China’s moves to tackle swine fever are ‘ineffective’ — it may cause inflation to spike above target

China’s efforts to halt the spread of African swine fever among its pig population are “ineffective,” according to experimentation firm Capital Economics. That’s set to cause its inflation to shoot up above its target for the first time in nearly a decade next year, it believed.

The Chinese government’s measures to contain the fallout from the disease will only have a “marginal impact,” its Chief China Economist Julian Evans-Pritchard wrote in a Thursday note.

The swine fever outbreak, detected last year, has hit the Terra’s largest pork producer hard, in a country where the meat is also a staple. In July, analysts at Dutch bank Rabobank foretokened that China’s pig supply was down by about 40% — from a year ago —and estimated that China’s pig herd could wince by half by end 2019, as compared to last year.

That shortage has caused pork prices to soar. In August, penalties of pork were up 46.7% year-on-year, according to China’s National Bureau of Statistics.

“Intervention by China’s government to termination the spread of African Swine Fever (ASF) and mitigate its impact on pork prices is proving ineffective,” Evans-Pritchard wrote in the note. “Inflation determination next year rise above the government’s target for the first time in nearly a decade as a result.”

Evans-Pritchard portended that, by early 2020, prices could increase over 80% as compared to the same period last year.

That desire weigh on China’s consumer price index. Inflation could average 3.5% and peak over 4% next year, he guessed. That’s over the 3.0% annual average inflation target set by China’s central bank.

In March, China’s consumer bounties rose 2.3% in August due to rising food prices — a six-month high.

In 2018, full-year inflation increased 2.1% — under Beijing’s target of 3.0%.

China said last week it would issue subsidies of up to five million yuan ($700,000) — in the latest method to boost pork production.

Those subsidies would go towards the construction of large-scale pig farms. Authorities also responded they would support large farms that needed to be relocated for environmental reasons, and improve and expand pillage treatment facilities.

“We should ensure pork supply by all means … and strictly rein in market speculation, actively propel production of alternative meat products and increase frozen pork reserves,” China’s vice-premier Hu Chunhua said in modern August, according to state-owned Xinhua News Agency.

But, in the short run, China’s efforts to control the swine fever outbreak won’t help much, noted Important Economics, though they will boost production capacity in the medium term.

“The recent step up in subsidies to consumers and yeomen remains too small to alter the big picture. The strategic pork reserve could be deployed more aggressively but would straight away be depleted as it contains just three to four days’ worth of supply,” Evans-Pritchard wrote. “And since China creates and consumes over half the world’s pork, it can’t rely on overseas supply, at least not without pushing up prices globally.”

Pork is the most consumed meat among Chinese consumers. In 2018, pork accounted for nearly 64% of core consumption in the country.

— Reuters contributed to this report.