Inflation or not, depends on pigs?

Save up for the raining day, is what our mothers’ generation always remind us. According to this rule of thumb, some countries have national oil reserves, some keep grain reserves, both are understandable. China, yet goes beyond that, has national pork reserves.

Pork price has long been a concern, not only for ordinary people in China, but for Prime Minister Wen.

So far, people in China who are lacking in macro-economic knowledge still believe they can tell whether the country is under inflation just by being aware of pork price, for pork makes up more than half the meat consumed in China, and up to 70 percent in some areas, China’s state-run CCTV television network reported in May. Therefore, to control pork price seems the simplest as well as the quickest way to cap inflation and conciliate public concern. Beijing, acts as a veritable self-deceiver, plugging ears while stealing a bell: With the price of pig meat up 38 percent in major cities since the start of the year, the government is about to put its ‘smart’ national pork reserve strategy into practice now. (China’s Commerce Ministry said Friday that it planned to release part of the central government’s 200,000-metric-ton stash of frozen pork onto the market, following earlier releases from pork reserves held by cities and at least 11 provinces.)

One of the ten basic rules in Mankiw’s principle of economics is that prices rise when the government prints too much money. Inflation is a signal of too much money in the market on the whole, and the rising pork price is only a drogue indicating how severe the inflation is.

However, the central government seems to ignore this fact, it keeps saying “With the progress of urbanization and increasing consumption of pork by the people, market control faces new challenges on the quantity of pork consumption.” The ministry’s spokesman, Yao Jian, said at a briefing on Friday.  

It is true that when demand over supply, price goes up, however, as I see it, Beijing seems to inverse the casual relation between pork price and inflation–Pork price is not a reason of inflation, is the result. Thus, the key point to curb inflation should not be concentrate on controlling the pork price. But right now, the government is making unprecedented efforts (In Shaoxing, a large city in coastal Zhejiang Province, the local government keeps a virtual reserve of pork by paying farmers a subsidy of 20 renminbi per pig to keep their herds at a set level.) to perform that they take care its citizens, just a way to gloss the inflation fact.

Pork, although a big part of Chinese people’s plate, is never a necessity. People tend to seek alternatives, like chicken, beef, mutton etc. when they cannot afford pork. However, a house does seem a necessity for a man who wants to marry a woman in China. Why our ‘taking care its citizens’ government does not put at least the same effort on controlling the housing price? I am confused.

About mengt

Meng Tian holds a B.A. from Peking University, China, in Broadcasting and Television, and a double degree in Economics. She is currently a first-year M.A. candidate in SPR program at Annenberg School of Journalism. Her motto is: Believe in fate, but never bend it over. Follow her on Twitter:meng1218.
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