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Experts call for CPI wrinkles to be ironed out (05/26/2010)

Updated: 2010/5/26 13:44:00

BEIJING - Leading economists have urged the government to straighten out its inflation mapping mechanism after statisticians faced flak for the methodology used to finalize the indicators.

After the government released its economic data for April on May 11, many people had expressed doubts as to why the Consumer Price Index (CPI), a main gauge of inflation, rose by 2.8 percent year-on-year when vegetable prices had risen 24.9 percent during the same period.

"I was really confused when I read the data in a newspaper. Not only vegetables, but things like water charges and home rents are also soaring," said Li Jing, a 56-year-old housewife in Beijing.

The National Bureau of Statistics had come in for criticism earlier after it said average home prices in China rose by 1.5 percent over the same period in 2009.

"The collation of indicators like the CPI needs to be highly scientific and there are several international practices that offer useful guidance in this regard," said Ardo Hansson, a lead economist at the World Bank´s China Office.

"The basket of goods used for compiling the CPI needs to accurately reflect the average consumption behavior in China," he said. "As average incomes grow and new goods come on the market, earlier indices can quickly become out of date."

Although officials have been trying to persuade the public that the CPI increase is still mild, expectations for rising inflation have pushed up demand for gold products. In some cities, people have rushed to buy gold bars, which further exacerbates expectations of rising prices.

According to an online survey conducted by hexun.com, a finance news website, 54.7 percent of respondents feel that the nation is experiencing inflation, while 58.2 percent said they could not stand an inflation rate exceeding 3 percent, or the target set by the government for this year.

Pang Xiaolin, the newly appointed head of the statistics bureau´s urban, social and economic survey department, however, feels that people´s feelings are somewhat different from the real situation as indicated by the official CPI figures due to the large disparities among various regions and the income levels.

"What´s more, residents are usually very sensitive to price increases of specific products. For example, they have strong feelings about the surging garlic price, but may neglect the declining pork price," he said.

His predecessor Wei Guixiang said recently that the bureau is looking for solutions to make the price statistical system more inclusive to better reflect the market situation. "But it is unrealistic for us to satisfy everybody."

Hansson said the bureau should verify that the consumption basket it uses is truly representative, and provide additional transparency on the way in which it calculates the index.

Zheng Chaoyu, economist with Renmin University of China, said the core CPI, which excludes energy and food prices and hence considered more stable, should be released separately to let the public know the real inflation situation.

Source: China Daily

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