Chinese Inflation Rises, Threatening Higher Consumer Prices

As China’s booming economy has made its citizens more prosperous, prices for many items, from food to clothing to new cars, have been rising.

BEIJING — When garment buyers from New York show up next month at China’s annual trade shows to bargain over next autumn’s fashions, many will face sticker shock.

They’re going to go home with 35 percent less product than for the same dollars as last year,” particularly for fur coats and cotton sportswear, said Bennett Model, chief executive of Cassin, a Manhattan-based line of designer clothing. “The consumer will definitely see the price rise.”

Inflation has arrived in China. And after Tuesday’s release of crucial financial statistics by China’s central bank, few economists expect Beijing officials to be able to tame rising prices any time soon.

While American importers of Chinese goods will feel the squeeze, the effect on American consumers may be more subtle and the overall impact on United States inflation may be minimal.

There are simply too many other markups along the way — from transportation to salesclerks’ wages — that affect the American retail prices of Chinese-made products. Excluding those markups, imports from China are equal to little more than 2 percent of the overall American economy.

The bigger consumer impact is in China itself. As China’s booming economy enables more of its own citizens to buy the goods pouring out of its factories, Chinese consumers are feeling inflation directly. And Beijing is increasingly worried about the social unrest that could result.

In China, consumer prices were 5.1 percent higher in November than a year earlier, according to official government data. And many economists say the official figures actually understate the rate of inflation, which might in reality be twice as high.

“Four percent, China can bear it — beyond 5 percent, people will complain a lot,” said Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation here.

Higher global commodity prices, as well as rising wages in China, play roles in the increasing cost of Chinese goods. But economists say the main reason for the inflation now is China’s foreign exchange reserves, which surged by a record amount in the fourth quarter.

In China, there is little question that the consumer price index understates the true extent of inflation.

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