China, already beset by a worrying real estate bubble, is now grappling with surging prices for a dinner table staple closer to home – garlic.

The world’s largest producer of the pungent bulbs, China has seen wholesale prices rocket as much as 15-fold since March in large cities such as Beijing, forced up in part by a combination of reduced acreage being planted by local farmers because of the recession – and a belief that garlic can keep away swine flu.

Schools have been hoarding garlic for pupils to eat because of its reputed properties in warding off swine flu. The China Daily has reported that a high school in Hangzhou in eastern China, bought 200 kg of garlic and made students eat it at lunch to keep healthy.

Also supplies have been cut because farmers in China and elsewhere slashed plantings when prices collapsed in the financial crisis.

But in a phenomenon with a whiff of the 17th-century Dutch tulip mania, when wealthy merchants used their life savings to buy single bulbs, another cause of the garlic bubble may be old-fashioned speculation.

Jerry Lou, Morgan Stanley China strategist, who has been gathering intelligence from the country’s biggest wholesalers, said speculators, financed by the abundant liquidity sloshing around the country, had moved into the relatively small market and manipulated prices.

Mr Lou’s view is consistent with news reports from Jinxiang in Shandong province, the country’s garlic-growing heartland, which describe how cash machines in the area have run out of money amid frenzied trading.

“You need a warehouse, a lot of cash, and a few trucks. That’s how it works,” Mr Lou said, describing the tools of the trade used by garlic speculators.

“Basically, what you do is try to arrest as much supply as possible then you bid up the price. Moving garlic from one warehouse to the other, you make millions of dollars.”

Mr Lou said wholesale garlic business chiefs with whom he had spoken told a similar story: gangs who had amassed cash and credit from dealing property and stocks in other parts of the country, and who had targeted the garlic market for their next ruse.

In the basement of Shanghai’s Dagu Road meat and vegetable market, stallholder Zhang Weidong claimed foreigners were importing Chinese garlic for their own swine flu wars, exacerbating a shortage on the mainland.

He says customers are asking for his $1-a-pound garlic for protection against swine flu, just as medieval Europeans believed it warded off the undead.

China produces about three-quarters of the world’s garlic. Argentina and Spain are the next largest exporters.

Former South African health minister Manto Tshabalala-Msimang notoriously pushed garlic as a cure for Aids in 2006.

Garlic has long enjoyed popular support for its healthgiving properties.

China’s Ministry of Commerce – which tracks the rising prices across the country – recently dismissed garlic as a panacea. It posted an article on its website quoting Chinese traditional medicine experts debunking the notion that garlic is as good as a flu shot.

Members of the onion family have had brushes with controversy before. In the 1950s, American legislators banned the trading of onion futures, blaming speculators for driving up the price.

Whatever the real story behind for the price rises, growers in California, America’s garlic heartland, will be pleased. For years, despite tariffs, the US market has found it difficult to compete with cheap garlic from China.

Additional reporting by Shirley Chen and Andy Ho

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