Beijing Releases Pigs From Central Reserves: Pigs ask for directions

A pig reserve? Really? Live pigs? Whaddya know...

China Moves To Head Off
Surge In Prices For Pork

Beijing Releases Pigs
From Central Reserves
As Inflation Worsens

By J.R. WU
September 24, 2007

BEIJING -- China has begun releasing pigs from its central reserves into the domestic market in a bid to head off surging pork prices that have helped boost inflation to 11-year highs.

While the measure may alleviate some pricing pressure, analysts said it isn't likely to ease worries of broader asset-price inflation and economic overheating that may be taking hold in China.

Under a plan issued jointly by the Ministry of Finance and the Ministry of Commerce, China is releasing 30,000 metric tons of live pigs from its central reserves between Sept. 10 and Oct. 15, a person who saw the government notice said Friday.

The pigs, which will be released into 22 cities in stages, will be priced slightly lower than market prices, the person said.

Pork prices in China have been on the rise due to porcine blue ear disease, rising grain prices and increased demand as higher incomes have made pork an affordable staple in the Chinese diet.

In August, meat and poultry prices surged 49% from a year earlier, boosting the month's consumer-price index growth to 6.5%, a level not seen since December 1996.

In July, the government said it would freeze all government-controlled prices until the end of the year and reiterated its determination Sept. 19, as the nation prepares for one of China's three major "Golden Week" holidays. Beginning on Oct. 1, the nation will celebrate National Day and the mid-autumn festival with five days of travel, food and shopping.

In early September, Bi Jingquan, a vice minister with the National Development and Reform Commission, predicted that a fundamental change in pork supply would happen only in the second quarter of 2008, as recent government measures to deal with the price surges need time to take effect.

Analysts agree the release of reserves won't meaningfully ease the situation soon. "This move is more like a symbolic gesture on the government's part," said Peng Danxue, analyst at Everbright Securities. China consumes 130,000 to 150,000 tons of pork a day, so 30,000 tons is "a drop in the bucket."

But the timing of measures is critical. The completion date for the reserves-release plan coincides with the start of China's five-yearly Communist Party Congress.

--Steven Yang contributed to this article.

Write to J.R. Wu at jr.wu@dowjones.com¹

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