However, the real value of China’s agricultural trade grew at only 2 percent per year, on average, from 1980 to 1996. The overall composition of China’s agricultural trade is presented in Tables 1 through 3. Tables 1 and 2 report exports and imports, respectively, over the five year 1992-96 time period. For the purposes of summarizing these extensive trade data, we have broken the agricultural trade figures in Tables 1 and 2 into four categories: grains, horticultural products, animal products, and other.China’s total agricultural exports were valued at $10.6 billion in 1996. Exports of grains were valued at $1.4 billion in 1996 and edible oil seeds and oils accounted for most of these grain exports. Maize exports were near zero in 1995 and 1996 . Earlier, in 1992 and 1993, maize exports were much more important and maize alone accounted for 13 percent of total agricultural exports in each of those two years. Prior to the export blockade, grains accounted for over 27 percent of total agricultural exports. In 1996, China’s horticultural exports totaled $5.1 billion, up from $3.5 billion in 1992. As a share of total agricultural exports, horticultural products increased from 39 percent in 1992 to 48 percent in 1996. Fruit and vegetable products are by far the most important component of horticultural exports, followed by “other crops” and vegetables . Exports of animal products also grew over this 1992 to 1996 time period,plastic square flower bucket from $2.0 to $3.4 billion, and from 22 to 33 percent of total agricultural exports. Unlike, grains and horticultural products, no one commodity has dominated animal product exports.
Processed poultry, processed swine, and raw wool were the most valuable exports in 1996 but in total these three commodities accounted for less than 15 percent of animal product exports.Turning to Table 2, we find that China’s agricultural imports grew from $4.9 billion in 1992 to $9.9 billion in 1996. Grains typically make up over one-half the value of imports, with wheat and vegetable oils and fats the major imports. In 1992, wheat plus vegetable oils and fats made up over 40 percent of total agricultural exports, with wheat at 30 percent and vegetable oils/fats at 10 percent. In 1996, these two commodity groups still had a 40 percent share of imports, but wheat’s share fell to 19 percent and vegetable oils/fats increased to 21 percent. From 1992 to 1996, the value of horticultural imports increased from $0.8 to $1.4 billion, but horticultural’s share in total agricultural imports fell from 18 percent to 14 percent over this period. Fruits tend to be the most important horticultural import, but imports are diversified across this product grouping. The share of animal products in total imports also fell over this period from 22 percent to 17 percent . Raw wool is by far the most important item in this group, accounting for over one-half of animal product imports. The data in Table 2 are the official imports and for some commodities they significantly under report the value of trade due to smuggling from Hong Kong. This is especially true for horticultural and animal products and this issue is discussed below.
We can utilize Table 3 to comment on Wang’s finding that China’s pattern of agricultural trade is consistent with its resource endowment, importing land intensive bulk commodities and exporting labor intensive horticultural and consumer ready products. For this purpose, we have aggregated China’s agricultural trade into the same categories defined by Wang : bulk commodities, consumer ready products, horticultural and other food products, and processed intermediary products. The make-up of these four categories is explained in the notes to Table 3.Our database for Table 3 covers the 1992 to 1996 time period, whereas Wang’s analysis was based on 1995 and 1996 data alone. Because of the export blockade, we believe the 1992 to 1994 time period gives a clearer picture of the economic forces within China that are influencing trade patterns, but of course it is still a very short time period. With the information revealed by these additional years, the conclusions by Wang are found to be questionable. Consider the top panel of Table 3. This panel shows that from 1992 to 1994, bulk commodities were indeed an important component of exports, accounting for anywhere from 25% to 29% of China’s exports. As expected, there was a sharp decline in the share of bulk commodity exports in 1995 during the blockade. In 1995 and 1996, China became a net exporter of rice and maize, shifting away from a net exporter position in the 1992-1994 time period. From 1992 to 1996 there was little change in the percentage of exports explained by two of the categories; horticultural and other food products, and processed intermediary products. The pattern of imports over the 1992 to 1996 time period is shown in the bottom panel of Table 3. The most striking result associated with these data is the lack of any trend, measured by the relative import percentages shown in the bottom one-half of the panel. Either bulk commodities or processed intermediary products account for around 90% of China’s official imports of agricultural products. The bulk imports are heavily concentrated in grains, vegetable oils, and cotton. In 1996, these commodities accounted for over 50% of the value of imports. In recent years, China has been the world’s largest importer of cotton, with annual imports average about 800,000 mt.
