Chinese consumers want discounts;gov't fights inflation

`Coupon generation' wields consumer power in China
More than a craze, discount shopping is becoming a way of life for young Chinese. Known as the "coupon generation," they are changing the way business is done in the world's second-largest economy.

Companies as global as Nike and as local as the Yonghe fast food chain are courting the bargain hunters. The eagerness for deals has spawned discount clubs, online group buying and sidewalk kiosks that dispense coupons.

A planned three-week campaign by Mercedes-Benz for its two-seat Smart car ended in a day when the more than 200 cars were snapped up in less than four hours at about 135,000 yuan ($20,000) each, a 20 percent discount, on China's most popular online retailer.

It's a relatively new and youth-oriented phenomenon in China, where consumerism has taken off only as the country has shifted from central planning to capitalism and started to grow.
Chinese consumers are the hope of the world, but they will not resemble the free-spending wealthy who gobble up luxury goods. Discount and group-buy websites are very popular and will only become more popular.

Meanwhile, the government is releasing grain reserves to hold down food prices. This could have unintended consequences if the cost of food continues to rise. Price will rapidly increase (or go to infinity in a shortage) if the government runs out of reserves.Reaping fruit of Beijing's war on runaway prices
The reason China can keep its price rises below 10 per cent year on year while other emerging market economies are facing double-digit inflation is mainly because it has two weapons.

One is its state procurement and reserve system for key agricultural products and, by extension, selective management of staple supplies in every category - such as strawberries during the festival season and Chinese cabbage in early winter.

Dang Guoying , an economist with the Chinese Academy of Social Sciences familiar with rural development, said the state reserve system blocked speculators' efforts to manipulate the market and jack up prices for their own gain.

The other weapon, a legacy of the planned economy of the past, is the government control of utilities and certain key resources and services - such as all major transport.

As part of its effort to stabilise food prices, the central government has banned charging road tolls on vehicles carrying farm produce to the cities.

One way the state uses its reserves to harness inflation is to offer the commodities for sale in wholesale markets, at times in large quantities at a discount price, with the state absorbing all the losses.

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