Fighting global food price rises in the developing world: the response of China and its effect on domestic and world markets

This article addresses how China is being affected by and is responding to the world food crisis. So far, Chinese officials have responded to higher world prices by drawing down stocks and limiting exports of major grains. These policy instruments were not available for soybeans, so domestic prices of soy and other oilseeds have risen with international prices. Using a global CGE model, we show that the initial world price rise was largely due to higher world oil prices and demand for biofuels as opposed to other factors, especially in maize and soybeans. China's response to this shock has kept domestic grain prices low relative to world grain markets and to domestic soybean prices. As grain stocks are depleted, however, demand growth will push domestic prices back into alignment. Anticipating this pressure on consumers and accelerating supply response through public investment will facilitate adjustment.     

Did China Hurt the Textiles and Clothing Exports of Other Asian Economies, 1990–2005?

Employing a gravity model, this article examines the impact of the rise of China's textile and clothing (T&C) sector on the exports of its Asian counterparts. It was established that China's textile exports posed a greater competitive threat than its clothing exports to the T&C exports of other Asian economies. It was also found that higher-income Asian economies fared better than their lower-income counterparts. This is because the higher-income Asian economies tended to be specialized in segments of the T&C sector less exposed to Chinese competition.     

China and Taiwan access to the World Trade Organization: implications for U.S. agriculture and trade

This paper investigates the impact of China's and Taiwan's accession to the World Trade Organization (WTO) on U.S. and world agricultural trade by means of a 12-region, 14-sector Computable General Equilibrium model for world trade and production. The simulation results show that integrating China and Taiwan into the global trading system could induce more competition on labor-intensive Products and reduce their prices. It could drive up the demand for capital and skill-intensive manufactured goods, thus further improving industrial countries' terms of trade. The expansion of labor-intensive sectors in China could also induce contraction in agricultural exports from China and increase its net agricultural imports by as much as US$9 billion annually, causing food and agricultural exports from other regions to increase. Total U.S. food and agricultural exports could increase by about US$2.4 billion annually, with the non-grain crop sectors gaining the most. The biggest winner from China's WTO accession is China itself. WTO membership could bring a net welfare gain of about US$30 billion a year for China, a substantial benefit compared with the gains for the USA (US$8.5 billion).     

Impacts of agricultural price support policy on price variability and welfare: Evidence from China's soybean market

China is a predominant soybean importer; thus, its domestic soybean policies have a large impact on world soybean market dynamics. We develop the first aggregate structural econometric model of China's soybean market and link it to the rest of the world (ROW), which allows us to analyze the impacts of China's soybean price support policy that ran from 2008 to 2013. We investigate the impacts of China's policy on the variability of their domestic and world soybean prices, and adopt a Monte Carlo simulation to evaluate the effects on distributional and aggregate welfare. Our results indicate: (a) after China's soybean price support policy, price transmission elasticity decreases, China's domestic price variability decreases, and world price variability increases; (b) China's producer surplus increases, consumer surplus decreases and the net welfare change in their domestic market is negative; and (c) although soybean exporting countries in the ROW experience significant welfare gains, the world net welfare change is negative.     

China's agriculture: drivers of change and implications for China and the rest of world

The overall goal of this article is to identify major changes in China's agriculture/food economy and their implications for both China itself and, more importantly, to the rest of world. China has become one of the fastest‐growing economies in the world since late 1970s. GDP grew at about 10% annually in the past 30 years. China's experience shows the importance of both domestic and external policies in achieving sustainable growth. The results from this study provide significant policy implications to many countries that are currently China's major trade partners or those seeking greater economic and trade relations with China. The main conclusions on the implications of China's rapid economic growth are that China's growth will provide more opportunities than challenges to the rest of the world, on average. Overall, the rest of the world will gain from China's economic expansion though this general conclusion may not hold for some countries.     

How can trade partners be chosen when facing food scandals? China's milk scandal as a natural experiment

Using China's milk scandal as a natural experiment, this paper explores whether the countries of origin and export destinations have the same responses to the original country's food scandal. Our difference-in-difference estimation shows that the outbreak of China's milk scandal had asymmetric impacts on China's total imports (increased by 23.4%) and exports (sharply dropped by 65.8%). The results further show that China's milk scandal contributed to import increases from European and Oceanian countries. Moreover, China's milk scandal worsened exports, mainly those going to neighbouring Asian regions but increased exports to Oceania. A product quality index is constructed to explain this finding. Intuitively, consumers' perceived quality of Chinese products declined, and they tended to consume products from other countries. The lower the product quality was with those in China, the lower the perceived quality and safety, thereby affecting demand. During the scandal, Chinese consumers tended to buy high-quality dairy products from Europe and Oceania rather than the perceived unreliable dairy products produced by China or neighbouring countries. We conclude that product quality plays a key role in imports and exports when facing food scandals.     

