China Agricultural Economic Review

Bjorn Gustafsson; Ximing Yue

2012 China Agricultural Economic Review

doi: 10.1108/17561371211263310

Purpose – The purpose of this paper is to investigate rural people's perception of income adequacy in order to understand how it is affected by income in the county where the respondent lives, age of household members, as well as number of household members. The paper also aims to find out how poverty lines and poverty counts derived from people's perception relate to what has been previously reported. Design/methodology/approach – The Subjective Poverty Line (SPL) methodology is modified by asking one question on the amount of grains necessary for the respondent's household and another on the amount of cash necessary. Information was obtained from a large survey covering 22 provinces in 2003 and analysed using regressions analysis. Findings – People in high‐income counties perceive that more cash, but not grains are needed than those living in low‐income counties. Respondents perceive that economies of scale exist in amounts of cash needed for a household. They also perceive that young children need less grain than adults and that a schoolchild incurs higher money expenditures than an adult. A poverty line for rural China derived by the SPL methodology is higher than the low income line used by the National Bureau of Statistics for 2002. However, a poverty count based on the SPL methodology is similar to what has been reported. Practical implications – The findings suggest that poverty lines for rural China preferably should consider not only spatial differences in cost of living but also the number of household members in a non‐linear way. Originality/value – The paper describes the first application of the SPL approach to rural China.

Habtu T. Weldegebriel; Xiuqing Wang; Anthony J. Rayner

2012 China Agricultural Economic Review

doi: 10.1108/17561371211263329

Purpose – The purpose of this paper is to develop a theoretical model of price transmission from the farm to the retail sector, allowing not only for an interaction between oligopoly power, oligopsony power and non‐constant returns to scale in industry technology, but also allowing for the market power conduct parameters to vary in response to an industry‐wide exogenous shock. Also, the degree of price transmission under imperfect competition relative to that under perfect competition is evaluated. Design/methodology/approach – Conjectural variations are used to parameterize both seller and buyer market power conduct of the industry and then the equilibrium displacement approach is applied to solve a system of six structural equations which describe the demand for and supply of industry retail output and farm and marketing inputs. Findings – First, it is found that given empirical values of retail output demand elasticity, of farm and marketing inputs supply elasticities, of market power conducts, and of the returns to scale measure, the degree of price transmission under imperfect competition is greater than that under perfect competition. Second, it is found that the relative degree of price transmission under imperfect competition could be greater or smaller under the assumption of a varying market power conduct than one under the alternative assumption of a constant market power conduct, depending on whether market conduct is falling or rising, respectively. Originality/value – The paper makes two original contributions to the literature. First, it allows for an interaction between oligopoly power, oligopsony power and industry technology. Second, it allows both oligopoly and oligopsony power parameters to vary in response to industry‐wide exogenous shocks.

Xiaoou Liu; Rigoberto Lopez

2012 China Agricultural Economic Review

doi: 10.1108/17561371211263347

Purpose – The purpose of this paper is to apply the Becker‐Murphy theory of rational addiction to the case of carbonated soft drinks. The research aims to reveal the rational addiction evidence of carbonated soft drinks and derive policy implications under this evidence. Consumers' rational addictive evidence for carbonated soft drinks provides a warning for the Chinese government to regulate the industry, due to its bad health consequences. Design/methodology/approach – The authors empirically apply a time‐varying parameter model and scanner data set from 46 US cities. Findings – Empirical results provide strong evidence that carbonated soft drinks are rationally addictive, thus opening the door to taxation and regulation. Taking rational addition into account, estimated demand elasticities are much lower than previous estimates using scanner data, which implies a limited role for taxes to curb consumption but a strong role to raise revenue to fund health promotion programs. Originality/value – This is the first study to test the rational addiction nature of carbonated soft drinks, thus adding to the scarce economic literature on food addiction. Although the empirical results derived are based on soft drink consumption in the USA, China is experiencing a similar consumption increase in carbonated soft drinks as in the USA, in the examined period. Therefore, the lessons from the USA are also valuable for the public policy makers in China.

Shengfei Han; Pei He

2012 China Agricultural Economic Review

doi: 10.1108/17561371211263356

Purpose – The purpose of this paper is to develop a new approach to market analysis, and test how the China‐US soybean market integration and arbitrage efficiency have changed across 1995/1‐/2004/1 – a period covering strengthened government efforts to join WTO, and the institutional changes following WTO accession. Design/methodology/approach – The authors employ a regime‐switching model with parametric, semi‐parametric, and nonparametric measures to discern different market conditions in the sample period, as well as detect the structural shifts over time. Three types of data – expected prices, transaction costs, and trade flow – are used for the analysis. Findings – Results of the analysis indicate better integration over time, but deteriorating efficiency. The markets often departed from efficient arbitrage throughout the study periods, and counter‐intuitively worsened after China's elimination of quota in 1999, and accession to WTO in 2001. One other interesting finding is that the state monopoly practice in soybean trading during the early periods produced seemingly competitive equilibrium price relationships. Originality/value – The paper is an original work that provides policy implications regarding the impacts and effectiveness of government policies on China's international soybean markets, the remaining bottlenecks, and the challenge to both Chinese soybean farmers and the US exporters. The method of identifying trade variation in a price model and the combination of parametric and semi‐parametric analyses with comprehensive data further permits more accurate and intuitive interpretations previously unavailable.

