The cover story in the August issue of China Economic Review looks at how certain companies are positioning themselves to leverage the marketing opportunities created by the 2008 Olympics.

Obviously, a host of other firms - most with no official Olympic ties whatsoever - are going to extremes to cash in on the Olympics story. They include, it seems, a wildlife research center in Chengdu, in southwestern China. Staff at the center are sculpting Olympic souvenirs out of panda dung, of which they are blessed with 300 metric tons each year.

“We used to spend at least RMB6,000 a month to get rid of the droppings, but now they can prove lucrative as half of them will be sold as souvenirs,” said Jing Shimin, assistant to the director of the center.

And don’t worry about the smell.

“They don’t smell too bad because 70% of the dung is just remains of the bamboo that the pandas are unable to digest.”

Pork has been in the news this week, contributing as it has to rising headline inflation here. The latest inflation figures, for May, were released two days ago by the National Bureau of Statistics, showing the highest inflation rate on the mainland in more than two years — 3.4%.

Meat prices contributed significantly to that rise, as they increased 27% year-on-year, as did poultry, which increased 37% in the same period.

The meat increase was mainly due to more expensive pork, caused by an outbreak of “blue-ear” disease in southern China that claimed 18,000 swine lives since the start of the year, and up to a million more since last year, if unofficial estimates are to be believed.

The numbers certainly look daunting, but how serious is all this, really? According to a number of economists, it’s nothing to get too alarmed about.

Here’s what Jun Ma, Greater China economist for Deutsche Bank, had to say in a recent research note mailed to the media:

This May CPI inflation is close to the latest consensus estimate of 3.3% (such consensus estimates tend to converge to the actual figure in the few days before the official release), but significantly lower than the market feared 2-3 weeks ago about its possible overshooting to 4% or above. In this sense, this figure helps ease some pressure for immediate rate hike.

The key to this sanguine response is that core inflation has remained relatively stable over the years. Jonathan Anderson at UBS remarked in a research note in January (titled “No inflation scare just yet”) core inflation did not exceed 1% year-on-year for the past five years. He also noted that historically, the central bank has paid little heed to headline inflation figures.

the PBC (People’s Bank of China) has historically been very slow to raise lending or deposit rates if core inflation is not moving. The last time we saw strong CPI inflation, it wasn’t until the headline figure reached 5.5% in the fall of 2004 that the authorities raised rates - and then only by a minimal 27 basis points. And this was during a period of sharp macroeconomic tightening to boot.

So there you have it, no need to start that bacon and pork chop stockpile just yet.

An interesting story this morning in the Wall Street Journal (subscription required, or read our brief for free): state broadcaster China Central TV (CCTV) will ban all images of pigs in its broadcasts to avoid offending Muslims:

“China is a multi-ethnic country,” the network’s ad department said in a notice sent to ad agencies late Tuesday. “To show respect to Islam, and upon guidance from higher levels of the government, CCTV will keep any ‘pig’ images off the TV screen.”

Sounds odd - at least at first. Isn’t the pig China’s favorite animal to eat, not to mention a traditional symbol of prosperity, luck and fertility? And since when has the government been especially cautious about offending Muslims? The article answers your questions:

Chinese TV’s ban comes in the wake of the killing of 18 Muslims by police in the country’s remote northwest earlier this month. The government accused the men of being terrorists. Muslim activists have called for an independent investigation.

The policy shift offers a window on the inner workings of China’s governmental machinery, known for its surprise edicts and abrupt shifts in regulation. It wasn’t immediately clear whether the ban applies just to ads or to all TV content. And some analysts said the government could still reverse itself, or offer exceptions to the ban.

Advertising-industry executives in China say senior Communist Party leaders recently told CCTV that references to pigs should be avoided to prevent conflicts among ethnic groups. CCTV’s move was then announced to advertisers just as many were finalizing their spots for the holiday, which begins Feb. 18.

What’s next? Calling off the Year of the Dragon to avoid negative imagery associated with the mythical beast by some foreigners? At least advertisers will be able to air their piggy commercials on provincial and local TV networks, the article says. It ends with this classic line from Ma Yunfu, vice chairman of the China Islamic Association:

“We don’t want to see any misunderstanding like the one 12 years ago,” during the last Year of the Pig, says Mr Ma. At that time, Mr Ma says, some newspapers published a tale in which a pig saves the life of Muhammad. “That aroused a lot of anger,” he says.

Rounding up people’s dogs and putting them down? No problem! Complaining about it? A national disgrace! The protests in Beijing over the recently imposed “one dog” rule following a rabies scare have apparently shamed Beijing in the eyes of the world, in the eyes of its own law and order officials, that is. As one animal rights activist put it in the South China Morning Post,

“Friends with the Beijing Public Security Bureau told me they wanted to punish the event’s leaders, who made the city lose face in international society while the 2008 Olympics host city is under the spotlight.”