However, in 1998/99 China will revert to becoming a net cotton exporter. China also has excessive stockpiles of grain and cotton. For instance, for 1998/99, China’s cotton stockpile is estimated to be 3.3 mmt, or 40 percent of the world’s stocks.It is somewhat puzzling that the share of land-intensive agricultural exports such as grain and cotton has not declined, because China does not have a comparative advantage in land-intensive commodities. One possible explanation to this puzzle could lie with the domestic “two-tier” pricing system. The “two-tier” price system may cause trade patterns to diverge from what might be expected from domestic resource endowments and this possibility has not been adequately examined in the literature. The potential trade distortions caused by the domestic pricing policy also has important implications for future trade policy reform. More than 95% of China’s marketed cotton and 50% of the marketed grain6 is procured by the government. Under the “two-tier” pricing system, COFCO in the case of grain, and China’s National Textiles Import and Export Corporation in the case of cotton,plastic plant pot could earn profits from exporting even when the domestic free market price is lower than the world price. COFCO and CHINATEX will have an incentive of export grain and cotton whenever the world price PW > PP + marketing costs + taxes. This is the case even if the domestic free market price PF > PW . This was true in 1993-94 when the domestic free market prices rose significantly as the slowdown in domestic production created excess domestic demand, and at the same time, China’s grain exports reached historical records. In 1993-94, domestic grain prices increased dramatically and the State Grain Bureau could have sold grain into the domestic market to stabilize prices, but instead they increased exports and reduced imports. Partly to override these perverse incentives, the central government eventually imposed a grain export embargo in 1995. More recently,COFCO has exported corn to world markets, even though world prices were below domestic free market prices.7 Figure 1 displays China’s net agricultural exports for four aggregate groups: grains, animal products, horticultural products and “other.” Although there are erratic swings in the value of exports, China continues to be a net exporter of grains . The data in Figure 1 show exports of horticultural products have grown, and these are products where China probably does have a comparative advantage. However, China’s official trade data do not account for smuggling. If net exports of horticultural products were adjusted for imports smuggled into China, the rise in horticultural exports on the part of China would not be so strong. To help illustrate this point with regard to smuggling, Figure 2 shows net exports of fruits and vegetables from China, Hong Kong, and the two combined. We see from Figure 2 that both Hong Kong’s imports and China’s exports of fruits and vegetables have risen significantly in the past ten years. However, China’s exports did drop off in 1996 and 1997.
If we combine the two, we find that the 1997 value of net exports into the region was not much different from that of the late 1980s. China tends to directly import bulk agricultural commodities, whereas a large share of the processed food and consumer ready products are first imported into Hong Kong and then re-exported to mainland China. For example, almost all of the U.S. meat, fruit, and vegetable exports to China are routed through Hong Kong. Despite a relatively small population of only 6 million, Hong Kong imported over $14.2 billion in agricultural products in 1996 more than official imports into mainland China. Hong Kong ranks as one of the top Asian markets for farm products, and it is the second largest Asian market for U.S. horticultural products. As an additional measure of its importance, Hong Kong imports 20 percent of U.S. fruit and vegetable exports and it has been a growing market. However, these imports are not all for domestic consumption purposes and, in fact, Hong Kong officially re-exports about 55 percent of its agricultural imports. There is a large two way trade in agricultural products between Hong Kong and China. Hong Kong’s imports from China include poultry, fruits, vegetables, rice, and nuts. At the same time, Hong Kong exports substantial amounts of poultry, fruits, vegetables, nuts, oil seeds, and cotton to China. In addition to the legal shipments from Hong Kong to China, there is a large illegal trade . Undocumented shipments of fresh fruit may account for up to 70 percent of Hong Kong’s imports . For example, the value of chicken parts smuggled into China alone could amount to over $300 million per year . It is difficult to estimate the total dollar value of undocumented agricultural exports from Hong Kong to China, but it could exceed $1 billion per year. For “other” primary products, the subgroups that were in surplus in 1980-82 accounted for 40.34% of the value of normalized agricultural trade in 1994-96. Of these goods, 15.74% of trade moved to balance by 1994-96 and 10.34% moved to a deficit. Adding up the diagonal elements in Table 5, we find that 44.4% of the trade in manufacturing was persistent, from 1980 to 1996. These results suggest less persistence in “other” primary products trade compared to agricultural trade. Turning to manufacturing, in Table 6, the subgroups that were in surplus in 1980-82 accounted for 31.82% of the value of normalized agricultural trade in 1994-96. Of these goods, 4.93% of trade moved to balance by 1994-96 and 0.81% moved to deficit. Adding up the diagonal elements in Table 6, we find that 65.5% of the trade in manufacturing was persistent, from 1980 to 1996. These results suggest almost as much persistence in manufacturing trade compared to agricultural trade. As a statistical measure of trade persistence, we can use a transformation of the standard chisquared test, Cramer’s C-statistic, suggested by Carolan et. al.. The C-statistic lies between zero and one, with one representing complete association between the beginning and the ending trade balance. From Tables 7, 8 and 9 we find the C-statistic is 0.66 for agriculture, 0.39 for other primary products, and 0.54 for manufactures. These results suggest there was the least change in the trade balances over the 1980-1996 time period for agriculture, because the C-statistic is relatively high. For manufacturing and other primary products the results suggest there was relatively more change in the trade balances over the time period studied, because the C-statistics are lower.Rather than just comparing the beginning and ending time periods, we can construct histograms for agriculture and manufacturing, based on the number of years each subgroup runs a surplus .