There is a great deal of concern in China regarding inflation. The May Consumer Price Index rose 3.4 percent from a year ago, and the CPI food component increased 8.3 percent, led by a surge in meat and grain prices. The price of all durable consumer goods increased 2.4 percent. In spite of this price inflation, it has not yet spread to the retail apparel sector, with the average apparel retail price in May dropping .1 percent from the previous year.

China's retailers discontinued the heavy discounting of apparel in the fall of 2006. They were successful in slightly raising prices, but have not been able to pass along any significant increases even as overall inflation rises in China. The steady prices are boosting sales, with May apparel retail sales surging 23.5 percent from year-ago levels.