Impacts of Food and Energy Price Hikes and Proposed Coping Strategies

Based on sample survey data for the years 2006 and 2007, we find that inflation of food and energy prices in China is moving at a slower pace than in the international market; however, the livelihood of low income groups has been significantly impacted. Urban sample households in low income groups have been shifting from consumption of high value food to lower value substitutes; and all of the rural sample households are reducing their total consumption expenditure in real terms. The Engel's coefficient of the rural household enlarged while their proportion of spending on clothing and energy declined. Farmers' households are moving toward more imbalanced diets, and the nutritional status of the poor is apparently deteriorating. The emergency‐response measures that the government should implement include stopping subsidies to biofuel producers, who use foodstuffs as inputs, and providing food aid to the poor. The mid‐term strategies should include anti‐monopoly tactics, improving the market environment for the right competition, and eliminating price distortion. Midterm and long‐term socioeconomic policy reform must be undertaken to adjust the social structure, to correct the mechanism of factor price formation, and to transform the pattern of economic growth.