Middle-class appetites drive China food inflation

[May 11, 2011]  BEIJING (AP) -- Hunger was such a constant companion in Yao Qizhong's childhood that even now, at age 40, he'll stoop down to salvage a single clove of garlic that falls from his table at the Beijing market where he hawks fresh produce.

Life is less harsh these days, but China's fast-rising food prices have hit his family hard, making it increasingly difficult to save for his three kids' education -- Yao's main goal.

Across town, Zhong Sheng rinses a still-twitching Mandarin fish and picks the stems from a handful of greens as he expounds on his philosophy of grocery shopping. Health and safety are his top concerns, ever since the architect became a father five years ago. Cost is a secondary consideration.

"You can buy cheap stuff," says Zhong as he and his wife cooked together and the smells of soy and scallion filled their cozy kitchen, "but if it makes you sick, you're going to end up paying more anyway in hospital fees."

The starkly contrasting fortunes of the Zhong and Yao families offer a glimpse into how soaring food prices are playing out in the developing world -- home to more than three quarters of the globe's 6.9 billion people.

Prosperity and a fast-growing middle class have cultivated more sophisticated and exotic tastes. Such luxuries as blueberries, avocado, asparagus, and endive, recently unattainable to all but the wealthiest, are now widely available in China's big cities.

But rising affluence has taxed the ability of farmers to meet growing demand while the rural labor pool dwindles. The result: Rising food prices hit every level of society, not just those who can afford imported South American bananas or pricey mushrooms and herbs from China's remote Yunnan province. People on low or fixed incomes feel the pinch most.

"We don't dare to try and eat good stuff because we can't afford it," says Yao, whose four grandparents starved to death during China's 1960 famine. He was so poor growing up in rural Anhui province that his neighbors assumed he would end up a beggar on the streets.

"If I go to a supermarket," he says, "it's a novelty, like sightseeing."

In China, farm workers have flocked by the millions to factory and service jobs in coastal cities. Luring them back to till and weed by hand is proving a tough sell. The resulting supply pinch helped send food prices up 11.7 percent in March from the year before, adding to months of steep increases.

"You can't find (farm) workers and they're expensive, over a dollar (7 yuan) an hour," said Liu Li, a wholesaler hawking Napa cabbage and coriander at Beijing's Xinfadi, north China's biggest agricultural distribution center.

People in the countryside want factory work or a job in the service industry, where they'd get to stay indoors and have a warm place to sleep, said Liu. Farm work, she said, is "too dirty and too hard."

Even with sharply higher food prices, Zhong, who runs his own business and has a master's degree from a prestigious Beijing university, can afford to be picky. Besides, he sees good reason to favor more expensive organically grown and imported foods after infant formula tainted with an industrial chemical killed six children and sickened 300,000 in China in 2008.

Zhong, his wife and daughter sit down to a typical dinner of steamed fish, two types of greens, mushrooms, pork, rice and sliced apples. Total cost, about 80 yuan ($12). Each month the family spends some 2,000 yuan ($307) on food -- about 10 percent of their income.

Yao, who left the countryside more than two decades ago, still eats like a peasant, filling up on cheap steamed buns and noodles and pinching every penny so that he can put his kids through school. For him, meat is a once-a-week treat, though he tries to make sure his children eat it more often.

As a migrant laborer, Yao has been able to skirt China's strict birth limits, having three kids instead of the two most rural families are limited to. But his migrant status means he must pay school fees himself.

A recent and routine lunch for Yao and his wife and children was a bowl of simple noodles with greens. Yao's ginger and garlic stall earns him about 2,000 yuan ($307) a month, of which about 600 yuan ($92) goes on food for his five-person family.

"I need to save money but I feel like I am already scraping the bottom of the barrel," he said. "At the same time, I know we have to feed ourselves and eat enough, otherwise our health is going to be affected."

A host of other factors are also blamed for food prices hikes in China and elsewhere in Asia, including too much money sloshing about the economy after stimulus policies that warded off the global recession, rising oil prices and shrinking land for cultivation because of pollution and encroachment by industry.

The U.N. Food and Agriculture Office's index of global prices for meat, cereals and dairy foods has surged 37 percent in the first three months of 2011. In many Asian countries, that has translated into a 10 percent increase in local food prices, which the Asian Development Bank estimates is enough to drag another 64 million people below the $1.25 a day poverty line.

Yet the changes in food and work preferences aren't all bad because they reflect the human and economic development taking place in China, said Scott Rozelle, an agricultural economist at Stanford University and an expert on China's food markets.

Rozelle says that China's scattered and small scale farms are becoming more consolidated and mechanized, which could eventualy raise productivity, but the changes probably won't stop food prices from rising. Economic development involves both increases in prices and incomes, he says.

Higher food prices have in fact lifted lagging rural incomes. The per capita net income for rural Chinese grew faster than urban incomes last year, jumping 10 percent to 5,919 yuan ($902).

Rural Chinese are "going from grinding poor to poor," said Rozelle, describing villages he's seen with new brick homes and gravel roads, where all the girls go to school and every family has a mobile phone.

But the changes feel painful for many urban dwellers, particularly retirees, civil servants and migrants, like Yao, whose incomes haven't kept pace. And the discontent that a widening gap between privileged and poor can generate deeply worries China's communist leaders, who are mindful that the anti-government protests that toppled Egypt's government earlier this year were triggered in part by discontent over climbing food costs.

Yao says he envies people who can eat what they like without concern for cost, but tries not to dwell on it.

"Yes, it's unfair," he said. "But I know I just have to keep going. I have to work hard and it will get better."

Even those benefiting from China's rising prosperity such as Zhong, the Beijing architect, are concerned.

"Their incomes are not rising as fast so for them this is difficult," he said. "I think the government needs to find a way to help them raise that sector's incomes too, and take care of them."

[Associated Press; By ALEXA OLESEN]

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