For many people in China, headline inflation of 2% is just a cruel joke

Beijing

PROJECT manager Yuan Fang says that she's cutting spending and working overtime after a 20 per cent surge in the cost of both her Beijing room rent and her favourite Japanese lunch boxes. Civil servant Neo Zhu, who bought an apartment in the eastern city of Hangzhou 10 years ago, feels costs of everything from gas to food are stable.

Ms Yuan is putting her savings into gold to protect them from inflation. Mr Zhu is confident his extra cash will be protected in a fixed-income fund.

The contrasting perspectives underscore China's two-speed inflation picture, where living costs are stable in rural areas and small towns but surgin…