- Pork prices surged an eye-watering 20.2% according to the National Bureau of Statistics, even as producer price inflation slowed to 4.2% in July, from 6.1% in June, on the back of weaker commodity prices.
- Rising pork prices, the staple meat of Chinese, is likely to lead to growing discontent with Chinese policymakers, and Chinese who are becoming increasingly vocal about the social compact that they had maintained with the Communist Party for decades.
A moribund economy is not a good backdrop as inflation ticks higher in China, with the Consumer Price Index up by 2.7% in July and prices at their highest level in two years.
Just as Beijing is struggling to manage a real estate implosion that threatens to take down 29% of GDP along with it, growing protests against banks freezing withdrawals and refusal to pay mortgages on uncompleted projects, pork buns are now more expensive than ever.
Pork prices surged an eye-watering 20.2% according to the National Bureau of Statistics, even as producer price inflation slowed to 4.2% in July, from 6.1% in June, on the back of weaker commodity prices.
Unlike Europe and the U.S., consumer inflation in China has been relatively benign this year as strict Covid restrictions and sporadic outbreaks curbed consumer and business spending.
Zero-Covid lockdown policies, sparked by sporadic virus flare-ups, along with slowing global demand and an ongoing real estate crisis have kept China’s economic recovery fragile, with factory activity unexpectedly shrinking last month and appetite for property continuing to wane.
Rising pork prices, the staple meat of Chinese, is likely to lead to growing discontent with Chinese policymakers, and Chinese who are becoming increasingly vocal about the social compact that they had maintained with the Communist Party for decades.
With inflation likely to rise past 3% in the coming months, thanks to a low base and a lift from pork prices, Beijing will be hopeful that weak domestic demand will provide plenty of headroom for more accommodative policy to cater for a rapidly slowing economy.
With economic prospects declining, a growing number of unemployed and underemployed graduates putting pressure on Beijing to act, July’s inflation, driven largely by gains in the price of pork, fresh vegetables and other food items, is likely to make matters worse as the Communist Party looks to usher in an unprecedented third term for President Xi Jinping.
In contrast, the median estimate for inflation in the U.S. suggests softer headline inflation of 8.7% in July, compared with the 9.1% recorded in June, but still well above the U.S. Federal Reserve’s target and putting continued pressure on policymakers to tighten.
China on the other hand has some room to continue loosening conditions and the divergent monetary policies of the world’s two largest economies could see the yuan weaken further versus the dollar.