The effects of China's growth on the food prices and the food exports of other developing countries

This article explores the impacts of China's growth in the international markets of agricultural products along two dimensions: food price inflation and export growth in other developing countries. China's food imports of vegetable oils have grown dramatically over the last decade, linking China's economic growth to the recent increases in global food prices. If China is a source of global food price inflation, exporting countries will benefit whether they sell directly to China or not. These direct and indirect linkages are explored using a short‐run, partial‐equilibrium model of international trade in agricultural products in which consumer prices and trade costs are derived from bilateral trade flows. China's effects on food prices and exports are estimated by reducing Chinese food expenditures in 2007 by half, roughly China's level of expenditures in 1995. Results indicate that food prices as measured by CES price indexes in developing Asia, Africa, and Latin America would have been reduced by 1.27%, 0.32%, and 0.22%, respectively. China has been an important source of growth for exporters selling directly to China. There is no evidence of export growth due to an overall increase in food prices caused by China's growth.     

Cotton market integration and the impact of China's new exchange rate regime

This article studies the integration of China's cotton market with the international market, especially the U.S. market. Investigating the futures prices from the Intercontinental Exchange (ICE) in the U.S. and the Zhengzhou Commodity Exchange (ZCE) in China with several time series models, we find that a long‐run cointegration relationship exists between these two series. The two markets share price transmissions, and based on results from an Autoregressive Conditional Heteroskedasticity (ARCH) model, we find their price volatilities are similar. We argue that China's recent exchange rate reform and its gradual liberalization in bilateral cotton trade since it joined World Trade Organization have had important impacts on these futures markets. Based on these findings, several important economic and policy implications are derived.     

新一轮国际粮食价格上涨：原因及对中国市场的影响

[目的]随着中国粮食进口不断增加,国内外市场联系越来越紧密。2020年下半年以来,国际市场粮食价格快速上涨,对国内粮食市场产生一定影响,分析国际市场价格上涨的原因和影响对确保国内粮食供应稳定、保障国家粮食安全具有重要意义。[方法]文章分析了2019年以来小麦、大米、玉米、大豆4种粮食产品的国内外价格走势,从供需状况、贸易政策、气候变化等因素分析国际市场价格波动的原因,并探讨了国际价格对国内价格的影响。[结果]当前全球主要粮食品种供应充足,库存仍处于较高水平,此轮国际粮食价格上涨主要是受到美国等发达国家宽松的货币政策以及疫情后全球消费逐步回暖的影响;但国际市场价格上涨对中国市场的影响总体有限,国内小麦、大米、玉米价格上涨的主因是国内消费回暖和生猪产能恢复带动的饲用需求快速增长,油用大豆受国际市场的影响较大。[结论]为稳定国内粮食市场,避免国际市场的冲击,中国要进一步提升粮食综合生产能力,强化科技支撑,加强粮食储备管理,健全政策支持体系,并引导居民建立科学的消费观念。     

Price transmission,asymmetric adjustment and threshold effects in the cotton supply chain: a case study for Vidarbha,India

This study examines price transmission asymmetries in Vidarbha's (India) cotton supply chain from 2002 to 2012. The analysis takes account of thresholds in price adjustments toward their long‐run equilibrium. The first stage considers the price dynamics between international and Indian domestic cotton prices. The second stage considers price transmission from domestic to farm gate cotton prices in Vidarbha. Results from the first stage indicate that Indian and international cotton markets are well‐integrated. In contrast, the second stage reveals significant threshold‐type nonlinearities as well as asymmetries in price transmission between domestic and farm gate prices. The short‐run dynamics suggest that the pass‐through from domestic to farm gate prices is larger when domestic prices decrease than when they increase. Moreover, back of the envelope calculations suggest that the loss in revenue for a typical farmer from a decrease in domestic price is larger than the gains from an increase in domestic price of the same magnitude. The implication is that traders benefit from price fluctuations at the expense of farmers. Evidence from fieldwork in Vidarbha suggest that asymmetries revealed in this analysis may be linked to trader's market power and inadequate market information among farmers.     

