The forces that prompted China to tap its strategic pork reserve may explain more than just the price of pig in Beijing.

They might also, when it comes to it, help to explain much else that’s happened in financial markets in recent months, from a rebound in the price of oil to a recovery in riskier assets.

The Beijing municipal government moved last week to begin what it said was an unprecedented release of pork from frozen reserves, in an effort to ease record prices, up about 50 percent over a year.

While there are supply issues in China’s pork industry, a recent vertiginous rise in prices has coincided with a massive injection of credit into the economy by authorities. Pork has also risen alongside prices and trading in other more financial commodities.

This has all happened as China, fearful of a slowdown in its economy, engineered a huge increase in credit and lending. It seems likely that some of this money is driving food and other commodity price rises.

All of this paints a picture of an economy enjoying, if that is the right term, the effects of a credit-fueled sugar buzz. This causes problems, such as the high price of pork, but by no means implies that a bust is near.

It may also give us good reason to query some of the other global market phenomena that have come alongside China’s credit-based revival.

Ever since a meeting of the Group of 20 finance chiefs in Shanghai at the end of February, there has been marked improvement in trading on global financial markets.

The Fed has effectively backed away from earlier projections of rate rises in coming months, the Bank of Japan has held tight and shown reluctance to push rates further down, and the European Central Bank has pushed credit easing in lieu of rate moves.

All of this has led to some arguing that central banks are trapped, left without sufficient ammunition and acting in concert as a result.

Joachim Fels, a Pimco global economic adviser, argues that policy has not lost its punch.

“It was the mere talk about rate hikes which caused a lot of problems last year,” he said last week. “When the Fed became more dovish in March, things got better.”

Things did get better, but perhaps this gives short shrift to the power of China’s credit creation machine. It is impossible to look at Japan, at the U.S. or at the eurozone and find signs of policy-engineered economic activity that bear any comparison with what is happening in China.

If the new calm on global markets is made in China, then it is there it must be supported — and there it will be unmade.


James Saft writes for Reuters.