Is Ms. Piggy going to be Wen's downfall?

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The latest CPI (Consumer Price Index) figures released by the government today can only be creating more questions about the fate of China's Premier.

As Zhongnanhai recently reported to you, the word making the rounds is that China's Premier, Wen Jiabao, could well end up being the fall guy for China's rising inflation rate. And today, the National Bureau of Statistics released new figures which show that China's CPI for 2007 rose 4.8 percent. At the beginning of last year, the Central Government's mouthpiece, Xinhua, estimated the 2007 CPI target at 2.5 percent. So these latest stats indicate that the government blew that target by almost 100 percent, which, statistically-speaking, is pretty embarrassing. The reason, the NBS points out - and has continued to point out for the last few months - is that the CPI rise has been mainly fueled by rising pork prices. So what does this have to do with the fate of China's Premier? Let me explain:

First, we have to go back to 2006. The government now admits that in 2006 the price of pork was underestimated. As such, pork production in China - which accounts for 50 percent of the world's total - began to decline. This, on top of Blue Ear disease in pigs spreading from the south to the north of this country, added to a supply shortage, and started the then-unseen push forward in pork prices. From mid-2006 to mid-2007, retail pork prices here in China jumped 50 percent, while wholesale prices rose an astounding 95 percent. This prompted Premier Wen Jiabao in May of last year to call an emergency cabinet meeting and later go on the television and publicly announce a new plan to increase domestic pork production through incentive programs and subsidies to try to level out the prices. However, the plan offered very few specifics. And even though, at that time, pork prices on a global level did appear to be stabilizing, the price has since continued to increase. And because China accounts for 50 percent of the world's pork production, it has to be assumed that these measures the Cabinet talked about last May obviously haven't worked. So who's to blame?

Well, in the grand scheme of things, there are numerous factors involved in the rise of pork prices, including feed shortages due to a global increase in biofuel production and import issues because of live-animal transport restrictions. As such, in reality, it's not really Wen Jiabao's fault. That's the reality. But history has shown us that the CPC will often overlook reality to save face with the people (see: the Mao 70-30 calculation). So if the CPI index continues to rise (which it is likely to do, but not only due to pork prices, of course), this government may eventually be called on to provide an answer and a face to go with it. And unfortunately for Mr. Wen, it was his face that was plastered all over the tube last May.


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This page contains a single entry by Paul published on January 24, 2008 1:42 PM.

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