Changing Trends Of Wheat Marketing In China

Wheat is the second largest grain in China and its output accounts for 25 percent of total grain production. The quality of Chinese wheat is generally low. Lower quality wheat meets well the most of domestic demand. Demand for higher quality wheat has been growing rapidly since 1980s. A large part of high quality wheat demanded in China, however, has to depend on the import. For example, China had almost imported all its needed high quality wheat by the middle of 1990s. Although the domestic production of high quality wheat has been increasing, China has continued to rely its large portion of high quality wheat demand on the international market. On the other hand, the domestic production of low (or normal) quality wheat has exceeded market demand, in particular, the internal low quality spring wheat has few market demand.The regional patterns of wheat production and consumptions determine the necessity of wheat regional circulation or trade. The wheat regional circulation in terms of trade flow direction and quantity largely depends on the gaps between regional production and consumption. With continuous changes of the regional production and consumption, the regional trade has also been changing. The regional trade patterns follow the fluctuations of production among years and over seasons and the changes in wheat consumption that are resulted from income growth, and the changes in relative food prices and consumption patterns.The objective of this study is to have a better understanding of changing trends of wheat marketing in China. The factors that determine wheat circulation and the challenges of China's WTO accession on China's wheat marketing are discussed. Data used in this study are from based on our primary wheat marketing survey and secondary data on regional wheat production, consumption, and trade. The primary wheat marketing survey was conducted in major wheat production province (Henan) and main wheat importing areas (Guangdong, Chongqing, and Shanghai). The comparative advantages or policy distortion in wheat is analyzed through computation of nominal protection rates (NPR).The result shows that the changing patterns of wheat regional circulation reflect the evolution of China's grain marketing reform. The statistic data indicate that the share of state owned grain circulation system in domestic grain marketing has declined from 90 percent in the early 1980s to less than 50% in 2003. On the other hand, non-state owned wheat marketing enterprises (private or collective) have emerging. They are gradually taking over the wheat regional trade that originally was dominated by the national or local grain bureaus. Our analysis also shows that the changes in wheat prices in major wheat production regions have been closely associated with the price changing in major wheat importing regions. The price difference between wheat production area and importing area is very close to the transportation cost. The government's interference to domestic wheat trade is very low. The wheat price signal is not distorted in transferring processof domestic market, so the market is highly integrated and efficient. HuangHuaiHe basin and Southwest China are the only two regions in which wheat production exceeds their consumption and therefore they are major wheat exporting regions in China. From 1992/93 to 2002/03. however, exporting wheat from wheat surplus regions to wheat deficit regions decreased, while the wheat import in wheat deficit provinces increased. This reflects the changing trend of wheat production and demand in China. Before 2000 the domestic wheat wholesale prices were always above the international market price (CIF price) with the highest value (96 percent) of NPR. The NPR value has been decreasing since 1988, domestic wheat price is approaching the international prices. Till 2000, NPR decreased to 18 percent (which means domestic price was only 18 percent higher than international price). Although the ratios of domestic prices of high quality wheat to international wheat were unstable from January...