Regional comparative advantage in grain production in China
Date
2002
Authors
Zhong, Funing
Xu, Zhigang
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Abstract
Since the end of 1996, Chinese agriculture has produced a surplus of many major products, which has led to sharp decreases in farm prices and the stagnation of farmers’ income. To deal with these problems, the Chinese government has called for a ‘strategic adjustment’ in the structures of agriculture and the rural economy. The goals of this strategic adjustment are to meet changing market demands and increase farmers’ incomes by improving efficiency in resource allocation among regions and sub-sectors, and by increasing the variety and improving the quality of farm product. A major component of the strategic adjustment is the restructuring of the grain sector, which still accounts for a lion’s share of the crops sector in general. Re-allocation of the production of each major grain crop among the regions on the basis of regional comparative advantage is likely to increase average yields and decrease average costs. Thus, improved efficiency in resource allocation will bring about increases in farmers’ incomes. Also, since competition in the world commodity market is largely based on price, any significant reduction in China’s grain production costs will improve its position in the world grain market. It is widely agreed that years of government intervention and underdeveloped infrastructure have prevented regional comparative advantages in the grain sector from being realised. For the same reasons, inter-regional trade and international trade also do not reveal yes regional comparative advantages. Thus, domestic resource cost (DRC) is used as a measure of underlying, but not yet realised, regional comparative advantages in the Chinese grain sector. The purpose of this study is to make suggestions regarding the desired direction for structural adjustment of grain production in each province, and to discuss the implications of the proposed restructuring.
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grain production, China, regional comparative advantage, agricultural trade
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