While I can appreciate on some level that allowing organized protests of any kind makes the PSB lose face in front of city and central government authorities - since it reflects badly on their ability to control the public in the run-up to an event where everything must go according to plan, or else - this is a ultimately a losing PR move and only attracts negative international attention. Like, for instance, from the Washington Post.

Especially so when your city is still having days like yesterday, when “thick fog”, as Shanghai Daily so generously puts it, caused 80 planes to be delayed at Beijing’s Capital International Airport. Let’s not kid ourselves here - there’s a word for that weather, and it isn’t fog. Just take a look at this picture, taken yesterday:

There may be some moisture in the air there, but there are definitely plenty of sooty particulates as well.

Somebody, please explain to Beijing city officials which is the bigger loss of face internationally, not just within their own bureaucracy.

Photos from ENS Newswire and Shanghai Daily websites.

Following the purges of recent weeks, all seems to be running smoothly again at the top of the political food chain.

As reported by the South China Morning Post today (subscription required, or check here instead for our summary), the Central Committee of the Communist Party of China has given President Hu Jintao the thumbs up for his plan to construct a “socialist harmonious society”.

The blessing came in a communiqué released on the last day of an annual gathering of top party members. The gathering will be forever etched into history for the purging of Hu’s political rivals that preceeded it, victims of both the pension fund scandal that has rocked Shanghai in recent months and of their membership of the so-called Shanghai faction, a group of political heavyweights loyal to former president Jiang Zemin.

In a sign of just how harmonious things have become, Hu has even gone so far to appoint the next cab-off-the-rank in the political rivalry stakes, Vice-President Zeng Qinghong, to run the show at next year’s Communist Party congress. It’s a big call because the congress will establish the contenders to take the rudder from Hu when he steps down, most likely in 2012.

As chief lieutenant to Jiang in the days when he occupied the presidency, Zeng’s appointment to the event mangement role is a sure sign Hu is confident the purge has done the trick.

Either that, or its a sign that the pension purge really was about corruption and not about political power plays as widely believed (see for example, CER’s politics and society column for October, unfortunately published shortly before the removal of Chen Liangyu, and the cover story on financial sector reform in the same issue), in which case he’s made a monkey’s uncle out of all of us.

More likely, however, it is Zeng that is the monkey, and not the pundits. To paraphrase an old Chinese saying, it remains to be seen just how scared the killing of Chicken Chen has made Zeng.

But my bet is he’ll be sticking to bananas rather than making a grab for the spoils at the top of the food chain.

While I wouldn’t want people to think that we at China Economic Review have an improper fascination with animals - we are animal-lovers, but in the socially-acceptable sense - I feel obliged to persevere with our dog-slaughtering thread.

We have established that dog-owners in Yunnan were offered US$0.63 a pooch to kill their pets as part of a provincial purge that saw 54,429 animals culled (here), and that China’s new breed of animal lovers were outraged by it (here).

Now we find that China has in fact grown rather rich from allowing foreigners to hunt animals far more endangered than the domestic dog. By the end of 2005, a total of US$36 million had been earned by granting 1,101 foreign nationals permission to hunt, the South China Morning Post reported at the weekend.

This emerged after an auction was planned - and subsequently cancelled in response to (you’ve guessed it) a public outcry - in Chengdu that would have allowed four Chinese agents to bid for permits to hunt 289 individual animals. The permits, which would then have been sold overseas, covered white-lipped deer, Tibetan antelopes, wild yak, argali (a sheep with spiritual horns, apparently) and wolves.

It appears these hunts have been taking place for 20 years - in remote parts of Sichuan, Gansu and Qinghai - with licenses awarded by “internal administrative approval” as opposed to auctions.

It’s difficult to know how to respond to this. In a way, the existence of such hunts isn’t at all surprising but it makes for an interesting parallel to the dead dogs situation.

I suppose the answer would be to convince the Western hunters that the potentially rabid dogs are in fact unique creatures prized by game shooters across China (having seen the condition of some dogs in the country’s less-developed areas, this might be deceptively easy). The hunters would then be persuaded to spend huge amounts of money on what is in fact a US$0.63-per-carcass killing, with the dog owners getting the difference.

But what is perhaps most interesting is the fact that the whole system was scuppered by its move to the auction format. Something that was previously decided in non-transparent and - probably - bribe-fueled circumstances was taken apart due to its entry into the public domain.

Dogs are still getting killed around China. And people around the world are still throwing up their arms in shock.

“My God, man, they are murdering pooches!”

