China And The Great Pig Panic.(World Affairs)

Byline: Melinda Liu

Why pork-jackings and rising prices are bad news for the Middle Kingdom--and the world.

Pork is so important to the Chinese diet that many people here simply know it as rou, or "meat." So you can imagine Beijing's concern last year when an outbreak of deadly blue-ear disease hit Chinese hog farms, infecting hundreds of thousands of animals and necessitating an enormous cull. Discouraged by their losses and by rising feed-grain prices, many farmers soon gave up on raising hogs. Pork supplies dropped by a tenth, driving prices up about 55 percent, to more than $4 a kilo today.

Now, as the country heads into its Lunar New Year holiday on Feb. 7--when millions head home for pork-rich family banquets--concerns over the shortage are intensifying. Already reports of "pigjackings" are popping up in the news: one gang of thieves was arrested in Shenzhen last summer when a member tried to ride offaon a motorcycle with 125 kilos of stolen pork strapped to the back. "They used to [steal] motorbikes," explained a local newspaper. But those sell "for 1,000 RMB, while 125 kilos of pork [now] sells for at least 3,000 RMB [about $420]."

That price is making everyone in China nervous--especially the government. Even as they face the possibility of a U.S.-led global economic slowdown, Chinese planners are struggling mightily to restrain a white-hot economy. Last year China's GDP grew a startling 11.4 percent, the highest rate since 1994, and the full-year inflation rate was 4.8 percent, much higher than the 3 percent limit China's leaders attempt to maintain. On Jan. 16, Beijing imposed short-term price controls for large-scale producers of staples such as grain, edible oils, milk, eggs, cooking gas--and pork. It claims that the measures are helping, and will be lifted once prices stabilize. But analysts in Hong Kong expect China's consumer price index to top an annualized rate of 7 percent in January, the highest level since the mid-1990s, and food prices to rise three times faster than the average. Dong Tao, chief regional economist at Credit Suisse in Hong Kong, warns that with easy credit and rising wages adding to the inflationary impact of the food crunch, "inflation is getting out of control."

For a variety of reasons, China's pork shortage seems sure to worsen, driving prices still higher and having other destabilizing effects--around the world. The harder China fights inflation by restraining domestic demand (with spending cuts or higher interest rates) the slower it will grow, and the less it can help bail out the global economy. Restraining demand for pork will take truly draconian efforts.

To understand why, start by considering just how hooked on the meat the Chinese really are. Their addiction parallels Americans' oil habit--as could the consequences. Pork has been a mainstay of the Chinese diet for millennia, and leaders long found ways to weather cyclical or regional crunches in supply and demand.aUsually, when supplies dropped due to problems with weather, harvests or disease, some farmers give up pig cultivation--but others would take it on once shortages make it lucrative again. Recently, however, this hog cycle has been pushed out of whack.