China’s income inequality and implications for food trade

1. China’s income inequality and implications for food trade Qingbin Wang Community Development and Applied Economics The University of Vermont

2. Outline • Introduction • Changes in China’s income & inequality • Effects of income on food demand • Implications for food trade • Conclusions

3. Introduction -- China: basic statistics -- China’s economic reform since 1978 -- Rural reform started in 1978 -- Urban reform started in 1983 -- Transition to a market economic system -- Impacts of the reform -- Economic growth -- Trade -- Income and living standard -- Problems and concerns -- Objectives of this study:

5. China’s basic statistics in comparison with the U.S. China U.S. • Area 9.6 m. sq. km 9.4 • Population 1.3 b. 0.29 • Pop. growth since 1990 1% per yr. 1% • Per capita GNP in 1998 $750 29,000 • Per capita PPP in 1998 $3220 29,000 • Index of openness (1980-98) 0.06 - 0.22 0.12 - 0.14 • Engel coefficient 0.38 - 0.46 0.12 • Economic system ? Market • History • Economic growth • Challenge of agriculture • Food market • Agricultural policy

6. China’s exports and imports ($ bil)

7. Changes in China’s income & inequality -- Urban per capita income -- Rural per capita income -- Urban-rural income gap -- Income inequality in urban and rural China

8. China’s average income: urban

9. China’s average income: rural

10. China’s urban-rural income gap

11. China’s urban-rural income ratio

12. China’s estimated Gini coefficients

13. Effects of income on food demand -- Changes over time: transition from grains to high value food products (e.g., meats, dairy, fruits, etc.) -- Evidence from cross-sectional data by income groups -- A case study: milk and dairy products

14. Per capita grain consumption

15. Urban per capita grain consumptionby income groups in 2002

16. China’s meat production

17. China’s milk production

18. Urban per capita milk consumptionby income groups in 1998 and 2002

19. Per capita consumption of sour milk and milk powder by income groups in 1998

20. Average number of refrigerators per 100 households in China

21. Income distribution and consumptions (Average number of TVs, bicycles and refrigerators per 100 urban households)

22. Implications for food trade -- China’s food demand and trade behavior are increasingly determined by consumer demand -- Potentials for U.S. food products in the Chinese market -- Challenges

23. U.S. agricultural trade with China

24. U.S. agricultural exports to China for selected HVPs

25. Number of McDonald’s restaurants in China

26. Price comparison for pork cuts & variety meats in China and the U.S. ($/lb) China price U.S. Price Loin 1.20 1.32 Lung 0.24 0.03 Pork stomach 2.16 0.54 Pork kidney 1.54 0.17 Lard 0.72 0.25 Pork feet 0.87 0.20 Boneless butt 1.20 0.81 Nape of neck with bone 1.32 0.10

27. Comparison of per capita milk and milk product consumption (kg)

28. A survey in Guangzhou in 1996

30. Conclusions -- China’s per capita income and income inequality have increased significantly since the reform -- Food consumptions are closely related to per capita income -- China’s food market and trade behavior are increasingly determined by consumers -- There are both potentials and challenges for the U.S. in the Chinese market