China’s Next Looming Crisis: Pork Shortage

It’s turning out that the Trump administration’s trade war with China is not the only major problem for the far eastern power. The year-long swine flu has had a disastrous effect on that nation’s food supply, and it is quite possibly going to be a gigantic issue for Chairman Xi.

Fears over a year-long outbreak of deadly African swine fever have steadily grown to the point that the topic now dominates the nation’s domestic and foreign agenda with talk of “pork politics”, “pork economics” and “pork diplomacy”.

There’s good reason for the fuss. Pork is the principal source of dietary protein for the Chinese, who consume half the world’s supplies. Since the virus was discovered at a farm not far from China’s border with Russia in August last year, it has spread to all 31 mainland provinces and up to 200 million pigs – nearly half the number in the country – have either died from the disease or been culled.

Couple that with President Trump’s tariffs, and thing in China have gotten really expensive for the people.

Pork, as the biggest single consumer goods item in the consumer price index (CPI) basket, is a key player in inflation. It accounts for 10 percentage points of food prices and more than three percentage points overall in China’s CPI. That is why the 46.7 per cent year-on-year jump in pork prices in August pushed the CPI to a 20-month high of 2.8 per cent last month. The price of pork was responsible for more than 100 basis points, and more than one third of the headline inflation figure last month, according to data released by China’s National Bureau of Statistics on Tuesday.

What’s more, when pork prices rise, they drag other foods with them. The prices of chicken, beef and lamb are also now soaring, as consumers seek more affordable meats as substitutes.

In turn, the rising cost of living weakens consumers’ spending power, thereby undermining the government’s efforts to restructure the Chinese economy from being overreliant on capital investment and exports to one based on private consumption.

And the price of soybeans doesn’t help.

For now, though, it looks like China has a looming disaster on its hands.

 

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