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Banks heed warning from Chinese pork - Western inflation will rise

by 5m Editor
18 June 2007, at 11:41am

AUSTRALIA - For more than a week now, share markets have been volatile, as fears of rising inflation spooked investors around the world. So far most of the fears have centred on the United States. But the bigger worry, potentially, is China.

For years now, it's been exporting deflation to the world, in the form of cheap goods. But how long can this conitnue now that inflation has begun to rise in China - with a big rise in pork prices sparking particular concern.

Some fear that China's pork crisis could have implications for the global economy.

Economics Correspondent Stephen Long says that pigs are a way a life in China. From spare ribs to pork buns, pork is a staple of the Chinese diet. But in the Year of the Pig, Chinese pork is in short supply, and the world is now taking notice.

Last week The New York Times featured the China's pork crisis and argued that the soaring price for bacon and pork loin were a sign that after a decade-long absence, Chinese inflation was creeping back, - with implications global implications.

"The inflation rate in China has just doubled to 3.4 per cent, I think, in the March quarter. That's about double what it was at this time last year," said Luke Deer, who is completing a PhD (Doctor of Philosophy) on China's huge foreign currency reserves.

"Inflation has been very low in China, pretty much since the mid 1990s. Prior to that it was a shortage economy, and there was big inflationary pressure in the lead-up to 1989, Tiananmen Square, and also into the mid-90s.

Source: ABC

5m Editor