Do China's agricultural policies matter for world commodity markets?

Abstract

PurposeThe purpose of this paper is to quantify the implications of China's recently adopted agricultural policies on domestic and international commodity markets.Design/methodology/approachA systematic, quantitative analysis is applied to address whether China's recent trade and production policies distort China's domestic and international commodity markets. The paper provides a clear picture of how trade‐restricting policies affect markets using a 42‐country partial equilibrium global dynamic agricultural simulation model.FindingsThe paper shows that recent agricultural policy reforms increase China's production slightly, causing imports to decrease while exports decline because of input subsidies, export taxes and the reduction of export value added tax rebates. Domestic prices to consumers decrease in real terms. The effects on world markets are small as the set of policies adopted partially offset each other in the international arena.Research limitations/implicationsThe paper indicates that the adoption of the policy reforms lower price levels domestically and benefit lower income urban and rural households, whose diets are largely based on rice and wheat as staple foods. Future model enhancements should include measures of producer and consumer welfare in order to capture the total impacts of policies and policy changes in China.Originality/valueThe paper quantifies the potential implications of the recent agricultural policy reforms in China. This contributes to the investigation of the effects of these policies implemented by the Chinese Government to achieve the country's policy objectives. Owing to the dynamics of China's policy implementation an in‐depth analysis sheds light and contributes to capturing the impacts of policy reforms on the domestic and international markets.