MNI REALITY CHECK: Virus Effect May Keep China Feb CPI At High

By Wanxia Lin

     BEIJING (MNI) - Although analysts see China's February consumer prices

backing off from the 8-year high seen in January,  any slowdown could be limited

as food prices remain elevated with the agricultural sector struggling over

transportation issues as restrictions remain in place to slow the spread of

coronavirus.

     The cost of food items are seen rising, although perhaps at a slower pace

than in recent months, with pork and vegetable prices leading the way higher,

according to people interviewed for the MNI Reality Check.

     Pork prices, the main inflation driver in the past year, surged early in

February before declining back to about CNY48 per kilo by the end of the month

after Beijing released 70,000 tons of frozen meat from the national reserves.

     By month-end, retail prices in large-scale supermarkets nationwide

monitored by Baichuan Information, a commodities consultancy based in the

capital, rose more than 3% from January, or 172% on a year earlier, said Li

Bing, a Baichuan analyst. This left the m/m gain below the 8.5% rise seen in

January, although y/y gains have outstripped the 116% y/y rise reported by the

National Bureau of Statistics (NBS).

     --CROP PRICES

     Other foods are also seeing price rises as logistical problems weigh. With

many roads blocked or closed due to virus-slowing measures, some crops are being

left to rot in the fields and prices are rising in some cities.

     Hu Jian, who grows and sells Chinese cabbage in Zhangjiakou city in Hebei

province told MNI the wholesale price could be as low as CNY0.6 per kilo,

although media report some supermarkets selling cabbage at CNY60-70 a head.

     Increased transportation costs due to quarantine measure, along with higher

processing costs were all pushing prices higher. Cabbages need to be trimmed,

cooled and packed in plastic sachets and labour costs are rising and even then

"it is hard to find workers even raising the salary," said Hu. 

     "The wholesale prices of food needed for everyday such as cabbages and

potatoes are relatively stable, increasing slightly from January," said Shen

Bin, founder and CEO of CNHNB.com, a B2B website helping to match farmers with

buyers covering more than 2,800 counties nationwide.

     Cabbage prices peaked at about CNY0.8 per kilo, a rise of 8% from the

previous month, he said.

     Fruit prices, less of a staple than cabbage "were more turbulent with

demand falling," said Shen, adding that the price of strawberries declined over

17% on a monthly basis.

     --WEB-MATCHING

     E-commerce platforms have played a role in smoothing prices alongside

government's efforts. Oranges originated from Xinning county in Hunan province,

whose busy season generally lasts into April, dropped to CNY2 per kilo in early

February.

     The website launched online videos promoting unsold oranges to buyers

unable to travel due to restrictions. "This helped to sell more than 100 tons in

two days, stabilizing the wholesale price at about CNY4 per kilo," said Shen.

     As for non-food categories, spending on catering, accommodation and tourism

fell sharply as the coronavirus outbreak kept people home - taking a toll over

the Lunar New Year celebrations. Fuel costs may also decrease on the two

adjustments of domestic gasoline and diesel prices, which have been reduced by

the government by CNY835 and CNY805 per ton, respectively.

     The NBS is set to publish the February CPI data on 0930 local time on March

10, with analysts expecting the y/y rate to drop to 5.2% from January's 5.4%

y/y.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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