Sep 19 2007
In the meantime, retaliatory regulations contribute to China’s inflation!
Published by Jason Welker at 11:16 pm under Inflation,Price controls,Protection,Trade
FT.com / Asia-Pacific / China – Beijing rejects North American pork
Here’s a follow up to the previous post about China’s attempt to keep inflation low by clamping down on rising prices through price controls. The main cause of the record inflation figures is the shortage of pork in the country. This headline’s irony was obvious, only a few articles below the one linked in the last post!
Here’s the thing; pig shortages have driven up the price of pork by around 60-70% in China. What’s one obvious solution to this problem? Import more pork from overseas to meet the excess demand. So, what’s the government doing about it? Playing politics with the US and blocking imports of American pork! Ha! Looks like their concern for the common Chinese may take a backseat to the retaliatory message sent to the US, which has recently threatened new tariffs on Chinese goods in the wake of concerns over product safety and frustration over the persistent trade imbalance between the two countries.
Beijing has rejected consignments of pork from the US and Canada because they contain a banned additive – in spite of a domestic shortage of China’s staple meat, which pushed inflation to a
10-year high in August.
Again, China’s meddling in the market economy seems to only make things worse for the Chinese people.
Chinese officials have said they expect the pork shortage to remain a problem into next year, but prices have already started to come down from their August high, Xinhua, the official news agency, reported at the weekend. Prices decreased by 11.3 per cent in early September from the levels in August because of an increase in supplies of pigs, Xinhua said.
The number of pigs ready for sale was up 9.9 per cent early this month compared with a year ago, said Sun Zhengcai, the agriculture minister.
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About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course.
Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this authorRelated posts:
I feel that the Chinese government's move to control the prices of pork in the country are ignorant at best. I feel that they are taking advantage of the common people's lack of knowledge in economics and behavior of the market to make them live under the false impression that their government is really looking out for them in creating a price ceiling. It is also unwise of the government to make the importing of foreign pork more difficult; it only puts more strain on consumers so that the government can push their own political agenda.
As suggested by Mr. Welker I do believe that the implementation of government subisides for pig farmers would greatly shift the supply curve and provide more pork AND at lower prices to the Chinese people who really need it.
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I also agree that it is wrong for China to make importing foreign pork more difficult, just because many Chinese products have been recalled in the United States. However, I wonder what type of banned additive is supposedly in the United States and Canada.
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I also agree with how China government made a wrong decision. According to what we learned in class, the price control would lead to more gap between price demanded and price supplied, and therefore, rather than making the price ceiling, I think the government should have provided subsidies or let the price led by the invisible hand.
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