China's Inflation Rate Reaches 34-Month High

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Inflation in China has reached 5.5 percent—a 34-month high. Food prices have gone up considerably, which is affecting people's standard of living. Authorities are adopting monetary policies to combat the problem, but inflation may now be a long-term problem for China.

Chinese officials announced on Tuesday, the country's inflation rate has reached 5.5 percent. The inflation figure, for the month of May, is slightly above expectations and is the highest inflation figure recorded for 34 months.

Overall inflation is being driven by a jump in food prices. Figures for May showed an annual increase of 11.7 percent for food products, while non-food goods increased by just 2.9 percent.

The increase in food prices has particularly affected China's urban poor. Residents say wage increases have failed to keep up with the rising cost of living.

[Xiao Man, Beijing Resident]:
"If it carries on like this, then I think it will have a definite impact on our lives, because our overall wages haven't risen, so if it goes on this way, our quality of life will go down."

Food prices have been pushed up due to ruined crops from droughts, floods and other weather disasters across the country. Meat prices have also risen, with pork prices rising 40 percent since last year. Now consumers are buying less.

[Lou Guoli, Butcher]:
"Because all prices are going up, it's not just meat, all goods are getting more expensive, so some people are choosing to save money, and are especially eating a bit less meat. When it's cheap they eat more, when it's expensive, they eat less [meat]."

Chinese policy makers say they are doing everything they can to bring inflation under control. On Tuesday officials raised the amount of money banks have to keep in reserves by half a percent to a record 21.5 percent of deposits.