The Effect of Climate Risk on China‘s Agri-food Trade

This paper investigates the effect of climate risks on China‘s agricultural and food trade. The motivation is to analyse the linking between various climate risks and agri-food sectoral trade using climate-agriculture-trade for China and provide more specific policies to mitigate the negative damage. We employ the Poisson Pseudo Maximum Likelihood with the High-Dimensional Fixed Effects model for empirical analysis. We construct an empirical model with features of climate risks and agricultural production. To be more climate specific, we extend climate risks into different types to better explain climate and agricultural trade. The panel data covers 31 Chinese provinces and five agri-food sectors from 2015 to 2019. The study finds that climate risks have significant effects on China‘s agricultural trade. Among them, droughts and floods suppress agri-food trade at the provincial level in China. However, different climate risks have various effects on different agri-food trade. The varying effects primarily play roles through the agricultural water usage of different provinces in China. After being affected by droughts, the import of agricultural products in the northern regions increases. However, the duration of sunshine in the northern regions is beneficial to agri-food trade, while the opposite occurs for the southern regions. Droughts have a clear negative effect on China‘s agricultural trade with non-high-income countries.