Cost of living rises in cities across China

Global index highlights expense residents of major urban areas face

Shanghai is placed beside New York in a global cost of living index that also confirms Hong Kong's standing as the most expensive Chinese city.

New York is the benchmark city for the survey against which the cost of living in major cities is measured. Prices in Shanghai, on a weighted basis, match it.

With a score of 99 against New York's 100, Shanghai was ranked 30th of 131 cities, up 11 places from last year, by the Economist Intelligence Unit's survey.

Hong Kong led Chinese cities, taking fourth place in Asia and 14th spot worldwide. After Shanghai, Shenzhen was second among Chinese mainland cities, coming in 14th in Asia and holding down 40th place overall, followed by Dalian, Beijing and Guangzhou. These cities all moved up the ranks from last year.

Tokyo regained the title of the world's most expensive city.

The survey editor cited growing consumerism as a key factor for the rising cost of living in China.

Costs have gone up as increased consumer demand offsets wage increases and government efforts to keep the economy from overheating, Jon Copestake told China Daily.

Copestake suggested that the latest figures reflect recent economic expansion and the trend that China looks set to be the world's biggest economy, possibly as soon as 2020.

"China is catching up with other economies, so it's more expensive," he said. "You could say it is the price of success. It's a small price to pay, because wage inflation in China is still keeping up with the receding cost-of-living inflation, at the moment anyway."

Five years ago, Shanghai was ranked at 53 in the world.

Robert Theleen, chairman of the American Chamber of Commerce in Shanghai, has seen living costs rocket during his 32-year stay in China.

"In cities like London or Chicago, they have well-developed logistics and supply chain management. That creates a fully competitive market which helps to cut costs," Theleen said.

He said the service culture is not taking hold simply because people are used to relying on cheap labor. But this is changing as labor costs rise.

"It didn't matter 10 years ago. But now, to run a restaurant, you need to take advantage of modern technology to offset surging wages. If not, you will need to charge more to offset the costs," he said.

Theleen forecast that five years from now, Shanghai will experience a lowering of costs as the city replaces cheap labor.

The biannual survey compares more than 400 individual prices across 160 products and services in 140 cities. The index measures the cost of an expatriate lifestyle using a weighted average of products and services.

According to Theleen, the reason that Tokyo is stuck with high prices is largely because they haven't changed their distribution system, which is highly complicated and inefficient.

"If you export to Japan, you will have to go through four layers of distributors, to get to the customers," he said.

Ye Hang, a Shanghai native who worked at a New York Internet company for two years, concurred with the study's basic finding - that Shanghai is expensive.

"The cost of living in New York is relatively less than Shanghai," Ye said.

Ye said rent on a "nice one-bedroom apartment in Brooklyn or Queens, which involves only around a half-hour commute to downtown Manhattan", could be had for $1,500. An equivalent place in Shanghai, he said, would fetch more than 3,000 yuan (nearly $500) - a harder hit to the wallet in real terms.

While there are concerns that high living costs may deter talent, Theleen said it is a problem not unique to Shanghai.