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It's called the China Effect - massive demand in China pushing up prices for commodities from Australian iron ore to Brazilian soybeans. Well, now it's hit a new sector. As NPR's Louisa Lim reports, Chinese buyers are sending prices of racing pigeons sky high.

(SOUNDBITE OF PIGEONS)

LOUISA LIM, BYLINE: To the average observer, they look like ordinary pigeons caged into a balcony in a high rise Beijing apartment, but make no mistake. These cooing birds, according to breeder Yang Shibo, are more like top of the line sports cars.

YANG SHIBO: (Through translator) These are the Ferraris of the bird world. They're the most expensive and the fastest.

(SOUNDBITE OF WHISTLE)

LIM: The pigeons are being summoned back from their afternoon flight. Pigeons can be lucrative, as the prize money for races is increasing exponentially in China. Yang's best bird, a German pigeon, cost more than $1,000 back in 2001. Its descendants have earned him around $150,000 in prize money.

Good pigeons come with family trees going back five generations, like pedigreed race horses. Indeed, Yang points out, pigeons are, in many ways, the race horses of China.

SHIBO: (Through translator) Chinese law allows pigeon racing in China. Horse racing is only allowed in Hong Kong, not in mainland China.

LIM: Indeed, the highest price ever paid for a pigeon was $328,000, set earlier this year by a Chinese buyer. Chinese make up half the customers at Belgium's premier pigeon house, Pipa. That's up from 18 percent six years ago. The influx of Chinese money means the price of an average pigeon has doubled in a couple of years.

LUNA LAI: I think the main reason is that they are buying them for their status. You are rich. You have a super one. I want to buy a super one, too.

LIM: That's Luna Lai, Pipa's Greater China manager. She admits the market is overheated.

LAI: Somehow, the market is really very hot - too hot - but there's still a lot of Chinese rich buyer and they still want to buy. People will say it's like a economy bubble, but I think unless China's economy goes downhill - otherwise, I don't think it's a pigeon bubble yet.

XING WEI: (Foreign language spoken).

LIM: Buyers like 40 year old entrepreneur Xing Wei go to Europe every year to find top flight world class pigeons at astronomical prices, which he asked us not to disclose. Like so many other wealthy Chinese, his fortune is, in part, from real estate deals and Chinese real estate money, he says, is driving the pigeon market.

WEI: (Through translator) The price of birds imported from Europe to China rises and falls along with the Chinese real estate market. It follows the same trend lines.

(Foreign language spoken).

LAI: (Foreign language spoken).

LIM: Pigeon fanciers flock to his loft in Tangshan, about 100 miles from Beijing. Today, one man has come 700 miles to buy a pigeon for his boss. A single squab, or baby pigeon, bred from Xing Wei's best bird, a Belgian champion racer called Ike, costs a mind-boggling $15,000.

Xing Wei's pigeons live in coops on top of his company headquarters. He has three full time pigeon trainers. Xing Wei's bought 2,000 birds from Europe. He's so determined to raise a flock of super pigeons, sometimes his trainers kill inferior birds in an act of pigeon eugenics.

Xing Wei is scathing about China's pigeon races, saying most of the lofts that organize them are dishonest.

WEI: (Through translator) It's not corruption. It's just the market is chaotic. The majority of the races, 90 percent, are not fair. There are lots of things these lofts do, like letting out a bird by itself instead of together with the other birds. Some people use steroids.

LIM: Xing Wei's love for pigeons was nurtured by a personal tragedy. He was given his first pigeon at age five after a massive earthquake killed 240,000 people in his hometown, Tangshan.

WEI: (Through translator) There was devastation everywhere. All the houses were flattened. From then on, I thirsted for and valued life. An elderly neighbor gave me a pigeon. It felt like it was destiny.

LIM: That year was the first that pigeon racing was allowed after the Cultural Revolution. It had been forbidden for its capitalist tendencies. In less than four decades, Chinese buyers have come from nowhere. Now, they set the price for the world's best pigeons and the anti-China backlash has begun with European buyers complaining about being priced out of the market. With racing pigeons, as with so many other commodities, China's hold on the market is beginning to unnerve the outside world.

Louisa Lim, NPR News, Beijing.

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