A Price Analysis of U.S. Agricultural Exports in East Asian Markets

This paper examines the price competition between U.S. agricultural exports and that of its competitors in East Asia. The results show weak price competition in Japan's corn and soybean markets, and no price competition in the wheat market. U.S. cotton exports to Japan face strong price competition. In Hong Kong, U.S. market shares are low, while the demand for its rice, corn, soybeans and cotton is elastic. For South Korea and Taiwan, improved political relationships between China, South Korea, and Taiwan have caused the U.S. to lose market shares to China.     

EFFECTS OF ALTERNATIVE CHINESE POLICIES ON THE WORLD GRAINS MARKET

The implications for the world grains market of a reduction in China's domestic absorption, and of the removal of its key manufacturing protection, are analysed in this paper. These policy changes are modelled both alone and together with grain self-sufficiency in China and with reduction in farm support in the US and EC. In themselves, the reduction in absorption and removal of manufacturing protection in China would have only marginal effects on the world grains market. If, however, China were to achieve grain self-sufficiency while adopting these macroeconomic and trade policies, world grain prices and trade would fall considerably. In contrast, even a partial removal of protection in the US and EC, simultaneously with the above Chinese macroeconomic and trade policy changes, could substantially increase world grain prices and trade. These positive effects would be considerably reduced if at the same time China were to become self-sufficient in grain.     

China's Competitive Threat to Latin America: An Analysis for 1990–2002

This paper explores China's competitive threat to Latin America in trade in manufactured goods. The direct threat to exports to third country markets appears small: Latin America and the Caribbean's (LAC's) trade structure is largely complementary to that of China. In bilateral trade, several LAC countries are increasing primary and resource-based exports to China. However, the pattern of trade, with LAC specializing increasingly in resource-based products and China in manufactured goods, seems worrying. Given cumulative capability building, China's success in increasingly technology-based products with strong learning externalities can place it on a higher growth path than specialization in “simpler” goods, as in LAC. China may thus affect LAC's technological upgrading in exports and industrial production. The issue is not so much current competition as the “spaces” open for LAC in the emerging technology-based world.     

Tariff Liberalisation,Price Transmission and Rural Welfare in China

China's tariff liberalisation as part of its WTO accession application and eventual agreement has been thoroughly analysed in the literature. However, much of this literature is based on forward‐looking ex‐ante analyses and few studies provide empirical evidence on its actual impact. We fill in this gap by evaluating empirically the welfare effects of China's actual tariff liberalisation on Chinese farmers during the 1997–2010 period. By estimating the domestic market price effects of China's tariff liberalisation and the associated wage earning effects, we find that on average Chinese farmers were able to gain more from reduced consumption prices than they would lose from reduced agricultural and wage income due to tariff liberalisation. Welfare gains over time are estimated to be positively correlated with the actual degrees of tariff liberalisation, implying that relatively more gains were realized immediately before and after China's WTO accession in 2001, as compared to the more recent period when relatively little liberalisation was carried out. Farmers’ rising non‐agricultural income and increasing consumption shares of non‐agricultural products are important determinants of these positive average welfare effects. Moreover, welfare gains from tariff liberalisation are shown to be distributed unevenly across Chinese provinces and income levels, with farmers located in coastal provinces and at higher income levels gaining more than their counterparts in remote provinces and at lower income levels.     

When China strikes: Quantifying Australian companies' stock price responses to China's trade restrictions

In early 2020, China, Australia's top export market, unilaterally imposed trade restrictions on Australian barley, beef, coal, cotton, timber, copper and wine. However, convincing evidence regarding the effects of such trade restrictions on firms is scarce. Leveraging data on daily stock returns from 20 listed Australian and 32 listed Chinese firms that produce the restricted commodities, we provide the first systematic analysis of the firm-level economic impacts of China's trade restrictions on Australian and Chinese firms. We find significant adverse effects on Australian firms' stock returns, leading to almost 20% loss within 10 trading days; however, most firms' stock returns immediately rebounded. In contrast, Chinese firms usually saw significant positive stock returns, leading to almost 30% gains, and the positive abnormal returns continuously increased within 10 trading days. Media coverage and trade dependence substantially impact Australian and Chinese firms' stock returns—industries with stronger trade dependence on China saw greater losses in Australian firms' stock returns. Our results suggest that trade reallocation and deflection are two effective mitigation mechanisms for Australian exporters facing China's trade restrictions.     

