Producer prices have been rising rapidly, increasing by 6.6% year on year in January, compared with 5.9% in December. Rising costs have made some manufacturers to consider changing their sourcing patterns. A Hong Kong-based clothing retailer, Esprit, is switching its textile-sourcing business from China to Bangladesh, even though its retail sales in China are rising, while a US footwear group, Collective Brands, has unveiled plans to shift a portion of its production from China to Indonesia. For firms targeting the domestic market, rising costs are encouraging a tougher approach to poorly performing stores. A French hypermarket chain, Carrefour, has closed stores in Dalian, Xi'an, Jiaozuo and Foshan, for example.

Pricing issues have hit Carrefour in other ways: together with a US retailer, Wal-Mart, Carrefour was involved in a scandal when the prices that it charged for goods failed to match those on labels. As supermarkets try to keep down costs, their suppliers are feeling increased pressure. A Taiwan-based food conglomerate, Tingyi Holdings, suspended shipments of its popular Master Kong noodle brand to Carrefour in December in a row over the commissions charged by the retailer. In February the Ministry of Commerce announced that it was drafting new regulations governing the way retailers charge fees to their suppliers. Its comment that excessive charges could raise the cost of goods for consumers suggests that it may lean in favour of suppliers.

At least retailers can take comfort from the fact that incomes are outstripping price rises, ensuring strengthening consumer purchasing power. Urban per-head disposable incomes rose by 11.3% in 2010, to an average of Rmb19,109 (around US$2,900), while rural per-head net incomes rose by 14.9%, to Rmb5,919. Although growth in rural net incomes outpaced that in urban incomes (by the widest margin on record), the gap between urban and rural incomes continue to widen.