This report is prepared for the Council of Agriculture, Executive Yuan, Taipei,
Taiwan. This study comprises of two parts. In the first part, the effort is made to investigate
the latest development of food consumption behavior in urban Mainland China. A two-stage
LA/ AIDS model with different specifications in terms of time period and regional coverage
is used to estimate food demand elasticities with the aggregated provincial household data
from the State Statistical Bureau, Mainland China. The results show that most food items are
price elastic, reflecting that the Chinese consumers are becoming more responsive to price
signals in their food consumption. The surging grain prices and high grain price elasticities are
the main reasons for the decreases in grain consumption observed in recent years. Chinese
urban consumers are expected to increase their spending on fruits, vegetables, spirits, and
cigarettes, poultry, and aquatic products when their income increases. However, the grain
consumption will still account for a large portion of consumers' additional income, though
its consumption in quantity will decrease.
The empirical results also display the differences in consumption behavior among
regions and structural changes over time. In recent years, urban Chinese consumers spent
more on meat but less on grain when their income rose. Consumers in the coastal region tend
to spend more on vegetables, fruits and melons, poultry, aquatic products, and fresh milk
than those in the inland region.
In part two of the study, we incorporate our estimates of food demand elasticities
from the first part of this study and other estimates available in the literature into the CPPA-Mainland China model---a simulation model developed by the Economic Research Service
of U.S. Department of Agriculture. Using alternative assumptions on the growth rates of the
yields of major crops, urbanization and income growth, we develop five scenarios to simulate
agricultural production, consumption, and trade in Mainland China for the next 10 years.
The results indicate that Mainland China is expected to import a large quantity of grains,
especially coarse grain, and the import volume will be more than twice as much as the largest
import volume in its history, i.e., more than 38 million tons by 2005. A higher economic
growth will increase the net import quantity of grains to 61 million tons in 2005. However,
our results also show that grain import will be far less than 300 million tons by year 2030
as projected by Lester Brown.
Our projection shows that Mainland China may export up to 1. 54 million tons of rice
by 2005. This figure may seem very high in comparison to Taiwan's domestic production of
1.57 million tons in 1996. However, we note that the projected net export of rice in 2005 is
only 0 .18 million tons. It is not obvious whether or not the projected rice export from
Mainland China will impact the rice sector in Taiwan. In recent years, Mainland China has
been exporting high quality rice from the northeast region and importing lower quality rice
in the south. Due to its vicinity to China's northeast region and its strong demand for high
qaulity rice, Japan has been the major market for China's rice export. For example, in 1994,
Japan imported 640 million kg of husked rice from Mainland China, representing 98.7% of
China's total export of husked rice. In the same year, almost half of Mainland China's
exported fine rice (422 million kg) went to Japan. Therefore, if Mainland China continues to
export rice in the future, it should target Japan as its major market. In addition, even after
Taiwan joins WTO, its rice market will be opened only gradually. Our view is that Taiwan's
rice sector will be more likely affected by the world market situation than the possible export
from Mainland China.