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 >>

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