China’s economy has experienced remarkable growth since the reforms were
initiated in 1978 and pushed forward by a number of subsequent policy initiatives. Since
the mid-1980s, rural township and village-owned enterprises development, measures to
provide a better market environment through domestic market reform, fiscal and financial
initiatives, the devaluation of the exchange rate, trade liberalization, the expansion of
special economic zones to attract foreign direct investment (FDI), state-owned enterprise
(SOE) reform, agricultural trade liberalization and many other policy efforts have
contributed to China’s economic growth. In response, the annual growth rate of gross
domestic product (GDP) was nearly 10 percent between 1979 and 2008 (NSBC, 2009).
Rapid economic growth has been accompanied by significant structural changes in
the economy. Rising income together with urbanization and other dynamics of the economy
have resulted in large changes in demand and consumption patterns (Huang and Bouis
1996; Fan et al. 1995). These changes have in turn formed part of the driving force that
stimulated structural changes in the economy. The share of agriculture in GDP declined
from about 40 percent in 1970 to 11 percent in 2007 (NSBC, 2008). The share of services
has risen over time. Within the agricultural sector, considerable structural adjustments have
also been observed as a result of changes in the pattern of food consumption.
While past changes in China have been wrenching for both China and the rest of
world, changes are expected to continue in the future—and in some cases the pace of the
change will accelerate. Continued growth, continued urbanization and continued dynamism
in China’s economy will affect all segments of the economy and all regions of the nation.
And, because of China’s size, continued growth, urbanization and marketization will likely
have profound impacts on the rest of the world.
In exploring what the driving forces of China’s economy might mean for the rest of
the world, it is worth observing that China has a large agricultural sector and large food
economy. The performance in these sectors is of great significance for future outcomes in
the rest of the world. As such, what happens inside China’s borders will also affect the
actions of policy makers globally.
The overall goal of this paper is to identify major changes in China’s
agriculture/food economy and their implications to both China itself and, more importantly,
to the rest of world. In order to achieve these goals, the rest of this paper is organized as
follows. The next two sections first discuss the major drivers of demand and then identify
and analyze the major drivers of agricultural supply. The paper’s next two sections then
describe a framework that we use to predict changes in supply and demand and trade and
measure the implications—first—to China, and—second—to the rest of world. The final
section concludes.