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Do China's agricultural policies matter for world commodity markets?

  • Jim Hansen
  • Francis Tuan
  • Linxiu Zhang
  • Agapi Somwaru

Purpose – The purpose of this paper is to quantify the implications of China's recently adopted agricultural policies on domestic and international commodity markets. Design/methodology/approach – A systematic, quantitative analysis is applied to address whether China's recent trade and production policies distort China's domestic and international commodity markets. The paper provides a clear picture of how trade-restricting policies affect markets using a 42-country partial equilibrium global dynamic agricultural simulation model. Findings – The paper shows that recent agricultural policy reforms increase China's production slightly, causing imports to decrease while exports decline because of input subsidies, export taxes and the reduction of export value added tax rebates. Domestic prices to consumers decrease in real terms. The effects on world markets are small as the set of policies adopted partially offset each other in the international arena. Research limitations/implications – The paper indicates that the adoption of the policy reforms lower price levels domestically and benefit lower income urban and rural households, whose diets are largely based on rice and wheat as staple foods. Future model enhancements should include measures of producer and consumer welfare in order to capture the total impacts of policies and policy changes in China. Originality/value – The paper quantifies the potential implications of the recent agricultural policy reforms in China. This contributes to the investigation of the effects of these policies implemented by the Chinese Government to achieve the country's policy objectives. Owing to the dynamics of China's policy implementation an in-depth analysis sheds light and contributes to capturing the impacts of policy reforms on the domestic and international markets.

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Article provided by Emerald Group Publishing in its journal China Agricultural Economic Review.

Volume (Year): 3 (2011)
Issue (Month): 1 (January)
Pages: 6-25

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Handle: RePEc:eme:caerpp:v:3:y:2010:i:1:6-25
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  1. Colby, Hunter & Diao, Xinshen & Tuan, Francis, 2001. "China's WTO accession," TMD discussion papers 68, International Food Policy Research Institute (IFPRI).
  2. Heerink, Nico & Kuiper, Marijke H. & Xiaoping, Shi, 2006. "China's New Rural Income Support Policy: Impact on Grain Production and Rural Income Inequality," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25625, International Association of Agricultural Economists.
  3. Huang, Jikun & Wang, Xiaobing & Zhi, Huayong & Huang, Zhurong & Rozelle, Scott, 2011. "Subsidies and distortions in China’s agriculture: evidence from producer-level data," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(1), March.
  4. Xiwen Chen, 2009. "Review of China's agricultural and rural development: policy changes and current issues," China Agricultural Economic Review, Emerald Group Publishing, vol. 1(2), pages 121-135, May.
  5. Lars Brink, 2009. "WTO Constraints on Domestic Support in Agriculture: Past and Future," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 57(1), pages 1-21, 03.
  6. Lohmar, Bryan & Gale, H. Frederick, Jr. & Tuan, Francis C. & Hansen, James M., 2009. "China's Ongoing Agricultural Modernization: Challenges Remain After 30 Years of Reform," Economic Information Bulletin 58316, United States Department of Agriculture, Economic Research Service.
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