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Chinese food: inflationary climate heralds a new ice age

Hot and spicy braised fish, stir fry noodles and spring rolls are must-have dishes for lunar new year dinner tables. The looming week-long Chinese holiday is as famous for the huge sums — around RMB1tn ($157bn) — spent on shopping and dining, as it is for dragon dance parades. This year, a larger chunk than usual will go to a previously overlooked market: frozen food.

The upcoming festivities are likely to be overshadowed by China’s worst Covid-19 outbreak since Wuhan in big cities such as Xi’an. The governments of Shanghai and Beijing have warned against travelling. Dining out is increasingly risky. As extreme lockdowns drag on, some residents of Xi’an are complaining of food shortages.

That partly explains the surge in shares of local frozen food companies. Those of Zhanjiang Guolian Aquatic Products gained 20 per cent — its daily limit — on Friday alone. Peers Zoneco Group, Joyvio Agriculture and Shandong Delisi Food rose by a tenth even as broader markets fell.

Yet even after the holidays, demand for frozen foods is unlikely to ease. Beijing called for food stockpiling as early as November, highlighting supply challenges. Longer term, the trend toward healthy, fresh foods in China may take a hit due to surging inflation.

Local vegetable prices rose over 30 per cent in November, according to official data, adding to steep increases in the previous month. Prices of eggs and fish rose by a fifth. Though supplies picked up in December, frozen food may be the best way for the government to achieve greater food security. It could become the main affordable option for some locals.

Shares of frozen food companies suffered last year because of a Chinese theory that coronavirus was brought to Wuhan through such products. Local port cities such as Dalian ordered all businesses handling frozen foods to suspend operations in November. The tables have now turned. Expect to see more appetite for the sector this year.

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