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Is pork still affordable?

July 14, 2011 Leave a comment

The Chinese Prime Minister Wen Jiabao hosted the Executive Meeting of the State Council on Tuesday, 12th July, during which a ‘sustainable’ control of pork price was decided.

Famous pork dish: Chairman Mao's braised pork in brown sauce

Famous pork dish: Chairman Mao's braised pork in brown sauce

During the last month, the pork price has been raised dramatically in both rural and urban China. The raise has become a major concern of citizens and caused a chain of price-rising of living goods.

Hunan Province, which has the largest number of swine standing stock, says that the number is on the raise. However compared to the same period of last year, the number has been declined by 4.93 per cent.

Piggy price 33.5 Yuan/KG

According to Lei Wang from zhue.com.cn, the average piggy price of 470 markets by the end of June is 33.5 Yuan per kilo, raised by 131.7 per cent from the same period last year.

Pork price 26.56 Yuan/KG

The pork price reached 26.56 Yuan per kilo till 14:00 13, July, which is raised by 1 per cent compared to 12, July.

The normal pork price from around Beijing has raised above 20 Yuan per kilo. Statistics from the Ministry of Agriculture shows that the pork price in the second week of June has risen by 63.6 per cent compared to June 2010. From 4 to 10 July, the average pork price is 25.17 Yuan per kilo, reaching the highest of the year.

When the Prime Minister Wen visited a market last week, he said to the grocers that the pork price would be stable in the next two months. He also asked them not to worry too much.

Inflation issue

Yuhui Liu from Institute of Finance, Chinese Academy of Social Sciences concludes that the inflation that China is suffering from is caused by both easy-money policy and poor investment rate.

Pork in local market © Yangcheng Evening News

Pork in local market © Yangcheng Evening News

The easy-money policy has been interfering China’s economy since 2003. In the last eight years, the expedition speed of the finance factor has been far ahead of the growth of economic aggregate. In the bigger picture, China’s economy is at a turning point. The inflation has been long rooted in this situation. The housing policy reform in 1998 and the market-driven land-purchasing request a large amount of currency.

The inflation is following a pattern from over-amount of currency, assets bubbles to consumer price inflation. The consumer price inflation consists of urban service sector and food price. In the case of pork price, both pork processing and pork itself has requested more money which undoubtedly contributes to the highest pork price in the year.

On the other hand, the poor investment rate makes the case worse. In case of China, the government and state-owned-enterprises (SOEs) control the economic arteries by occupying the materials and sources and the power of changing related policies. This inevitably over-estimates the growth of the economy.

Liu also suggests that it is time to nourish middle-class and to promote social equity in the country. He says the government and the SOEs must give the fortune back to the families instead of taking it from them to spur economic growth.

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