I read an interesting article today in the Wall Street Journal about the importance of pork in the Chinese economy. The title of the piece is Why Pigs are Crucial to Understanding China’s Surprisingly Low Inflation.
The gist of the article is that falling pork prices in China are primarily due to the “anti-extravagance” campaign being waged by the government:
Farmers usually make decisions about production at least six months prior to the high-demand seasons. But demand for pork lately hasn’t shown strong seasonal rebounds, Mr. Zhou said.
The impact of Beijing’s anti-extravagance campaign has been rippling through far corners of the economy, beyond consumption of luxury goods and gift cards and impacting many Chinese households. Apparently, as some make do with less, less pork makes it to their tables.
Pig farmers have been suffering losses. Hog prices need to be six times the price of grain in order for them to break even. The multiple has been below that level since the beginning of last year and is currently at an unprofitable 5.7 times, official data showed.
The government’s efforts to stockpile for its pork reserves have failed to lift prices for the country’s favorite meat.
This article reminded me of a conversation I once had with a friend in Beijing who studies religion and civil society.
“Chinese people will never convert to Islam,” he said with a tone of absolute certainty.
“Do you know why? Because of PORK! Chinese people will never give up eating pork. So obviously Islam has no future in China.”
Nothing like good ol’ Chinese pragmatism!
Image Source: Wall Street Journal