Food Self-Sufficiency, Comparative Advantage, and Agricultural Trade: A Policy Analysis Matrix for Chinese Agriculture

We assess the comparative advantage and protection of China's major agricultural crops using a modified Policy Analysis Matrix (PAM) and 1996 to 1998 data. We consider the following commodities: early indica rice, late indica rice, japonica rice, south wheat, north wheat, south corn, north corn, sorghum, soybean, rapeseed, cotton, tobacco, sugarcane, and a subset of fruits and vegetables. Consistent with the intuition of the simple Heckscher-Ohlin model, the results strongly suggest that China has a comparative advantage in labor-intensive crops, and a disadvantage in land-intensive crops. Specifically, land-intensive grain and oilseed crops are less socially profitable than fruits and vegetables. Within the grain sector, high quality rice and high quality north wheat have a more comparative advantage than early indica rice and south wheat, respectively. The findings suggest that China's current grain self-sufficiency policy incurs efficiency losses. Our results shed light on likely changes in agricultural trade patterns in China, if accession to the World Trade Organization (WTO) takes place. We also stress the need for greater input productivity in grain production to improve its competitiveness if China keeps its food security policy.