Beijing Stories

Jasper Becker is thrilled by plummeting costs in the pricey Chinese capital ? but saddened as cars displace the once ubiquitous bicycle

It's nice living in a deflationary world. Beijing was once ranked just behind Tokyo as the most expensive place on earth to do business, but since 1998 prices have been falling.

It's nice living in a deflationary world. Beijing was once ranked just behind Tokyo as the most expensive place on earth to do business, but since 1998 prices have been falling.

Every day brings a new and pleasant surprise. Last week, I stopped at the tollgate to the airport, extracted 15 yuan (£1.30) and was about to hand it over when an electronic voice advised me it was now 10 yuan. Overseas phone calls are down by half, thanks to the arrival of pre-paid cards. Ten years ago, it was impossible to get a phone line unless you were a Communist Party member or a foreigner. Now there are 190 million mobiles in China.

Electronic gadgetry keeps plummeting in price so fast that, when you go into the homes of poor peasants in the country around Beijing, even they will probably have stumped up for a giant TV screen and a DVD player, or at least a video recorder. The same is true in parts of Beijing where lavatories and running water are still a novelty.

But housing in the capital is also subject to deflation. Villas which five or six years ago would be rented out to expat businessmen for $10,000 (£6,300) a month are now on offer for a quarter of that price.

Beijing is famous for fakes. I've eaten counterfeit peanut butter, drunk red wine that never saw a French chateau – despite the promise of the label – and bought everything from "Coca-Cola" to medicine to software – all packaged like famous brands – which weren't genuine. Fakes too are getting cheaper, along with the antiques being made in such quantities.

Some say joining the World Trade Organisation has made things cost less, because China had to abolish import tariffs. But prices had already been falling long before then and economists are warning of a vicious deflationary spiral. Not only that: China is now accused of exporting deflation, one form of free trade nobody envisaged.

In days past, Beijing's dawn chorus consisted of bicycle bells. But though bicycles have also dropped in price, they no longer flood the Avenue of Eternal Peace like some huge migratory herd. The great cycle lanes in this flat, grid-like city, once hailed by visitors as our ecological future, are shrinking or vanishing to make way for the car.

There are still 10 million bicycles in the capital, but car ownership is increasing so fast that four-wheel vehicles may one day exceed two-wheelers. A decade ago, you couldn't find a taxi for love or money after 7pm. Now there are 1.8 million on the streets, their number swelled by an extra 20,000 a month. The average distance covered by bike is also falling to just three miles each day instead of seven.

Great swaths of central Beijing have been demolished and most people find themselves scattered far from their original homes. Their offices or factories, once a short bicycle ride away, have often been shifted as well. The city already has six ring roads; by 2008 there will be 500 miles of expressways. If you don't have a car, you will never get anywhere.