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Inflating Fast
Cover Stories Series 2011> Inflating Fast
UPDATED: May 13, 2011 NO. 20 MAY 19, 2011
An Enduring Headache

Lingering inflation has become the biggest headache for ordinary Chinese people. The CPI growth, a broad measure of inflation, has been hovering around 5 percent since last November, and it even hit a 32-month high of 5.4 percent in March.

Facing untamed prices, the low-income group and poor people are suffering the most. Food prices—the main driving force of China's inflation—have been soaring at more than 10 percent each month since January this year. For those in the low-income group and living in poverty, expenditures on food still take up a large proportion of their daily consumption.

Besides food, residential costs including rent, construction materials, and utility prices have also been growing at more than 6 percent each month since the beginning of the year. As China's social security system is still incomplete, another important expense for its citizens is medical treatment and health care, prices of which have been growing at around 3 percent each month since January.

Raising residents' income to mitigate the impact of inflation on their everyday life has become an urgent task for the government. Its latest effort has been to raise the minimum personal income tax threshold. As an amendment to the Personal Income Tax Law, the minimum tax threshold hike is expected to benefit 200 million ordinary Chinese. The draft amendment will soon be passed after soliciting public opinion, which will wrap up on May 31.

At the local government level, after a nationwide minimum wage increase of more than 10 percent last year, a new round has started this year, with Jiangsu Province being the first, followed by Shanghai, Shanxi Province, Chongqing and Zhejiang Province.

Meanwhile, the government's efforts to rein in inflation will continue. The central bank recently said there is no absolute cap on the level of the reserve requirement ratio, which has been raised five times this year. Further hikes of the interest rate, which has been raised twice this year, are also expected. But the effect of these monetary measures remains a question, as the current inflation is affected largely by outside factors—rising international commodities prices.

Therefore, efforts on raising ordinary people's income to alleviate their burden caused by inflation can't be slackened and deserve greater attention.

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