Chinese consumers are more concerned about rising prices at any time in the last decade

Chinese consumers are more concerned about rising prices at any time in the last decade, underscoring the pressure on policy makers to step up efforts to counter inflation running at a maximum of two years.

A price satisfaction index fell to 13.8 this quarter, the lowest level since data began in the fourth quarter of 1999, the central bank said on its website today.

The authorities have taken place outside of the addition of October to raise interest rates, rather than ratchet up bank reserve requirements and the use of tools such as the sale of food reserves to cope with inflation. The Ministry of Commerce said today that "closely monitored" prices during the next quarter, especially during holiday periods, and maintain the release of the pork stores and sugar.

"Normalization of interest rate is the best option," said Yao Wei, an economist at Societe Generale SA in Hong Kong. Inflation is "eroding the purchasing power" and encourage consumers to shift savings into assets such as stocks, he said.

The benchmark rate for one-year deposits stands at 2.5 percent and the interest rate is 5.56 percent rise in October after a quarter point.

The Shanghai Composite Index of stocks closed 0.5 percent, the first decline in four days, the concern that accelerating inflation will spur more monetary tightening.

Wealth Gap

China needs to "urgently" to stabilize prices to safeguard people's living standards, the National Development and Reform, the national planning agency, above, said on its website today after a meeting in Beijing of the regional heads of the office prices.

The ruling Communist Party seeks to avoid the higher prices and a widening gap between rich and poor lead to riots and public discontent.

November 5.1 percent annual gain in consumer prices was the biggest in 28 months, with rising food costs by 11.7 percent, also the most since July 2008.

"There is a widespread belief in China that the actual CPI inflation is higher than the data indicated," said Shen Jianguang, chief China economist at Mizuho Securities Asia Ltd. in Hong Kong. "The low-income people feel strongly about it."

In total, 74 percent of households considered prices too high, up to 15.6 percentage points from the third quarter, said the central bank. Its fourth-quarter survey was 20,000 households in 50 cities.

Price controls

Inflation expectations are "intensifying," said the central bank, with 61 percent expect price increases in the next quarter. In the previous survey, the proportion was 46 percent.

The government has pledged to use price controls on daily necessities when needed. These measures are in force in the southern city of Kunming, where retailers such as Wal-Mart Stores Inc. and Carrefour SA have been told to report any increase in price expectations.

Over 80 million people need food aid during the winter and spring after natural disasters, the government said last month.

Capital inflows may hinder government efforts to cool prices of consumer goods and real estate market by adding liquidity. Foreign direct investment in China rose 38 percent in November from a year earlier to $ 9,700,000,000, the Ministry of Commerce, said in a statement today in Beijing.

Asset markets

The central bank survey said that inflation may accelerate to encourage people to change money into property and stocks of savings accounts, hampering efforts to prevent asset bubbles in real estate in some cities. Of those surveyed, 45 percent preferred to put money into investment, compared with 39 percent in the third quarter. The interest rate on savings fell.

government of Prime Minister Wen Jiabao pledged to do more to stabilize prices after a financial planning conference concluded in Beijing on 12 December.

China has set an inflation target of 4 percent next year, state television reported yesterday, citing the National Development and Reform.

In the central bank survey, 76 percent of households said that property prices were unacceptably high. That was the highest proportion since the question was first included in the first quarter of 2009.

The high cost of housing in China is widening the wealth gap, Li Shenming, deputy director of China Academy of Social Sciences, said in Beijing on 8 December. China's Gini coefficient, a measure of inequality, reached 0.47 in 2009, surpassing the mark of 0.4 used as an indicator of social unrest, according to World Bank data.

Meanwhile, an indicator of the economic prospects of China rose for the sixth month of October, up 0.9 percent to 152.1, the New York-based Conference Board said on its website today.

A measure of the confidence of lenders in the fourth quarter fell to its lowest level in a year, another central bank survey showed today. About half of the executives of financial institutions expect a tighter monetary policy in the next quarter, according to the survey.