HSBC has just released a note arguing that recent rises in Chinese pork prices - by an average of 7 per cent year-on-year for each month starting in April - are no reason to worry about the overall effect on CPI writes Jennifer Thompson.

To put this in context you need to grasp the importance of the supply and cost of pork to the Chinese economy, and to do so requires the shortest of excursions back in time.

The Chinese pork industry has gone through something of a boom-and-bust cycle recently, mainly because a large chunk of the industry is composed of small, price-sensitive farmers raising relatively few animals. That often translates into wild gyrations in consumer pork prices year-to-year. In 2011 pork prices soared as supplies of pigs ran low: high input costs for farmers the year before were to blame. CPI that year was in a 4.1 to 6.5 per cent range; pork prices are one of the major determinants of the reading.