China’s consumer inflation stood at 2.8 percent in July, the second highest level in over seven years. Food prices were up 9.1 percent during the month from a year ago, according to data from the National Statistics Bureau.
In particular, pork prices soared 27 percent year on year while fresh fruit prices skyrocketed 39.1 percent, official data showed. Egg prices jumped 11.4 percent in the same period.
A number of factors contributed to the price increase.
China’s pork imports surged over 60 percent in July from a year ago due to the impact of African swine fever on domestic production.
As Beijing cuts back on purchases of US agriculture products, including soybeans, amid an escalating trade war with Washington, it has to buy more from other sources like Brazil and Argentina, which are taking advantage of the situation and raising their prices.
Unusual weather conditions and fall armyworm have damaged crops. China typically does not reveal its agriculture production, but one can get an idea by looking at North Korea, which borders Northeastern China and is a major crop producing region.
North Korea has admitted its agriculture output has suffered the worst crop failure in over a decade in May. Amid the crisis, South Korea and the US have agreed to provide assistance.
The surge in pork price coincides with a slowdown of the Chinese economy and a softening job market. An increasing number of Chinese families find it hard to afford the most widely consumed meat.
Around 29 provinces have already initiated a variety of measures, and have reportedly paid out a total of 2.2 billion yuan in consumer subsidies since April. For example, residents in Fujian province can buy one kilogram of low-price pork every day.
If prices keep rising along with easing economic growth, consumers would be under double whammy
Higher inflation, meanwhile, would limit Beijing’s room to stimulate the economy through easier monetary policy, creating a tougher situation.
The full article appeared in the Hong Kong Economic Journal on Aug 26
Translation by Julie Zhu
[Chinese version 中文版]
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