THE CHINESE RECIPE FOR INFLATION

When one of the very important commodities that can cause inflation in other parts of the economy - such as rice or coal - becomes more expensive in China, large state-owned firms are told to ensure that there is enough of the commodity to keep the price from rising more.

Firms can either increase production or buy abroad. The important thing is to nip inflation in the bud - before it hits the whole economy.

Although prices have been liberalised significantly on several occasions, China has not seen prices soar.

One such operation is currently under way. More than half of all pigs in the country have died because of the spread of swine fever. This has caused a shortage of pork and a rapid rise in prices. State-owned companies have bought up pork in huge quantities on world markets, and pig farmers have received increased subsidies for pig farming.