Record-high pork prices in China, which surged in August by 45 percent over last year’s level, continue to present a major concern for the nation’s leadership. While China is the world’s largest producer of pork, its production ability for the nation’s favorite meat is not keeping pace with increased demand from prosperous Chinese residents.

Putting a lid on the nation’s surging prices is still a top priority, according to China's central bank. "Our country has controlled several of the factors causing prices to rise, but the fundamentals have not been eliminated, and a stable price level still is the primary mission of macro-controls," a central bank statement said. Pork prices play a major role in driving the country’s inflation.

China's inflation spiked to a 37-month high of 6.5 percent in July before retreating to 6.2 percent in August, still among the highest levels of the past three years. For five consecutive weeks, pork prices have risen, including a spike of 0.4 percent for the week ending Sept. 4.

Inflation is politically dangerous for China's communist leaders as it erodes economic gains that help to ensure the ruling party's monopoly on power. Rising pork prices, however, could delay a return to overall lower inflation levels sought by Chinese leaders.

Analysts cite strong demand for food as well as a lending boom as contributors to the high inflation rates. Summer floods this year have damaged crops, reducing supplies of vegetables and grain. Rising incomes among China’s middle class has also led to stronger demand.

China represents the biggest potential for increasing U.S. pork exports. Exports to the nation through the first seven months of 2011 totaled 152,986 metric tons valued at $245 million, according to the U.S. Meat Export Federation. This is higher in volume and only slightly lower in value than the pace established in 2008, when pork exports to China reached an all-time high.

Source: AP, USMEF