There's a new wave of price hikes. What's going on
In march this year, shenzhen announced the convening of a water price adjustment hearing in april and announced two adjustment programmes. In the light of the adjustment programme, the total price of shenzhen running water is proposed to be adjusted by 3. 449/m3 to 3. 8991/m3, an increase of 13. 05 per cent。
In the case of four-person households, the amount of water used on the first step, 22 cubic metres, is increased by $5. 94 per month。
As of 1 june, another front-line city, guangzhou, announced an adjustment in the prices of running water in the centre of the city. Guangzhou had already held hearings last year and was now implementing the adjustment programme directly. According to the programme, the price of the first ladder increased from 1. 98 to 2. 55 yuan/m3, an increase of 28. 78 per cent, which is larger than the increase in shenzhen。
In fact, a number of cities have opened water price increases since this year. In nanjing, for example, 26 per cent rise, beijing goes five words。
As for the reasons for the price increases, official statements have generally remained unchanged for years, and costs are now coming up. In fact, a closer look shows that the prices of these infrastructure services, water, electricity and gas, have been on the rise over the years。
In 2023, at least 52 municipalities and counties across the country increased air prices. In 2024, urban gas prices rose in sichuan, chongqing and jiangsu provinces. In the same year, the prices of high iron tickets increased, including those of wu guangchang, quancheng, etc。
Why is the price of water and electricity all rising? There's a good saying that when you get low-cost services, someone has to pay behind your back。
To be honest, the price of these infrastructure facilities is really low. Our water prices are at the bottom of the world, and electricity prices have long been at lower international levels, as well as those for public transport such as subways and high irons。
The reason for keeping prices so low is the reliance on financial subsidies, more frankly land subsidies. Over the past two decades, our real estate has flourished, and the proceeds of the sale of land have contributed substantially to fiscal revenues everywhere。
In the case of subways, the metro companies in more than 30 cities, with the deduction of financial subsidies, are largely in deficit. The main reason for this is that fare prices are too low to cover costs at all。
In the past few years, however, the real estate market has fallen to a low level, land has become unsold and income has declined significantly. Land concessions amounted to $4. 87 trillion in 2024, which was almost flat compared to the peak period。
As a result, we have seen the suspension of some public facilities, the parking of a number of urban buses and the cutting down of subway lines. And basic services like water and electricity can't be stopped, so prices can only rise。
The cost of infrastructure will naturally shift as land revenues are reduced significantly and the subsidy age ends。
In addition, it was stated that the price increases were intended to boost domestic demand. I think there are such considerations, but they may not succeed. Since 2023, our cpi has long hovered near “0”, a decrease of 0. 1 per cent this quarter。
Cpi is so low that it means being on the edge of deflation, with the simple understanding that everyone is less motivated to consume. But price increases in public basic services seem to have had little effect, after all, since 2023。
In order for people to consume, it is necessary to work on three fronts: steady employment, for example, the ministry of human welfare, which says that improving the rate of return of unemployment insurance to enterprises more affected by tariffs is a good employment stabilization measure。
The other is an increase in income, such as an increase in the minimum wage in the provinces this year. There is also a strengthening of social security, such as an increase in pensions for retirees and basic pensions for urban and rural residents this year。
At the heart of this is a stable job for all, a wage rise and a willingness to consume without concern. As a result, the price of public basic services has risen, the most central reason being the reduction of subsidies. If the market does not warm up and revenues from the sale of land do not increase, there may be more places where the prices of basic services, such as water and electricity, may be adjusted。
