A blogger on Weibo, a Chinese version of Twitter, recently compared average monthly income and a few common expenses in America and in China that drew net-surfers’ attention.
The blog said: “China, salary: 5,000 yuan ($773); eating out: 100 yuan ($15.50); Levis jeans: 400 yuan ($62). America, salary: $5,000; eating out: $40; Levis jeans: $20.”
Even though the data may not be quite precise, it makes the point that there is a huge and puzzling price gap for consumer goods in America and in China.
Inflation is rampant in China. Figures for this May show a 5.5 percent price increase, reaching a three-year high. Compared to average income levels, the cost of ordinary consumer goods—such as clothing or eating out—is many times higher in China than in the United States.
Chinese economist Dr. Jian Tianlun told The Epoch Times in a telephone interview that he has done this kind of research before and was shocked by the results. Considering buying power and average income, many consumer prices in China are much higher than in America, he said.
“Housing prices in Beijing and Shanghai are higher than those in New York’s Manhattan. A 60 square meter (646 square foot), average-quality apartment costs 2 million yuan ($310,000). This is unbelievable,” Dr. Jian said.
Chinese people’s incomes are much less than Americans’, yet the consumer goods in China are more expensive, Dr. Jian added.
Research conducted by prominent economics commentator Shi Hanbing, editor of Shanghai Securities News opinion page concurred with Dr. Jian’s observations.
Last year on a visit to the U.S., Shi spent two weeks researching consumer prices, including luxury items.
Shi found that in China an Armani suit costs 30,000 yuan ($4,640), but in America it only costs $500. In China a Rolex watch costs 46,000 yuan ($7,116) while in America it costs $4,000. A BMW-1 series costs 500,000 yuan ($77,345) in China and $28,000 in America.
Even goods labeled “Made in China” are about 50 percent cheaper in America than in China.
Shi concluded that unless it involves services and labor, such as haircuts, or intellectual property, such as books and videos, prices for the same products are lower in the U.S.
Shi’s findings were published in a June 29 report by China Youth.
Bad Monetary Policies
Dr. Jian came up with a number of reasons for the high cost of consumer goods in China, among them monetary and economic policies imposed by the regime and also high logistics costs.
The large number of bank loans in China is one reason for high prices. Despite the fact that China’s GDP is significantly lower than America’s, China’s broad money supply, or M2, is over 20 percent larger than in the U.S., according to Dr. Jian.
“The Chinese regime has for a long time been devaluing the Chinese currency in order to stimulate exports, which has created large foreign trade surpluses resulting in increased foreign currency reserves. To keep the low exchange rate of the renminbi (RMB), China’s Central Bank has to print more RMB in order to keep a balance between foreign currency and RMB circulation,” Dr. Jian said, adding that this excessive printing of RMB has triggered inflation and rising prices.
At the same time, the costs of logistics in China are also very high, Dr. Jian said. He cited a report from a Chinese media that said it costs more to transport 1 kg of goods the 1,260 miles from Guiyang, capital of Guizhou Province, to Shanghai than to America, which is 6,140 miles.
Moreover, he said that to fill department store shelves in China, one has to pay a slew of fees: entry fees, commission fees, display fees, promotion fees, flyer fees, new product advertisement fees, etc. These fees can make up 30 percent of a product’s retail price.
In addition to inflation, high taxation also eats away people’s spending power. Jian said that year after year, the income increase of Chinese officials is higher than the GDP. It is common for Chinese officials’ income to increasing by 20 percent in any given year, and this is a result of high taxation.
Dr. Jian said, in his belief, these are the reasons why Chinese workers are making less and paying more for most consumer items than American workers.
Read the original Chinese article.