.
The National Development and Reform Commission was quick to say that it believed inflation would drop in the second half of the year. “It will be a process of slow [price] increases, with the magnitude depending on harvests in the autumn,” Cao Changqing, director of the NDRC’s price department, told the South China Morning Post.
But there’s the rub. Just a few days before Cao’s statement, the Ministry of Agriculture issued an emergency notice telling local governments to keep up grain production in the fall despite crop destruction caused by some of the worst flooding in years. “Stabilizing the autumn grain supply will be a challenging task,” the ministry said.
Although analysts generally say the latest inflation figures are nothing to worry about because core inflation remains stable, try telling that to the man on the street. Electricity and oil companies want to raise prices. Sugar is getting more expensive. Pork and chicken, of course, are practically becoming luxury meats (See July’s CER: ‘Revenge of the pork‘). Even that faithful standby, the humble instant noodle, has had a 20% (and in some cases 40%) price hike. No amount of MSG will make that go down any easier.