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Consumers Respond to Slowing CPI Increase Rate

Some Chinese have become more confident about their living conditions as the rate of increase in the consumer price index (CPI) slowed in May, although broad pressures still exist.

"I found the prices of vegetables down recently. Grains are about the same while pork prices are still very high," said Yu Guizhen, a retired college teacher shopping in an outlet of Wal-mart in Beijing.

Yu's sentiments reflect the CPI statistics released on Thursday.

The main gauge of inflation, the CPI, rose 7.7 percent year-on-year in May, its first significant drop since last year, the National Bureau of Statistics (NBS) said.

It fell from 8.5 percent in April and a 12-year high of 8.7 percent in February but was still much higher than the government's annual target of 4.8 percent.

The CPI is still mainly driven by food prices, especially pork prices, which rose 48 percent in May. However, the rate of increase was down 20.3 points from April, while vegetable prices decreased 15.7 percent compared with April.

The changes have been clearly felt by many ordinary Chinese, who see more hope for improvement.

Deng Li, 24, who graduated last year and works in central China's Hunan Province, said restaurant prices had almost doubled in recent years. Food prices also surged during the severe weather this past February in Hunan.

The CPI rose 7 percent in May in Hunan, down 0.8 point compared with April.

The drop eased Deng's concerns. "It proves the government's economic measures are starting to take effect, which gives me more confidence for the economy," she said.

"The decrease of the rate didn't surprise me at all, as experts have made precise predictions and China's efforts on controlling prices have been obvious," said 39-year-old Yao Yun, senior financial manager of an international company in Shanghai.

China's improving market prospects, especially in the Olympic year, convinced Yao's company to increase investment, which also increased Yao's income, she said.

"I do not feel that much pressed" by rising prices," said Yao, who earns more than 10,000 yuan (about US$1,449) monthly.

The slower increase rate was in line with forecasts, and more declines were likely, said Zhang Liqun, a macroeconomist at the Development Research Center of the State Council.

The major reason for the decline was an increasing supply of the foods that had been in shortage, and this situation would persist, Zhang said.

Meanwhile, the trailing factor -- the influence of price changes on subsequent indices --- had been decreasing during the past 12 months, said Guo Tianyong, director of the bank research center, the Central University of Finance and Economics.

But some people are still concerned about the economic environment.

Not as fortunate as the white-collar workers, some lower-income workers have been hurt more by higher prices and they expressed complaints.

A women in Beijing who identified herself as Mrs. Zhao said that she only went to the supermarket once a month, as she and her husband had both lost their jobs.

Zhao hoped the government could take more measures to solve the problem. She said she can only afford to buy meat for the children and the aged in her family.

Like other citizens, 67-year-old retiree Shi Ruilong in Shanghai also complains sometimes, but he showed an understanding towards the Chinese government at the same time.

"The government has done a lot to control prices. You see, the increase rate dropped in May," he said.

Life has been tougher than before for Shi and his wife, but he said he still can afford it.

"From the snow disaster to the recent earthquake, China has handled the difficulties. The Olympics is coming, I believe our government will take more actions on the price problem," Shi said.

(Xinhua News Agency June 14, 2008)

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