Regional Comparative Advantage in China's Main Grain Crops

Abstract

This paper explores the regional comparative advantage in grain production in China directly according to production and associated costs. Two groups of indicators are used in the study. The first group of indicators includes Net Social Profitability (NSP) and Domestic Resource Costs (DRC), both measuring the net social welfare gained from one production activity against its opportunity costs at border prices. The second group of indicators includes Efficiency Advantage Indices (EAI), Scale Advantage Indices (SAI) and Aggregated Advantage Indices (AAI), which measuring relative yield and scale advantages in a region. The study reveals that the comparative advantage in main grain crops varies significantly across China. It implies that there exists great potential to improve resource allocation and to increase grain production through restructuring of the grain sector. The study also indicates that China is able to compete in the world market even if it as a whole has comparative disadvantage in producing some crops, as some of its provinces may still have comparative advantage in those crops. This implies that detailed analyses at provincial level are needed in projecting China's grain trade flow in the future.