The Price Is Not Right in China; Alibaba’s Internet shopping price index shows that prices in February were up 11% from a year earlier. Alibaba sells a different range of goods than what’s in the CPI basket, but the difference between its number and the official figure is striking nonetheless.

April 9, 2013 Leave a comment

Updated April 9, 2013, 5:32 a.m. ET

The Price Is Not Right in China

By TOM ORLIK

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In China, it’s common for shoppers to haggle on prices. Investors should quibble over the country’s inflation data, too. Official figures show China’s consumer price index easing to 2.1% year-on-year in March from 3.2% in February. That’s not unexpected. In February, food prices were higher because of the Lunar New Year, which in 2012 occurred in January. With the celebrations over, food-price increases slowed.

But Chinese households have long harbored suspicions that the CPI is not capturing all of the price increases they face. Some Internet users joke that government statisticians don’t buy their own groceries so they don’t know how much things cost. Data from Alibaba, China’s biggest online-shopping platform, suggests the skeptics may have a point. Based on online transactions, Alibaba’s Internet shopping price index shows that prices in February were up 11% from a year earlier. Alibaba sells a different range of goods than what’s in the CPI basket, but the difference between its number and the official figure is striking nonetheless.

Property prices in major cities are rising fast too. Data from property agency Soufun shows prices in Guangzhou and Beijing rising at double-digit rates. Residential rent in Shanghai is up 13% from a year ago, according to Centaline, another property agency. That makes sense. China’s economy is awash in cash. Money supply expanded 13.8% year-on-year in 2012, compared with 7.8% growth in gross domestic product. A massive increase in new credit in the first two months of 2013 accelerated money-supply growth to 15.2%. Wages are rising at double digit rates. The markets cheered March’s relatively benign price rise. The Hang Seng China Enterprise Index gained 1.9% Tuesday. But if inflation is higher than CPI suggests, official data is not a good predictor of the need for tighter monetary policy.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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