Biotechnology Boosts to Crop Productivity in China and Its Impact on Global

China is developing the largest public plant biotechnology capacity outside of North America. The list of GM technologies in trials, including rice, cotton, tomato, wheat, potatoes and peanuts, is impressive. At the same time there is an active debate on whether China should continue to promote its GM biotechnology and when China should commercialize its GM food crops. Answers to these questions are of critical importance for policy makers and industry. This paper provides an economy-wide assessment of these issues and analyses the impact of adopting GM crops on production, trade and welfare of China and the rest of world under various scenarios. A main feature of this paper is that productivity impacts of GMOs are based on empirical micro-level data for the cotton and on field trial data for rice in China. Biotechnology leads to crop specific factor biased technical change, and our scenarios take this important aspect fully into account. A second feature is the thorough improvement of the database of the Global Trade Analysis Project (GTAP) model that incorporates the most updated information (up to 2001) on the Chinese economy and detailed information on factor shares of inputs by each agricultural commodity. Third, the representation of inter-sectoral and of bilateral trade linkages between world regions in the GTAP model allows us to study a wide range of trade implications. Furthermore, a baseline for the period 2002-2010 is constructed that includes China’s WTO accession and the MFA phase, with Version 5 data of the GTAP model. Our results indicate that the development of biotechnology has an important impact on China’s production, trade and welfare. The gains from adoption Bt cotton and GM rice are substantial. In the most optimistic scenario, where China commercializes both Bt cotton and GM rice, the annual welfare gains amount to an additional income of about 5 billion US$ by 2010. The estimated macro economic welfare gains far outweigh the public biotechnology research expenditures. For food crops we also investigate the possible impact of import restrictions pertaining to GM rice imposed by Japan, Korea, the EU and South East Asia and the impact of labeling of imported soybeans in the face of recently (March 2002) installed Chinese regulations. The results indicate that most gains occur inside China, the impact from trade restriction imposed by other countries is minimal. Labeling will significantly lower the welfare gain from GM food development. Policy makers should put less weight on the international dimension in making their decisions on biotechnology development.