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James Hong

Monday, May 17, 2010

XLB Index

I visited Shanghai for the first time in 1997. It was then that I discovered the famous "Nanxiang Xiao Long Bao Restaurant". Xiao Long Bao are commonly known in the US as soup dumplings or steamed dumplings. They are exceedingly bad for you and exceedingly delicious.

I remembered this store in particular because they were so cheap too This famous store sold 16 pieces for 4RMB (about 50 cents at the time).Then next time I visited in 2006, the prices had risen so much in 9 years that I decided to take a picture of their menu. 16 pieces now cost 8 RMB. In reality this is about 8% inflation per year, which in a fast growing place like China is not surprising.

(2006 - 16 pieces cost 8RMB)

This year prices have risen to 12 RMB per 16 pieces, or about 10.67% annualized inflation rate.

(2010 - 16 pieces cost 12 RMB)

The bigger realization is how much a number as small as "10%" compounds. Can you imagine what life would be like if we experienced 10% inflation in the US? I checked interest rates at local banks and they were fairly low, comparable to the US.. no wonder the equity and stock markets have been such a bubble over the last 10 years in China!! putting the money in the bank is akin to throwing it away.


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