Panic Buying Clears Shelves in Chinese City; Inflation Spurs Record Bank Run

Residents of Harbin in northeastern China, fearful of rising inflation, have gone on a massive spending spree, triggering the worst reported bank run there since the 1949 revolution, the official China Consumer News reported.

In the most graphic official account so far of panic buying, the newspaper, which reached Beijing on Monday, said shoppers in Harbin cleared department stores of goods that had been lying unsold for years.

In July, Harbin’s biggest department store sold $297,000 worth of electrical appliances, 200 times its monthly average.

The bank run began July 25. In three days, residents withdrew the equivalent of $3.38 million, which the newspaper said was the largest amount withdrawn in Harbin in 39 years of Communist rule.

On Monday, sources said the Beijing government will soon offer some relief by giving workers substantial raises and linking further pay increases to the national inflation rate. The sources, who recently attended meetings of top government officials, said the changes will be announced in about a month.

Official figures show that prices in China jumped 19% in June alone. Prices for top-quality cigarettes and liquor were increased up to six-fold by the government at the end of last month.

Bank interest rates are far below the inflation rate--only 7.2% for a one-year, fixed deposit for individuals.

The China Consumer News said that hundreds of people lined up outside Harbin department stores to snap up black-and-white television sets and tape recorders that had been in stock for years.

The newspaper blamed the panic on rumors of more price rises. The country’s leaders have repeatedly said that the price system is irrational and must be overhauled as part of far-reaching, market-oriented reforms. Chinese expect the cost of train fares, electricity and coal to go up.

The Economic Daily said Monday that China must raise its interest rates because current low levels hurt banks and individuals while companies get money too cheaply.