Expert:Labor Cost Rise behind Price Hike

Extreme weather conditions, hoarding and speculation are widely being blamed for the recent price hikes in agricultural products in China, which has pushed the consumer price index to an over two-year high. But, as our Zheng Chenguang tells us, some experts are now suggesting the agricultural price hikes are also the result of rising labor costs, and suggest the price increases are not all that bad.

Price increases are like an empirical circle: while some people consider farmers to be the big beneficiary after they hike product prices, farmers are complaining about the rising prices of everything else.

Mr. Xing grows cabbage in Henan province. He sold cabbage to retailers at 20 cents a kilo, which is not a bad price compared to previous years. But Xing says he can hardly make money out of it.

"Now, labor cost is rising, fertilizer cost is rising, electricity price is rising and gasoline price is rising, where can I earn money from?!"

Professor Su Jian from Peking University sees a break from the circle. He attributes the current price increase to rising labor cost. And the change may prompt a wider reform on income distribution.

"Actually, the salary increase is from those who work at the lowest production level. The increase of their income is making contribution to a larger system of social income distribution. And this is we are aiming to."

Migrant workers have long been known for taking low-end jobs with little earnings. But from the beginning of this year, migrant workers in many coastal cities have seen an increase in their salaries, which is estimated at 20 to 30 percent, much faster than that of urban dwellers.

Professor Cao Heping from Peking University says this can be a good opportunity to outdate labor-intensive enterprises in a larger effort for an industry restructuring.

"From this round of price increase, we can see the negative impact of inflation, but it DOES play a role in promoting industry restructuring, which will benefit the whole society."

Professor Cao adds from this perspective, the current price hike is not all bad.

For CRI, I'm Zheng Chenguang.