Jin‐Tao Zhan; Yan‐Rui Wu; Xiao‐Hui Zhang; Zhang‐Yue Zhou

2012 China Agricultural Economic Review

doi: 10.1108/17561371211263365

Purpose – The number of farms engaged in grain production in China has been declining in recent years. Limited efforts have been devoted to examine why producers quit from grain production and how such exits affect China's grain output. Such information, however, is invaluable in understanding whether the exit from grain production should be encouraged and if so, how. The purpose of this paper is to identify the factors that influence farmers' decision to quit from grain production, with a view to drawing implications for devising policies to deal with such exits. Design/methodology/approach – Both descriptive statistics and econometric techniques are used to analyse a set of unique and comprehensive farm‐level survey data to identify key factors that affect farmers' decision to quit from grain production. Findings – Key factors that influence a farm to quit from, or stay in, grain production include: family size, the share of farming labour out of total family labour, per capita arable land, the proportion of land used for grain production, the share of family income from grains. It was also found that the level of grain prices and the sunk cost in farming, chiefly in grain production, also affect the likelihood that a household will stay or exit from grain production. Further, farmers in more economically developed regions are more likely to quit from grain production. Originality/value – The paper's findings clearly indicate that farms with a larger scale of grain production and earning higher income from grain are the major contributors to China's grain production. Potential exists for China to raise its total grain output if the land from those exiting farmers is readily made available to larger producers, enabling them to further benefit from the economies of scale.

Hualiang Lu; Shuyi Feng; Jacques H. Trienekens; S.W.F. Omta

2012 China Agricultural Economic Review

doi: 10.1108/17561371211263374

Purpose – The purpose of this paper is to investigate the effects of network strength, transaction‐specific investments and inter‐personal trust on business relationship satisfaction for small‐and‐medium‐sized enterprises (SMEs) involved in agri‐food processing and exporting in China. Design/methodology/approach – Survey data collected from 80 agri‐food SMEs in Jiangsu Province were used for empirical testing. The authors applied an ordered logit regression approach for model estimation. Findings – The results demonstrate that strong guanxi networks, high level of transaction‐specific investments and inter‐personal trust significantly contribute to a high level of relationship satisfaction for agri‐food SMEs in China. In addition, inter‐personal trust shows a moderating effect on the relationship between transaction‐specific investments and relationship satisfaction. Practical implications – Business relationships play a critical role in the modern market environment. Relational arrangements (based on guanxi and inter‐personal trust) should be further enhanced in order to yield satisfied business relationships for SMEs in China. Originality/value – The paper extends our understanding of relationship ( guanxi ) marketing, as well as marketing practices for agri‐food SMEs in China.

Ling‐Yun He; Wen‐Si Xie

2012 China Agricultural Economic Review

doi: 10.1108/17561371211263383

Purpose – There is a distinct separation of price discovery from pricing power in China's sugar spot and futures markets. The purpose of this paper is to identify the reasons and provide plausible explanations for this stylized phenomenon. Therefore, the research may deepen the understandings of the operational mechanisms and internal efficiency of China's sugar spot and futures markets. Design/methodology/approach – The authors analyze the historical spot and futures price time series from China's sugar spot market and China's Zhengzhou Commodity Exchange (CZCE) within a co‐integration framework. Findings – It is found that China's sugar spot market has the pricing power, even though the futures market leads the spot market in price discovery. The phenomenon of observed separation of price discovery in spot market from pricing power in futures market may be caused by: irrational speculation in CZCE sugar futures market; oligopoly and local government politics; or the operational efficiency of the wholesale spot market, especially for its comparative advantages of information accessibility in the sugar producing areas. The results are compared with other empirical findings in many other commodities markets to obtain deeper understandings. Originality/value – The paper uncovers and provides the earliest econometric evidence of the observed stylized phenomenon and also provides plausible explanations for this phenomenon.

J. Alexander Nuetah; Yitian Xiao; Pei Guo

2012 China Agricultural Economic Review

doi: 10.1108/17561371211263392

Purpose – The purpose of this paper is to provide readers with the main findings and conclusions of papers presented at the 2011 CAER‐IFPRI International Conference held under the theme “Is China entering a high food price era?” Design/methodology/approach – The authors conduct a desk review of papers presented at the conference and provide a brief summary of the analytical tools, and main findings and conclusions of each presentation. Findings – These reviews show that, while there seems to be an increase in the prices of agricultural commodities on the Chinese market, in real terms, these rises fall far below the increases in the prices of industrial commodities. Thus, expert views remain divided on whether China is entering an era of high food price. Originality/value – The discussions initiated by the conference theme aroused researchers' curiosities for further studies into understanding the current level of food prices in China.