The Wool Trade And Its Influencing Factors In China

As the world's largest wool producing, processing and trading country, wool industry in China plays an important role in the world. Nevertheless, wool industry in China lacks the competitiveness in the international market. High degree of external dependence and weak international competitiveness make wool industry in China large but not strong, which brings the domestic wool market to be vulnerable to the influence of international market. With the advancement of trade liberalization, the wool market in China is in continuous opening-up process. Since 2002, imported wool has been subject to tariff quotas control in accordance with the WTO agreement. It ensures that China could import commitment volumes of wool with a lower tariff while provide market access opportunities for foreign wool. Moreover, in accordance with the free trade agreement of Country Specific Tariff Quotas, China shall grant duty-free treatment to imports origin wool from New Zealand and Australia, two main import sources, since 2009 and 2016 respectively. It's inevitable that the domestic trade and industry development will face greater shocks of international market in the future with the gradual, planned and targeted opening up of wool market in China. Therefore, it is essential to conduct a comprehensive research on wool trade and its main influencing factors in China.This paper is divided into three main parts as follows. Firstly, the paper generalizes and summarizes the wool production and trade in the world and China. Secondly, the paper does a research on the causes of wool trade change in China by using Constant Market Share Analysis. Thirdly, a depth research on influencing factors of wool import and export trade in China has been done. To finish this part, the following steps have been performed:first, using import demand model and gravity model, the paper analyzes the factors influenced on wool import in China; second, based on the estimated export competitivemess of wool in China, the paper summaries the forming factors of export competitiveness of wool in China by using Michael Porter Diamond Model, and further uses gravity model to analyze the influencing factors for wool tops export; finally, combined the potential of processing wool needs with wool supply capacity, the paper expects the wool trade in China in the future, and pays a specific attention on the influence of China-Australia Free Trade Agreement on wool trade in China by using GTAP model. This paper builds a more complete analysis framework on factors of influencing the wool trade in China and carries out some different treatments and procedures compared to previous research, which can not only tease out causes of change in wool trade effectively, but also provide ideas and decisionmaking basis for wool production and trade policies.Main conclusions of the paper are:(1) Both world wool producing area and yield distribution show big change. China has overtaken Australia to become the largest wool producer in the world, and there are some changes in wool producing varieties and area structures. As for trade, world's wool trade is greasy-oriented, and trade areas distribution has changed a lot. Wool trade deficit in China has lasted for many years, while mainly import greasy wool and export wool tops. (2) Trade deficit of greasy wool is wider because of not only increased import volume which caused by inadequate domestic supply and strong competition of foreign wool, but also declined export volume caused by lack of competitiveness and high dependency on world market. As for degreased wool, fluctuation of trade deficit owes to increased import volume which caused by inadequate domestic supply and strong competition of foreign wool, and increased export volume caused by growth of world demand, effect of export structure and weakness of competitiveness. In terms of wool tops, trade deficit turns into a surplus because of reduced imports caused by lack of competitiveness, while world demand growth and strong competitiveness promote a substantial increase in export. (3) From the view of import, the expenditure elasticities of Chinese demand for wool from major import countries are flexible, and the price elasticities of Chinese demand for greasy wool and degreased wool lack flexibility while for wool tops is flexible. At last, wool import is affected by many factors, and there are some differences among different varieties. The import of greasy wool and degreased wool are mainly influenced by the proportion of fine wool production and the number of sheep in year-end in China, while the import of wool tops is mainly affected by price. (4) From the view of export, only wool tops has a comparative and competitive advantage in exports while presents high export similarity with other countries. Factors involved in the Diamond Model all promote the formation of competitiveness in wool tops. The export of wool tops is mainly affected by the development of Chinese textile industry and economic, arrangement of trade liberalization, price and distance. (5) In the future, the import volume of wool in China will increase slowly. After the establishment of Sino-Australian FTA, wool will be more imported from Australia and export will be distributed to non-major destinations. Furthermore, if wool industry in China will be damaged by large import volume from Australia, the possibility of using trade remedy measures is little.