Bellerbys Economics - Mr Stephenson

Tuesday, September 11, 2007

Chinese Inflation

As we start our work on indicators, let's take into account that Chinese inflation in China this month is 6.5%.

What's caused this? Well, you don't need to look very far. The trade gap has increased by 33% since last year - increasing demand. In addition, the number of pigs in the country has fallen by 10% because of blue-ear disease. Why are pigs an important indicator in China? Because pork forms part of the staple Chinese diet and demand is very inelastic. A 10% cut in supply has led to a 49% increase in pork prices. Non-food inflation is actually very low - so the solution is to either eat less pork (chicken is equally good for you) or breed more pigs.

Unfortunately, breeding more pigs would lead to the same factory-farming practices that led to the rapid spread of blue-ear disease in the first place. So it looks like chicken is king in China at the moment. Buy shares in KFC now!

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