Why you feel different inflationary rates from official figures?
Updated 12:22, 13-Jun-2019
Chen Jiahe

Editor's Note: Chen Jiahe is the chief strategist at Cinda Securities. The article reflects the author's opinion and not necessarily the views of CGTN.

Sometimes I hear people say that they feel the inflationary rates in their daily lives differ from what is published by China's statistical bureau and question the accuracy of the official data.

However, the fact is that no one should feel the same inflationary rate exactly as the statistical bureau publishes it.

First, China is an enormous country and the inflationary data reflects the country's overall situation. Major metropolises might experience higher inflation, as they receive more capital inflow from other areas. Less-developed, rural areas sometimes experience less inflation. Therefore, many people may feel the inflationary rate is different from what is published.

Second, people use misleading gauges to measure inflation. For example, real estate prices are not a part of inflationary data. Only rent prices are included. Similarly, you also cannot count stock prices as inflationary data. Many people confuse the level of inflation with the level of overall currency outflow, including spending and investment, which is how a  misleading calculation is made.

Customers shop at a supermarket in Fuyang, Anhui Province on June 10, 2019. /VCG Photo

Customers shop at a supermarket in Fuyang, Anhui Province on June 10, 2019. /VCG Photo

The third reason comes from the fact that people with different income levels usually experience different inflationary levels, while the data published by the national statistics bureau is an average of 1.4 billion people. For example, a CEO in Shanghai might earn 1 million yuan per year and frequent luxury restaurants for dinner. However, as the average income of Shanghai citizens increases, more people may develop an appetite for dining out at fancy restaurants, which in turn raises prices due to demand. Therefore, this CEO will experience a much higher inflationary pressure compared to an ordinary citizen who consumes at a national average level.

Another important reason is that people often cannot make accurate numerical judgments based on their lived experiences. Psychologically speaking, people focus more on unpleasant things and thus are more likely to remember items that carry a higher price tag. For example, we usually hear discussions about rising educational costs in first-tier cities, but never about price cuts on televisions, mobile phones, automobiles, and so forth.

This bias is compounded by how the media reports on some issues. For instance, a news headline "Educational costs rise by 20% in the past two months" is much more appealing than "New car prices remain the same as 10 years ago." 

Back to the inflationary data published today, China’s overall inflationary rate remains moderate. However, we should now understand that it does not mean everyone will feel the same effect on their pocket. 

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