Local Governments Are Ordered to Peg Subsidies to CPI

China's top economic planner has ordered local governments to peg low-income subsides to price levels, so as to ensure low-income families' living standards are not adversely affected by rising costs.

Yingying has more.

Xu Yunbo, from Nanjing, Jiangsu Province, has been receiving low-income subsides since 2007. He complains that since 2010, his 700 Yuan monthly subsidy can barely cover his family's needs.

"Everything is rising in price, water, electricity, gas, and even toilet paper. The price of green beans has hit 20 Yuan per kilogram, a three-fold increase over the past year."

Statistics show that more than 70 million people in China are receiving low-income subsides from the government.

With the country's CPI rising 3.3 percent in 2010 and exceeding the government's target of 3 percent, low income families are feeling the pinch.

Tang Jun is a researcher at the Chinese Academy of Social Sciences.

"Low-income people are very sensitive to price fluctuations, because they rely heavily on their subsidies which are defined by the basic price level of consumer goods and services. If the prices especially food prices go up, low-income families are the first to feel the impact."

To help these people get through these difficult times, the National Development and Reform Commission (NDRC) has ordered local governments to establish a mechanism to peg low-income subsides to price levels by the end of this year.

Under the mechanism, if the consumer price index, or CPI, rises to a certain limit to be decided by local governments, extra money will be given to low-income families in addition to their monthly benefits.

If the CPI rises over several consecutive months, local governments then have to revise previous standards.

Researcher Tang Jun says that it would be better for local governments to calculate a CPI especially for low-income families.

"The calculation of the general CPI covers many aspects, such as housing and household appliances. But these are not the major concerns for low-income families. What affects them the most is the CPI regarding food, water, electricity and gas, which have been rising faster than the general CPI. The government should refer to this CPI when raising subsidy standards."

Tang Jun says before the National Development and Reform Commission issued this order, many big cities including Beijing, Shanghai and Guangzhou had already established similar rules to increase subsidies for low-income families. He suggests that the central government provides more financial support to less-developed areas so as to better implement this mechanism throughout the country.

For CRI, I'm Yingying.