Inflation, Interest Rate Hikes Hit Consumer Confidence

Chinese Find Essentials Cost More, Prompting Cutbacks in Non-essential Spending

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BEIJING (AdAgeChina.com) -- The confidence of Chinese bank card holders fell in October amid continuing inflationary pressure and an interest rate hike by China's central bank.

The Bankcard Consumer Confidence Index (BCCI), compiled by Xinhua News Agency and China UnionPay, an association for China's bank card industry, dropped to 85.69 in October 2010, down 0.63 points from September. Compared with the same month last year, the October BCCI figure was down 1.69 points.

Xinhua News Agency and China UnionPay jointly started compiling the BCCI index in April 2009 based on bank card transaction data and analysis of structural changes in urban consumption. According to their latest report, Chinese consumers increased their spending on essential items due to rising prices. The average amount of bank card transactions on essential items shot up 17% from September.

Rising prices had forced Chinese bank card holders to cut their spending on non-essentials items, meanwhile, such as home appliances and entertainment. The average amount spent per bank card transaction on non-essential items dropped by 9.2% in October from a month earlier.

Last month's interest rate hike of 0.25 percentage points by the People's Bank of China, the country's central bank, raised inflationary expectations among the public, who fear price rises will continue. Many economists expect China's consumer price index (CPI) to rise 4.1% year-on-year. The CPI figure soared to a 23-month high at 3.6% in September.

Source: Xinhua News Agency

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