Feng said the most recent price surge took place in 2004, when pork prices broke record highs. On seeing the big profits brought about by raising pigs, a lot of farmers were lured to expand breed scale, leading to a huge gap between demand and supply. By the end of 2005, Feng said, even if a pig was sold at 20 yuan, nobody would buy it. Farmers were deeply hurt by the cheap pigs and were forced to reduce the number of pigs, which in turn, led to this year's shortage. The blue ear disease added fuel to the already sluggish pig market and forced some farmers to kill their pigs. According to the Ministry of Agriculture, about 280,000 pigs were affected by the disease, and 70,000 died of the disease.

Research conducted by the Ministry of Agriculture shows that pork prices operate on a three-year cycle. During the cycle, the price increase usually cannot make up the price drop, which means farmers' profits will eventually be devoured by the price slump during recessions.

"It seems like we've made a big fortune from pigs, but after the price falls, we will lose the little profit we made," Feng said. He worried the pork price will drop sharply in the near future, as many farmers are again turning to raising pigs.

Therefore, for pig farmers like Feng, their biggest wish is to keep the pork price stable. "Stability is everything," Feng said, citing a well-known government slogan.

The Chinese Government has been taking measures to bring inflation under control. The People's Bank of China, the central bank, has raised the benchmark one-year deposit interest rate five times this year to 3.87 percent from 2.52 percent. The one-year lending interest rate was raised to 7.29 percent from 6.12 percent in an effort to repress investment impulses.

Zhou stated that China would strive to bring the real interest rate into the positive range. But currently, the interest rate is still negative: CPI is hovering over 6 percent, while the deposit interest rate is still below 4 percent. Economists have almost reached a consensus that the whole-year CPI will remain above 4 percent. Even though further interest rate hikes are widely expected, it will not likely exceed 4.68 percent, because the nominal annual interest rate of 15-year special treasury bonds sold to the ordinary citizens since September 18 is set at 4.68 percent.

Lin Yifu, a well-known economist, stated that Chinese commodity prices will continue to run at high levels if investment growth remains strong.

Problems beyond inflation

"The inflation pressure is indeed heavy, but is mainly caused by rising food prices," said Fan Gang, Director of the National Economic Research Institute under the China Reform Foundation.

Fan pointed out four risks confronting the Chinese economy. The deposit is too high, accounting for 50 percent of the Chinese GDP. The excessive trade surplus is extremely high and is expected to take up 10 percent in this year's GDP. Third, the excessive trade surplus and the continuous influx of foreign capital lead to huge foreign exchange reserves. Fourth, all the problems mentioned above give rise to excessive liquidity, meaning there is too much money in circulation.

Fan said that current inflation is controllable, but the real threat is an asset bubble, or asset inflation caused by excessive liquidity. "The first worry is a financial asset bubble, like the stock market," said Fan. "The other is a property market bubble." Currently, the benchmark Shanghai Composite Index has doubled since the beginning of this year, and the real estate is growing about 10 percent each month. The subprime mortgage crisis in the United States serves as a good lesson for Chinese decision makers, an event that led to a stock market slump and the burst of the property market bubble.

The booming property and stock markets, to some extent, provide a golden opportunity for the supervisory department to perfect supervision and combat insider trading and illegal use of capital.

"The most urgent task for the government is to curb the bubbling real estate and stock markets," Fan concluded, "only on that basis will the Chinese economy grow healthily."