China is not yet a consumer economy. Chinese people spend more than a third of their incomes on food – a much higher proportion than in developed economies. Americans spend about 30 percent on housing, 19 percent on transportation and 12 percent on food. According to a 2008 report from the Chinese Academy of Social Sciences (CASS), Chinese spend about 34 percent on food, 11.5 percent on education, and 10.6 percent on medical care. Ma Jiantang, head of the NBS, recently said that city dwellers spend 30 percent of their income on food, while rural Chinese people spend 40 percent of their income on food. And this pattern of consumption is likely to last for years.

Food prices will continue to be the main factor contributing to inflation in China. In recent years, China has become a large grain importer. And with increasing concerns about the continuing drought in China, it is almost certain that CPI will continue to increase sharply at least through the first quarter of 2011.

For China, 2011 will continue to be a year of transformation and structural adjustment. Hopefully government stimulus policies and appropriate monetary and financial policies will positively affect the overall economy and contribute to controlling inflation. The real task is not to invent new methods of calculating CPI but to deal with soaring food prices. How well the government handles the inflation issue will have crucial implications for China's political stability in 2011.

The author is a columnist with China.org.cn. For more information please visit:

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