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In China, inflation is subdued as global consumer prices soar

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CHENGDU, China – Sichuan peppercorns are ripe here in southwest China, with a spicy, minty scent emanating from rows of scrubby trees.

But farmers are worried. Prices for pods – which give crispy chili and other spicy Chinese foods a special boost – have plummeted this year as coronavirus lockdowns and a resulting economic chill have forced diners to pinch pennies.

“It’s hard to sell them this year,” said Liu Cuihua, 71, as she used a pair of shears to cut clusters of green pods from the thorny stems. “The prices are too low.”

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From Sichuan pepper to cotton to housing, the concern this year in China is falling prices. This is a stark difference from the West, where consumers face skyrocketing inflation.

“In the United States, you have people who have a lot of money to spend and not enough to buy,” said Jacob Gunter, senior analyst at the Mercator Institute for China Studies. “In China, you have the opposite problem. The demand has really been in the dumps.

Consumer prices in China rose 2.5% in June from a year earlier, a two-year high, but still far behind the United States, where inflation is above 9%, and the euro zone, where it exceeds 8%. Economists say China’s “core” inflation is even weaker, with prices of many everyday goods flat or falling. The divergence illustrates how the world’s second-largest economy has drifted away from the West following a trade war and China’s closing of its borders during the pandemic.

Sichuan peppercorns, or “huajiao” in Chinese, are used in home cooking, but they appear in more extravagant quantities in restaurant dishes, where they are applied to the handful for their festive appearance and pungent taste. They are often used in more expensive meat dishes and elaborate hot pot banquets, rather than in cheaper vegetable meals, making it a small measure of Chinese consumer sentiment.

Shoppers had to save more than just a pinch of spice.

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China’s “zero covid” policy has largely enabled the country to avoid the death toll seen elsewhere, but at a painful economic cost. The shutdowns have repeatedly halted factory production and transportation, delaying deliveries of sofas, cars and many other items for overseas consumers. In China, restrictions have left many unemployed or underemployed and led to belt-tightening consumers.

“The trend is likely to continue,” said Zhiguo He, a business professor at the University of Chicago, calling covid controls “draconian”. New coronavirus cases in Shanghai in recent days have raised the specter of a wider lockdown in the country’s most populous city.

Beijing refused to follow the United States in delivering large-scale stimulus directly to consumers, which helped the US economy rebound but accelerated inflation. There has been official support for certain sectors in China, such as housing, but house prices have fallen further for 10 months.

In Chengdu, taxi driver Yu Qibin, 48, says he has noticed a rise in pork prices, but his cost of living is otherwise stable. And while gas prices have risen in China, Beijing’s decision to continue buying oil from Russia means pump prices have not risen as much as in the West.

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But Yu says his taxi fares have come down a lot this year as pandemic restrictions continue to hamper tourism. Visitors to Chengdu from high-risk regions face a week-long quarantine even if they test negative for the coronavirus.

“I haven’t had a lot of business,” he said.

The Biden administration plans to lift some Trump-era tariffs on Chinese goods, which could help dampen US inflation and give China’s economy a boost. Even if these tariffs were lifted, some trade restrictions would remain in place, in particular a recent US ban on the majority of cotton sourcing from China, due to the risk of forced labor in the Xinjiang region.

“You earn almost nothing”

Liu, the farmer, says she hasn’t seen the kind of price inflation that has wreaked havoc on consumers’ wallets in other countries. What she has seen is that her income has declined as Sichuan pepper prices have fallen to around 90 cents per kilogram this year from around double last year.

On a recent afternoon, Liu sat at his home in Dongsheng village, south of Sichuan’s provincial capital, Chengdu, cutting the pods from the stems, which are covered in large thorns like a rose. Then she spread them out on a tarp on the ground, out of direct sunlight, and pointed an electric fan at them to speed up their drying.

“It’s all that hard work and you earn next to nothing,” she said.

This early harvest of green pods can be used fresh in cooking or to make an infused oil that is used to add zest to stir fries and other dishes. But local media reported that Sichuan pepper oil factories had reduced orders for the spice this year as they expected less consumer purchases.

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In early fall, the mature pods will be collected and dried, the black seeds inside discarded, and the fragrant husks retained. These will make their way to restaurants across the country and to factories where they are used to make other foods.

Sichuan residents say the recent price drop is partly due to vendors trying to unload stores from last year as the new harvest arrives. At Chengdu’s Five Rocks Wholesale Spice Market last week, vendors sat near a pile of Sichuan peppercorns from last year’s harvest in varying shades of red, brown and green. There were few buyers. Asked how business is doing, several vendors, who declined to be named, said sales were slow due to the pandemic’s impact on restaurants.

On Saturday evening in Chengdu, Wang Dong, manager of the 1802 Mingzhuanghui restaurant, poured thick slices of fish in a spicy Sichuan peppercorn broth into guests’ bowls. They were hosting a dinner to thank loyal customers and promote their wine business.

“The whole restaurant industry has been affected by the pandemic,” Wang said.

Ingredient prices have been largely stable this year, although there have been spikes in the prices of seafood flown in from the coast during periodic shutdowns, he said. Still, Wang added that the idea of ​​raising menu prices hadn’t crossed his mind.

“Restaurants that raise their prices risk closing their doors,” he said.

In Dongsheng village, Fu Deli, which has been cultivating Sichuan pepper for more than a decade, lamented the declining market for its products.

“Everything has gone well until this year,” he said.

Lyric Li in Seoul contributed to this report.

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Post expires at 10:04am on Thursday July 21st, 2022

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