The National Bureau of Statistics (NBS) said in Beijing on May
12 that China's price index had risen 1.2 percent in the first four
months of the year.
However, many people believe it's underestimated given that the
prices of many products are rising steadily. Are the CPI figures
accurate?
Delicate psychological factors
Mr. Zhang is complaining that charges for water, power and
natural gas have kept going up in recent years. A few days ago he
spent some 2,000 yuan (about US$249) on a 29-inch color television
set which may have cost him over 10,000 yuan (about US$1247) eight
or nine years ago.
The prices of commodities in daily use have risen one after
another in recent years. And their slight fluctuations can cause a
stir among consumers. At the same time, due to technological
advances the prices of household appliances, telecom equipment and
clothing are continuously being slashed, which allows people to
enjoy a higher standard of living. But strangely these price cuts
don't hold the attraction they used to as they're now considered
natural and therefore easy to ignore.
Actually it's a common psychological phenomenon, according to a
relevant expert. People are more likely to remember when the price
of something goes up but can't recall things falling in price.
House prices not reflected in CPI
Steadily rising house prices is of interest to urban residents
nationwide. However, few people realize that house prices are not
calculated into CPI.
As experts in the field point out apartments are usually
purchased as an investment. Many people buy to rent them out or,
after a period of time, to sell on. An apartment's depreciable life
could run for hundreds of years while the installment payment
method lasts dozens of years. The periods of time involved are much
longer than common durable products. An apartment is regarded as an
asset and used in many investment mixes.
Therefore home-buying is categorized as an investment – not
consumption – and accordingly doesn't appear on the CPI
listing.
But the fluctuation of house rents, the cost of water, power and
fuel, lending rates, house maintenance expenses, construction and
material investment can indirectly influence consumer prices.
Complaining that house prices are rising too sharply is
reasonable but questioning the accuracy of CPI statistics is
groundless.
CPI is not everything
Crude oil costs are rising as is that of iron ore, and various
company shares. These price changes influence CPI in some ways but
they're not calculated directly into CPI. This misunderstanding is
somehow rooted in people's knowledge of the system.
The consumer price index only reflects the fluctuations of some
products and services.
Currently, price investigations in China focus on over 700
commodities and services. They can be divided into eight categories
which include food, tobacco and wine, clothing, home appliances,
medicare and personal commodities, transportation and
communication, entertainment and education and housing. Nearly
120,000 urban and rural households nationwide are selected as the
sample group to contribute information to a model of habit and
consumption statistics.
Investigations are conducted by the National Bureau of
Statistics at over 50,000 sites in over 500 cities and counties.
Over 3,000 full-time price supervisors collect information at
markets and shops of various kinds. The commodities which are
closely connected to people's daily lives and experience frequent
price fluctuations will be surveyed every five days so the CPI can
reflect changes in the market in timely and accurate
fashion.
The benchmark of CPI is decided according to the consumption
composition of the surveyed 120,000 households. With a general
improvement in living standards, consumption trends are also
changing. Therefore the CPI benchmark requires a small adjustment
each year and more significant adjustment every five years.
(China.org.cn by Tang Fuchun, June 13, 2006)