Economy

Living cost mounts in China as cotton, food prices surge

(Xinhua)
Updated: 2010-11-11 14:36

JINAN - A resident named Cao Xinru found her monthly salary allowed her to only purchase two cotton-padded coats this winter when she was shopping over the weekend in east China's Shandong province.

"I feel the prices of clothes have risen a lot this year, especially the cotton-padded coats," said Cao, an employee of an advertising company in Jinan, capital of Shandong province, who has a monthly salary of 3,000 yuan ($451), when she wanted to buy coats for this winter.

Not only the clothes, but also other textile products had become more expensive, said Yu Hui, textile department manager of Yinzuo Shopping Plaza, one of the largest shopping centers in Jinan.

Also, prices of towels, underwear and beddings increased in varying degrees, Yu said.

The price increases are not only happening in Shandong, but also throughout the country.

In Hohhot, capital of north China's Inner Mongolia autonomous region, the price of cotton-padded coats rose 20 to 30 percent compared to last year.

"I used to sell six or seven pieces a day last year, but almost none this year," said Ren Min, a clothes dealer in Hohhot.

"Customers thought it was me who raised the price, but actually I just follow the price rises from my sources," she said.

The price increase was considered to be caused by the rising price of cotton since the end of 2009, which has impacted many Chinese enterprises.

According to the latest statistics posted on the website "Cottonchina.org", the cotton price has climbed from about 18,000 yuan to 28,500 yuan per ton since Sept 1.

Dezhou city in Shandong, 300 kilometers from Beijing, is one of the major cotton production locations in China. "The prices of unginned cotton had been climbing from last September's six yuan to May's 8.3 yuan per kilogramme, breaking the historical record of 7.2 yuan in 2003," said Ma Junkai, deputy general secretary of Dezhou municipal Cotton Association.

Additionally, the price of fine staple cotton rose 5,000 yuan per ton since last September and the price of long staple cotton rose 12,000 to 14,000 yuan per ton, up 30 to 50 percent, which had brought great pressure on cotton companies, said Li Chuanbo, general managing assistant of Shandong Demian Incorporated Company, the biggest cotton company in Dezhou.

The price of cotton yarn even doubled to 37,000 yuan per ton, which ordered the companies to wait and see rather than storing the materials as usual, Yu said.

"The prices of towels will be rising for the fourth time since the end of last year, and the price of bedding will also rise in a few days," he said, adding that prices of most daily commodities rose 15 to 20 percent.

Experts said the cause of the increases includes two factors, one is the increasing demand from India and America, while the other is the decreasing of planting acreage in China.

Real estate sector shows signs of cooling Related readings:  China's October CPI hits 25-month high  Chinese govt on guard with CPI to exceed 3%  China's 2010 CPI to exceed annual target of 3%  China's October CPI to rise 4.1%: forecast

According to a report by America's Department of Agriculture, the global demand for cotton will be 890,000 tons in November. Further, the futures of cotton in New York has been rising since late July and has now risen about 70 percent.

The cotton in northwest China's Xiniang Uygur autonomous region, accounting for one-third of China's total cotton output, will soon appear on the market, which is expected to relieve the current situation.

Compared to other agricultural products, cotton has a lower subsidy of 15 yuan for each mu, while the subsidy of other products could reach 38 yuan, Ma said.

Dezhou had 2.3 million mu of cotton in 2009, down 19 percent from 2008, which was the lowest point in the last seven years.

The planted cotton areas in the city are only 2.1 million mu this year, down 10 percent from last year, which is the lowest point in the last decade, Ma said.

The price increases were not only limited to cotton, but appeared in many other markets, including food and oil.

Food prices, which account for one-third of weight in calculating the CPI in China, climbed 10.1 percent in October, pushing the CPI to reach a 25-month high of 4.4 percent in October.

"China needs to do more to keep this year's inflation under the target ceiling," said Sheng Laiyun, spokesman with the National Bureau of Statistics, Thursday when announcing the October CPI figures.

Pressure for further price increases were mounting, while the quantitative easing policy adopted by the US would fuel inflation expectations within China, said analysts.

"The price cannot drop in a short while," said Cao Xinru, "The living pressure seems to be more real to me. I need to make a shopping plan for myself this winter."