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Abstract
The Chinese consumer price index slightly overstates the increase in the cost of living
and thus understates the growth in real income. Over the period 1995 to 2002, we find that
the annual growth in median urban household income defl
ated by the cost of living was 7%,
which is close to the growth in real GDP during this time. When de
flated by official CPI,
the median urban household sees only a 3% increase in real income.