The Impacts Of Trade Liberalization On China's Soybean Industry

Soybean is the bulky agricultural product whose trade liberalization was implemented earliest in China. In 1996, China turned from a net export country for soybean to a net import one. Afterwards, China's soybean import quantity has been increasing. In 2001, it amounted to 1367.8 million ton, which is equal to 88.8% of domestic production. The large amount of import soybean has caused tremendous impact on China's domestic soybean market. For example, the level of domestic soybean retail price has been declining from 1996. In 2002, it was as high as 84 percent of that of 1996. To avoid the negative effects of soybean trade liberalization, Chinese government has made and carried out some countermeasures.The main purposes of this study is to (a) measuring and evaluating the impacts of trade liberalization on China's soybean industries; (b) estimating and assessing the impacts of government's current or possible industrial policies on China's soybean industries.To achieve the purposes mentioned above, the study designs the following objectives: (1) identifing the basic characteristics of China's soybean economy, including the trend and fluctuation feature of China's soybean production, the consumption mode of China's soybean, the situation of China's soybean trade, the status of China's soybean in international soybean market, and the comparision of the yield, production costs of China's soybean with other main soybean production nations; (2) developing an econometric model to simulate and project China's soybean products' markets; (3) estimating supply response functions and demand functions of China's soybean products, and calculating these products' supply and demand elasticites; (4) evaluating the impacts of trade liberalization on China's soybean industry; (5) assessing the impacts of government's current or possible industrial policies on China's soybean economy.Based on the partial equilibrium theory and compariable static theory, the author developed China's Soybean Industry Policy Simulation and Projection Model (CSIPSP). The model is a multi-markets partial equilibrium model, covering six products such as soybean, corn, rapeseed, soybean cake, soybean oil and rapeseed oil. It captures the maineconomic interrelations of China's soybean industries. Using the model and the equilibrium displace model derived from it, the impacts of exogenous shocks on soybean industy can be simulated and projected, including impacts on production, consumption, price, import and export. Then the changes of consumer's welfare and supplier's welfare can be derived from the simulation results.Using updated data, the author estimated the main parameters of the CSIPSP model, while some orther parameters were cited from several related literatures. In supply side, the acreage supply response functions of soybean, corn and rapeseed were estimated, and the own price and cross price elasticities of these three commodities were derived from the estimated equations. The yield supply response and factors demand equation systems of soybean, corn and rapeseed were estimated, in order to obtain the own price elasticites of yield supply. In demand side, to get the own price, cross price and income elasticites of demand, several related demand equations were estimated.Supply response and demand analyses revealed that: (1) besides its own price, the sown acreage of soybean is significantly affected by the price of corn, which was main competitive crop of soybean in China. (2) Soybean acreage supply is inelastic, both values of its own price elasticity and cross price elasticity to com lie between -0.2 to -0.1. (3) The value of the own price elasticity of soybean yield is very small, only 0.051. (4) Demand of food soybean is also inelastic, the values of its own price elasticity and income elasticity is -0.246 and 0.379 respectively.To evaluate the impacts of trade liberalization and Chinese government's possible industrial policies on China's soybean industries, the study specified six simulation scenarios, which can be classified into three kinds such as baseline scenario, trade liberalization scenario and industrial policy adjustment scenario. The simulation results and welfare effects of related policies are as follows:(1) The changes of basic exogenous variables such as GDP and population will directly increase the demand for soybean products. Eventually, the demand quantities for soybean, soybean cake and soybean oil will increase by 9.56%, 14.39% and 7.85% respectively, the price by 4.85%, 6.55% and -10.7% respectively, and the domestic supply quantities by 1.72%, 14.42% and 14.42% respectively.(2) The trade liberalization of soybean, soybean cake, soybean oil and rapeseed oil will improve the national welfare as a whole, but have different effects on different interest groups. Beasue of trade liberalization, the domestic market prices of soybean, soybean cake...