Snowstorms send food prices in China to 'unbearable' highs

Last month's blizzards, the worst in China for half a century, wrought havoc, but as well as causing massive human misery the snowstorms drove food prices to record highs, forcing the biggest rise in inflation in 11 years.

Consumer prices rose a higher-than-forecast 8.7 per cent year-on-year in February, another surging increase straight after a 7.1 per cent rise in January. A survey by the People's Daily Online showed that most Chinese now describe inflation as "unbearable".

Wary of its destabilising effect, the senior leadership in Beijing has identified inflation and the overheating economy as China's two biggest threats. To make things worse, prices haven't stopped rising yet, and there have been warnings that inflation could continue to rise for some time yet.

And the price rises are hitting the Chinese where they can least afford it – in their shopping baskets. The main component in the rise in inflation was food costs, which soared 23 per cent after blizzards destroyed crops and blocked transport links, causing shortages.

At China's annual parliament, the National People's Congress, President Hu Jintao urged local governments to ensure that food prices remained stable and guarantee an adequate supply of major farm produce. "We must ensure stable production and prices of 'vegetable basket' products (non-staple food) for urban and rural consumers," Mr Hu told a session at the NPC.

The inflation figures put further pressure on China's central bank to raise interest rates. As global economic growth splutters, China has taken on a leading role in driving the world economy, and the government is in a tricky situation, trying to deal with overheating even though export growth is weakening on the back of a US slowdown.

Last year China hiked interest rates six times to try to keep a lid on inflation. Analysts are forecasting rates to rise by 2 or 3 per cent. The key one-year lending rate is at a nine-year high of 7.47 per cent. The deposit rate is 4.14 per cent, which is less than half the pace of inflation.

"We need to stay calm and take effective measures," said the Statistics Bureau, adding that the storms would make it "more difficult to control full-year inflation." There are fears that rising prices could undermine China's remarkable economic growth – the economy grew 11.4 per cent in 2007, a 13-year high, and is expected to expand by at least 9 per cent this year.

But for now, food prices remain the primary concern. The breakdown of the inflation data makes for grim reading in a country where food is a national obsession.

Pork prices soared 63 per cent from a year earlier, vegetables climbed 46 per cent, and edible oil rose 41 per cent, adding to the burden on the 300 million people that the World Bank reckons are still living below the poverty line in China.

A street seller in Baodingin Hebei province, using atraditional Chinese weighing scales to weigh out oranges, tells of how she has seen a sharp rise in fruit prices. "Prices have trebled in a year, it's tough enough. People want fruit obviously, but they really have to pay for it," says the fruit merchant, who wears a bright orange jacket and gives her surname only, Zhang.

A nearby food-stall owner, who smoothes the batter for a traditional bing pancake on to a hot plate with admirable dexterity, says he has the same problems. Food is getting expensive in China, especially if it comes from far away.

Further down the crowded streets of the town, a vegetable seller says one jin (a Chinese measure for half a kilo) of green peppers will cost four yuan (28p), which is double what they cost a year previously.

The peppers come from southern China, and the prices have been driven up since the coldest winter in half a century back in January meant moving goods around the country became a difficult proposition. Eastern and southern China were blasted by the blizzards and supply is only getting back to normal now.

"The mushrooms are local, so they do quite well, but a lot of people cannot afford to eat these foods from the south, especially laid-off factory workers," said the stall-holder, who comes from Henan province and is surnamed Chang.

Inflation has led to social unrest in China historically. It was dissatisfaction with prices spiralling out of control after the Second World War that led to strikes and social instability, which ultimately led to the failure of the Nationalist KMT leader Chiang Kai-shek to assert control after the end of the war.

While the demonstrations in Beijing and other cities in China in 1989 are generally linked in the popular imagination to the student pro-democracy movement, it was soaring grain prices over the course of the late 1980s that mobilised many factory workers and peasants in China to join in the anti-government wave.