Chinese consumption

I met some Chinese analysts yesterday who told me that the milk crisis still prevails in China and that they are importing milk powder from New Zealand rather than trusting their own. The root of the problem was that cattle feed had risen so much in price that villagers were watering down the milk to maintain their profits as they couldn't raise the price due to government controls. People cottoned on to the fact that the milk was suddenly half water and inspectors were sent to test the milk for protein. To get around this, the villagers began to add melamine to the watery milk and then babies started dying. The government gave the people some compensation: if your baby was sick from melamine poison, you were entitled to free health care.
That is another point about the high savings ratio in China, by the way. The one child policy means that a working couple has to save money for five people's healthcare: their own, their parents' and their child's. It is unlikely that this sort of saving will be spent on other items. People in the UK complain that the banks are not passing through interest rate cuts into mortgages but in China, mortgage rates are cut only once per year: on 1 January. Maybe there will be a very good Chinese New Year in 2009 as all the interest rate cuts this year will finally take effect in January. And...next Chinese New Year is the Year of the Ox which must be bullish, unless you define an ox as "a castrated bull."