06/30/2011, 00.00
CHINA
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Inflation in China: pork prices up 70 per cent in a year

Pork is a key component of the Chinese diet, but its cost is skyrocketing. Rising prices are reducing the purchasing power of middle class families, widening the gap between haves and have-nots. The result has been a rising tide of social protest in the past few weeks.
Beijing (AsiaNews/Agencies) – The average wholesale pork price in mainland China is about 70 per cent higher than a year ago, and rising. The trend has boosted food inflation, which is rapidly eroding the purchasing power of middle- and lower-income households. However, despite its inability to control inflation, which could fuel more unrest, the government is celebrating the country’s strong growth.

Pork is a key ingredient in the Chinese diet. By mid-June, pork prices surpassed the record high of 2008, this according to Ministry of Commerce figures released yesterday. In fact, the average price of pigs sold for slaughter was up about 85 per cent from a year earlier, according to data from soozhu.com, an industry website that monitors prices from 3,000 sources around the country.

High prices have prompted panic buying by pig traders, who have been travelling to wherever prices are slightly lower, like the northeastern provinces. Local traders said that long lines of lorries came to take away everything they could find.

However, once this supply is exhausted, prices are likely to rise again. In fact, production this year is lower than average because higher costs pushed many farmers to switch production. Last winter’s outbreak of swine disease did not help either. It will take another three years before production rebounds, experts say.

Record high pork prices are also but one factor in determining food inflation, which stood at 11.7 per cent in May against an average overall inflation of 5.5 per cent the same month. June’s rate is expected to be 6 per cent.

Another staple food is rice. Drought in the Yangtze River region, followed by devastating floods, badly affected production, causing damages to at least 338,000 hectares in Jiangxi and Hunan this month.

Hence, China doubled its rice imports in the first five months of this year over 2010, to almost 300,000 tonnes.

Still, the authorities are optimistic and expect the total rice harvest to rise by 1 per cent over last year, to 197.6 million metric tonnes in 2011. However, 2010 had a lower yield compared to previous years.

Violent protests have broken out in recent months over economic problems. Experts note that last year China saw more than 180,000 episodes of mass protests, above all over widespread corruption, land seizures and rising food prices.

Unable to stop inflation, the government has tried price controls. In March, the State Administration of Grain set a price floor of 102 yuan per 50 kilograms for early-indica rice for this year, 9.7 per cent higher than last year, the State Administration of Grain said in March. Farmers are likely however to demand between 110 yuan to 115 yuan, according to the traders surveyed.

Meanwhile, China's GDP growth in the first half of this year is expected to reach 9.5 per cent whilst its consumer price index likely rose by 5.3 per cent from a year earlier, the China Securities Journal cited the State Information Centre (SIC) reported.

These figures show a widening gap between expanding big corporations, especially state-owned, and hundreds of middle class families that are falling through the cracks because of inflation.

If the government sets food prices though, millions of farmers are likely to suffer losses, driving them into other productions.

Many problems in agriculture are structural. They include water shortages and dependency on rain water as well as widespread land contamination and river pollution.
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