中国新疆与哈萨克斯坦农产品贸易现状及潜力评价基于贸易引力模型的实证研究

目的 文章利用2004—2017年乌鲁木齐海关数据，研究中国新疆与哈萨克斯坦农产品贸易的现状、互补性及影响因素，挖掘中国新疆与哈萨克斯坦农产品贸易潜力，为进一步拓展双方农产品贸易提出建议。方法 采用产业内贸易指数和引力模型进行实证分析。结果 中国新疆与哈萨克斯坦农产品贸易规模总体处于增长态势，但贸易联系紧密度不高；中国新疆以出口水果、蔬菜等劳动密集型农产品为主，哈萨克斯坦主要出口畜产品、棉麻丝等资源密集型农产品；农产品贸易整体属于产业内贸易，在九大类细分农产品领域存在各自竞争优势，双方贸易需求基本没有重叠，互补性较强；双方经济总量、人口规模、农产品贸易联系紧密程度、空间距离等是影响农产品双边贸易的重要因素。结论 中国新疆与哈萨克斯坦农产品贸易潜力总体呈现增长趋势，尤其在“一带一路”倡议提出后，双方贸易潜力提升幅度明显。     

Trade policy, biotechnology and grain self-sufficiency in China

Over the past 20 years the growth of China's agricultural economy has been extraordinary. However, it seems unlikely that China will maintain self‐sufficiency in grains by 2005 without substantial intervention. We develop a CGE model to assess the options available to Chinese policy makers. We compare the welfare effects of import tariffs and domestic support, and explore the potential of biotechnology as a means to achieve self‐sufficiency through improvements in agricultural productivity. Our results indicate that the price interventions that would be required to maintain China's desired self‐sufficiency ratios are considerable, and are unlikely to be compatible with WTO accession. The productivity improvements required are also significant, and likely beyond the current potential of biotechnology.     

Effects of agricultural production fluctuations on the Chinese macroeconomy

Based on a macro-model framed in terms of China's agricultural, industrial, government and household sectors, this paper aims to identify the effects of agricultural production fluctuations on the Chinese macroeconomy over the period 1949–89. Using annual national time-series data, Granger-causality tests indicate that fluctuations in China's agricultural production have been a statistically significant cause of changes in other types of Chinese macroeconomic activity. Impulse response analysis shows that shocks in China's agricultural production were followed by analogous responses in national consumption, industrial output, investment, exports and income which peaked with a two-year lag and vanished after 6 years. Variance decomposition analysis indicates that changes in China's agricultural production were the most important determinant of changes in the level of national consumption and the second most important determinant of changes in the level of industrial production, national investment, exports and national income.     

Canada's beef exports: Border effects and prospects for market access

This paper examines the magnitudes of border effects on Canada's beef exports, and assesses the prospects for market access. The empirical analysis relies on a gravity model derived from a supply-based framework, and implements different econometric methodologies. It covers the conventional measurement of border effects that is determined relative to the intranational trade baseline. Also, it sets alternative baselines to estimate the wedge between the border effects on beef exports of Canada and those of other countries. The estimated parameters are used to carry out different scenarios to examine the tariff-related and nontariff border effects, and to evaluate the impacts of trade preferences for Canada's bilateral beef exports. The results reveal significant trade impediments facing Canada's bilateral beef exports to many large markets (e.g., EU-15, Japan, Republic of Korea, China, and Russia), and they often indicate that the effects of tariff reductions become considerably larger when coupled with reductions in nontariff impediments. Also, they underscore the significance of North American Free Trade Agreement (NAFTA)’s preferential market access for Canada's beef exports. The export opportunities for the Canadian beef industry that are generated through lower trade barriers would, however, decrease when trade barriers facing other beef-exporting countries are reduced.     

Policy reform and farmers' wheat allocation in rural China: a case study*

Market‐oriented policy reforms often have important effects on farm‐level grain production and utilisation decisions in developing countries. China's grain farmers are of particular interest because of China's importance in world grain markets and because of China's recent major agricultural policy advances and retrenchments. An empirical evaluation of market liberalisation among farmers located in two provinces in China on farm‐level wheat consumption, market sales and on‐farm storage during 1994 is presented. The results indicate that policymakers should account for such changes in farm household behaviour in designing and assessing the consequence of market liberalisation programs for agricultural sectors in developing countries.