The Hindu Business Line : How will Beijing bring home the bacon?

It may be the Year of the Pig, according to the Chinese zodiac but the animal is not having much luck in China. Several tens of thousands of pigs in the country have been afflicted by a mysterious disease which combined with a scarcity of hog-feed is leading to skyrocketing pork prices.

A Chinese staple, pork’s rising cost if unchecked could provoke the kind of political volatility associated in India with onions. Thus, in recent months the climbing price of the meat has become national news in China causing the leadership in Beijing to scramble in response.

Pork Priority

Over the last few months the Cabinet has met in emergency sessions to thrash out the pork strategy, municipal governments have been told to subsidise pork purchases for low-income families, farmers are being offered financial incentives to encourage hog-rearing, and the railways have begun to give priority to pig cargo.

Even China’s Premier Wen Jiabao made a much publicised visit to a piggery and meat market outside the city of Xi’an in late May, to reassure consumers that the government was doing its best to bring the situation under control.

According to the figures released by the Ministry of Agriculture earlier in the month, the wholesale price of pork in June surged 74.6 per cent compared to the same month a year earlier. By early July the average price of the meat was 18.57 yuan ($2.4) a kg, up 30 per cent rise from May.

The reasons given for this surge in prices include an epidemic called the ‘Blue Ear’ disease or Porcine Reproductive and Respiratory Syndrome. While exact numbers are unavailable, industry analysts say the disease could have killed several million pigs.

Low on feed

The rising cost of pig feed, mostly made up of corn, is another culprit. Corn prices have gone up by nearly 30 per cent since the start of the year, and this is ascribed to the growing use of corn for industrial purposes such as manufacturing ethanol. Finally, in sharp contrast to this year, 2006 saw a glut of pork in the market leading to several farmers discontinue raising pigs with some even slaughtering their stock to avoid the expense of maintaining them.

Pork is the main source of protein for most Chinese. It has been a cornerstone of Chinese food and culture for centuries, so much so that the word in Mandarin for meat “rou” is synonymous with that for pork. In 2006, urb an Chinese ate an average of 42 pounds (20 kg) of pig meat, according to the Ministry of Agriculture. The aggregate annual consumption of pork in China is a staggering 92 billion pounds (40 billion kg).

China is home to some 476 million pigs and given the direct relationship between the average Zhou’s household budget and the price of pork any sustained interruption to the supply of the meat could become a major political problem.

Sensitive Time

For Beijing this crisis-in-the-making is compounded by the fact that it comes in a year when a twice-a decade Communist Party Congress is scheduled to be held.

Maintaining social stability and calm before this Congress is of paramount importance for the leadership as expressions of disaffection amongst the people would challenge the ruling party’s legitimacy at a sensitive time.

As a result Beijing is actively mulling using its strategic pork reserves to ameliorate the situation. Both the central and local governments maintain pigs in reserve for emergencies.

The reserves include frozen meat and live pigs and farmers are paid subsidies by government agencies to keep animals in the programme.

That the authorities are considering making use of the strategic reserve indicates how seriously the ongoing price increase is being taken.

Further, the Ministry of Education has also ordered schools and universities to subsidise pork instead of allowing the price of the meat to rise on campus.

Analysts say that the move demonstrates efforts to placate what has in the past been a volatile social group in China.

It was students who took to the streets most prominently during the 1989 Tiananmen protests. But what is particularly worrying for Beijing is that the 1989 movement was in part motivated by high levels of inflation.

Inflation creeping up

Since the mid-1990s, prices in China have remained relatively flat. However there have been signs of inflation creeping up, and the soaring cost of pork could add pressure. The National Bureau of Statistics announced last week that the year-on-year CPI (consumer price index) inflation touched 4.4 per cent. The unofficial “tolerance rate” of China’s central bank is 3 per cent.

Pork prices are expected to continue to remain high for the rest of the year, according to the Ministry for Commerce. “Normally, it takes half a year to complete a pig breeding cycle and make more pork available in the market. That is why it’s so difficult to make a turnaround in supply-demand relations,” Huang Hai, Assistant Minister of Commerce was quoted as saying by Xinhua news agency.

And while the political fallout of the pork shortage may well be managed given the war-like operations that have been launched by different government departments, it is likely that the taste buds of the average penny-wise Chinese will need to wait at least till the Year of the Rat, for satiation.