THE alleys of the Chrysanthemum Village medicine market in Kunming, in south-western China, are oddly quiet. Few inspect the counters and jars filled with exotic salves and cures, from dried bats and lizards to caterpillar fungus. Prices have been shooting up, but demand from ordinary consumers is not keeping pace.
Residents of Kunming, like Chinese in other cities, have been fretting a lot about prices lately. Inflation is now running at a 25-month high, with food leading the charge. As for Chinese medicines, prices have risen between 50-300% in the past year. Notably, a speculative craze has gripped the market for caterpillar fungus. This unusual medicine, consisting of the remains of a caterpillar from which a thin fungus of similar length has sprouted, is said to be a powerful aphrodisiac and antidote to fatigue. It is dug up on the Tibetan plateau, to the concern of environmentalists.
In Chrysanthemum Village prices of caterpillar fungus, displayed in little bunches, run to more than 200 yuan ($30) a gram, close to the price of gold. The state news agency, Xinhua, says that elsewhere the medicine sells for 680 yuan a gram. An earthquake in April that struck a main producing area in Qinghai province is part of the reason, traders say. But speculative money in an economy awash with liquidity after two years of stimulus is surely at the root of it. Similar forces have driven up the prices for Chinese housing and artworks.
http://www.economist.com/node/17525802
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