(China Daily)
Updated: 2008-02-28 14:17

People living in Pingyao, Shanxi province, are feeling the pains of rising prices, illustrating inflation's influence across the country, The Guardian reported on Monday.

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Most of households, including middle-class families, lament the cost of cooking oil, clothing or even a snack at KFC.

"We don't eat pork, lamb or beef so much anymore. It's just too expensive," Wu Qiaomei, an accountant, said. "Vegetables that would have cost around three yuan ($0.40) last year are more than six yuan now."

"Its impact on low-income families will be beyond government's imagination," Ding Jianchen, professor at Beijing's University of International Business and Economics, said.

"When people's incomes don't rise at the same speed as the inflation and the employment pressures keep increasing then it will have influence on low-income families, " Ding said.

Some firms are at risk of a double whammy - the fall in demand from the US due to its downturn, coupled with spiraling production costs in China. Wages rose by 20 percent in the unskilled and low-skilled sector last year.

In the meantime, businesses must struggle with the higher cost of borrowing as well as the raised wage bill. Small firms are worst affected, but research by Standard Chartered's China team shows even a foreign blue chip firm is borrowing at 30 percent above the base rate.

"It does worry us, but we cannot do anything," Xu Jianguo, Wu's husband said. "It will have to be the government which regulates inflation. I believe China will keep getting better and more prosperous. With a country as strong as China, it cannot decline."

Domestically, there is a long way to go before the effects of inflation undermine the overall rise in the standard of living.

Despite complaints about the rising costs of flour and cooking oil, 84-year-old Pingyao resident Hua Benming still appreciated the long-term change.

"Thirty years ago, one family could probably eat 1 jin (0.5 kg) of meat a month. Now it's once a week," Hua said.