After returning from the wet market last week, my assistant remarked to me that the price of garlic has doubled.
It turns out that garlic is this year’s most prized commodity. The wholesale price at Jinxiang market, which houses the largest garlic plant in China, has increased 40-fold since March, according to an article in China Business News.
The reason for the price spike is partly that China reduced its garlic crop size by 50% last year, and partly because garlic is rumoured to have anti-swine flu properties.
Whether it really can fight the H1N1 virus remains to be seen, but with paranoia over swine flu hitting new highs over the winter season, buyers are taking every precaution.
However, the folk at Morgan Stanley believe that the garlic bubble is yet another symptom of China’s expansive liquidity. With so much money sloshing around the system, speculative asset bubbles tend to spring up, they say.
"We note that the recent increase in flu cases does not seem to have created much actual demand. Garlic transactions are conducted in cash and, according to the article, Jinxiang’s local banks and ATMs have struggled to meet the demand for cash due to the intense garlic trading activity."
The bank’s conclusion – until the government starts tightening money supply sometime next year, we can expect more froth. Watch out for the upcoming bubbles in chickens, to make winter-warming chicken soup, lamb, for hearty hotpots, and bai jiu, the fiery white spirit.