On August 4, officials in Jining, Shandong province, said they would kill all dogs within five kilometres of any rabies outbreak. In the last eight months, 16 people have died of rabies in Jining. State media did not say how many pooches would be harmed in the making of this policy but the city has about 500,000 dogs.

The day before, the good folks in Yunnan province killed 54,429 dogs in five days after three people died of rabies. Officials were creative in their efforts. They lit firecrackers and followed the barks. Owners were offered US$0.63 to kill their own dogs.

More than a century ago, a similar policy paid residents to kill rats and avoid the bubonic plague. The Chinese, creative entrepreneurs that they are, started importing rats by the truckload.

But as I was saying, the year of the dog is not working out well for our canine friends. (For more on this, see the previous blog Dead Dogs.)

The practice is not entirely new. In the three years leading to 1991, Yunnan folks killed 10 million dogs, Canada’s Globe and Mail reported. But that was before China became trendy, so it didn’t matter as much.

Nowadays, though, even commentaries within China are dead set against the slaughters. A big change from the last year of the dog, 1994, when the Communist party was demanding an end to the “uncivilised and unhealthy” practice of keeping dogs as pets, as the Financial Times tells us.

However, almost 2,400 people died of rabies in China last year. More affluent Chinese are buying dogs by the millions but only 3% are vaccinated.

I don’t know if buying a dog is a right or a privilege. Just like I don’t know what is more important, 2,400 human lives or half a million dogs. Although, I would probably go for the people – much as I like dogs. I also don’t know how you force hundreds of millions to vaccinate their dogs overnight. The Humane Society of the United States said Wednesday it would cough up US$100,000 for vaccines if China stops the killings. That’s like offering to make the Yangtze smaller by taking a sip through a straw.

I do know that no viable alternative step has been put forward, beyond letting dogs live and whoever is careless enough to get bitten take his or her chances with the rabies.

The most ridiculous comment came from People for the Ethical Treatment of Animals, an organization with some practice at the ridiculous comment business.

The group led by Ingrid Newkirk was “urging everyone to actively boycott – not a word we use lightly – anything from China, given the bludgeoning killing of thousands of dogs.”

PETA itself cancelled US$300,000 worth of orders of Chinese products.

That will show’em.

I can’t remember PETA making any kind of stink about the culling of millions of chickens whenever a new case of bird flu appears. Granted, bird flu is unknown and scary while there is a rabies vaccine. Still, that’s probably not much consolation for the chickens.

Imagine the conversation across rural Chinese households if the world actually listened to PETA.

Xiao Meimei: “Baba, where is Spot?”

Father: “Spot had to be killed daughter. We beat him. The government said he could have had rabies.”

Xiao Meimei: “What is rabies, Baba?”

Father: “A bad disease.”

Xiao Meimei: “Baba… why aren’t you at work?”

Father: “We were punished for doing what the government told us to do. They shut down the factory. Nobody wants to buy our things any more.”

Xiao Meimei: “How will we eat?”

Father: “Well, we still have Spot.”

It may be the Year of the Dog, but this didn’t stop government-ordered slaughter of nearly 55,000 pooches in Yunnan Province last week in response to three human fatalities from rabies.

So is a person’s life roughly equal to that of 18,000 dogs? It appears that many Chinese people are asking the same question and their sympathies are on the side of the creature that we won’t heartlessly and inappropriately refer to as “Yunnan’s best friend”.

The torrent of complaint prompted by this indiscriminate slaughter reopens the debate over man’s relationship with domestic beast in China, one that I have always found somewhat perplexing.

Guangdong people’s weakness for a taste of anything with a pulse is well documented, although it never really struck home with me until a visit to the Guangzhou animal market a few years ago. On weirdness alone, this is trumped by a story once told to me by an American girl who studied in Kunming. She and her Chinese roommate were happily watching a documentary about dinosaurs when said roommate broke the silence with: “Dinosaur meat … I wonder what that would taste like … perhaps a little tough.”

I have nothing against people thinking with their stomach, but the increasing appetite for keeping - not eating - domestic pets among China’s urban residents seems to create something of a double standard.

One day in Qingdao last year, I spent the morning visiting a market in the city suburbs. There, hanging in the fresh meat section, were the carcasses of several dogs, shorn of both fur and internal organs. Fast forward to the afternoon and I was in the company of a friend who had set up a business selling flashy accessories to dog owners with a penchant for grooming and dressing their pets as they might do a pampered child.

Stepping into a pet shop which stocked collars, leashes, brushes, hats and booties supplied by my friend, I was greeted by the sight of a miserable dog lying on a surgical couch attached to a drip. The animal’s owner sat alongside, eyes moist, gently stroking her pet’s back.

“What’s wrong with your dog?” I asked. “He’s been ill for a week,” the distressed woman explained. “When I talk to him he doesn’t answer back.”