Want To Know What's Up With China's Low Inflation? Look At Pork

Pig Pork Dumplings ChinaAPWorkers making pig-shaped dumplings at a stall in Shanghai, China in 2009.

China’s inflation is at a five-year low, and pigs may be playing a big part in the concern over deflation.

According to the Wall Street Journal, pork prices make up about 10-15 per cent when measuring CPI and inflation.

Since pork prices fell 4.3 per cent last year, this could be a key reason why consumer inflation has seen surprisingly low growth, at an average of 2 per cent for 2014. Other causes include falling oil prices and a slowed housing market.

The article connects the decline in pork prices with Chinese President Xi Jinping’s campaign against corruption and extravagant spending. Households are cutting down on pork, which is a large part of the Chinese diet. 

“What’s different this time around is that the government’s [anti-extravagance] campaign has changed pork consumption and thus the cycle of pork prices,” economist Zhou Hao told WSJ. “Things are different now. I just don’t see any signs of recovery in pork prices any time soon.”

Read more on the trend here at WSJ >>

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.