1. Did Chinese food price go up in 2022? (Provide supporting data).

As shown in the figure, in the first half of 2022, food prices basically stay stable, and per
capita consumption increased by 2.7% year-on-year, 0.2 percentage points higher than that of
last year, 0.5% higher than that of last month, and 0.5 percentage points higher than that of
last month. Among them, the tail raising effect of last year's price change was about 0.9
percentage points, down about 0.3 percentage points from the previous month. In particular,
average prices in July climbed was about 1.8 percentage points, up 0.5 percentage from the
previous month. And the sharp rise of food on a month basis caused the rebound of CPI. In
terms of annual effect, the sharp rise of food on a year on year basis promoted the year-on-
year rise of CPI in this month. In addition, the core CPI excluding food and energy prices
rose 0.8% year on year. We forecast that the CPI in July will grow 2.7% year on year, which
is in line with the actual results, but lower than the market expectation, mainly because the
food item has risen more than expected.

The growth data is listed by category:

1) Meat output: the price of pork rose by 25.6% due to factors such as the gradual emergence
of the effect of pig production capacity reduction in the early stage, some farmers' reluctance
to sell and the recovery of consumer demand; Affected by the continuous high temperature
weather in many places, leading to the reduction of 2.2 percentage than the same stage of last
year in overall productions.

2) Fresh vegetables: the price from a 9.2% drop last month to an increase of 10.3%, higher
than the same period in 2021. In July 2022, PPI rose 4.2% year on year, 1.9 percentage points
lower than the previous month, 1.3% lower than the previous month, and 1.3 percentage
points lower than the previous month. Among them, the tail raising effect of last year's price
change was 3.2 percentage points, about 0.4 percentage points higher than that of last month.
The impact of the new price rise was about 1.0 percentage points, 1.3 percentage points lower
than that of last month. The month on month decline of means of production is the main
reason for the month on month decline of PPI, and the year-on-year decline of means of
production is the main reason for the year-on-year decline of PPI. We predict that the PPI in
the next season will rise by 4.4%, reaching 0.2 percentage points higher than the actual result.
The main source of error is the overestimation of the prices of means of production and the
underestimation of the prices of means of living. Unfortunately, the prices of food in China
are still in the upward channel, indicating a moderate recovery in demand and a steady
growth

3) Agricultural crops: without price increase, the price of wheat alone will drop by nearly
20% in the first three quarters of 2022, but still 24% higher than a year ago. The decline in
the price of agricultural products reflects some situations: the wheat harvest is good, higher
than the experts' expectations. The rice market has also maintained a stable supply, and the
miscellaneous grains and cereals have declined by 15% instead.

Tracing to the root: the prospect of commodity prices is affected by multiple risks, the
COVID-19, and climate issues. Especially in the spring and summer of 2022, most of China's
land will encounter unprecedented high temperature and drought, which will hinder crop
production and significantly reduce the output. This has led to the perpetuation of challenges
related to food insecurity.

2)How has China's food inflation affect domestic private consumption.

Food inflation refers to continuous rise in food prices. Thus, such forces consumers to pay
more for the same quantity of goods. China has experienced rising inflation over the past one
year due to factors such as surge in energy prices due to the ongoing Ukraine-Russian war.
With Russia being a global leader in crude oil and petroleum products, the war resulted in
Russia being sanctioned by the Western countries thus affecting its ability to supply markets.
Such would significantly impact global oil supply, affecting many countries including China.
Another factor that caused rise in inflation is covid-19 restrictions imposed to curb the spread
of the virus in 2022. Hence such disrupted the supply of key food such as pork and
vegetables.

The covid-19 pandemic is still weighing on consumers confidence thus affecting their
consumption tendencies as most fear the impromptu lockdowns across the country could
leave them with little disposable income to spend. Such lockdowns have prevented the
country domestic consumers to increase their demand thus affecting various sectors of the
economy. Hence such has made people reduce their spending on other non-basic items and
instead shift their focus on basic consumption like food. With such factors, the rate of food
inflation rose hence heavily impacting the private consumption for many citizens in the
country. Food prices rose by 7% year-on-year in October 2022. Prices of key food
components like pork, eggs, milk, and cooking oil rose significantly. Therefore, such
increases in price of food affected how consumers spent their disposable income.

Food inflation has made industries like real estate face reduced sales as more people's cost of
living has gone up. Such has necessitated these consumers to reduce their concentration on
such segments of the economy like property acquisition, thus significantly affecting property
market. The property market has faced downward fall as many consumers' ability reduces
due to inflation especially food inflation. Property sales fell by 20% in October in 100 cities
year-on-year, indicating that consumers were shifting priorities on important aspects like
survival through food consumption against acquiring new properties.
With disposable income remaining the same, most consumers face the challenge of managing
their consumption. Furthermore, the increase in food prices results in many households
focusing on purchasing food deemed essential and minimizing other types of food viewed as
luxurious or unnecessary. Thus, such negatively impacts a household's private consumption
as many reduce unnecessary expenditures.

The impact of food inflation reduced private domestic consumption on tourism as people’s
priority shifted to more saving and spending on key components like food. Many Chinese
people increased their savings due to future uncertainty rising from impromptu lockdowns in
cities across the country that are facing increases in covid-19 cases. Domestic tourism in
China is a significant indicator of consumer spending. Domestic tourism fell form 3.1% year-
on-year in June to 2.7% in July, an indication that most consumers in the country were
focusing on other pertinent expenditures like food instead of concentrating on travels and
holidaying across the country.

Food inflation has also heavily impacted private consumption on hospitality and
entertainment. Many Chinese people have reduced going out to eat and instead choosing to
eat at home. Such was necessitated by the general increase in price of food thus limiting how
much people would spend on eating out or going to entertainment venues. Therefore, with
reduced expenditure in the food and hospitality sector, the economy experienced a reduction
its domestic private consumption segment.