Fred Gale

Food demand in China: income, quality, and nutrient effects

Purpose - Chinas remarkable income growth has changed the food landscape in recent years. Chinese consumers are demanding greater food quantity and quality and changing the nutrient content of their diets. Most food demand studies are based on data from earlier time periods before these structural changes had taken hold. The purpose of this paper is to show how the rapid change in food markets and surprisingly slow growth of food imports warrants a new assessment of food demand in China. Design/methodology/approach - Engel equations measuring elasticities of food quantity and quality purchases with respect to household income are estimated. These estimates are then converted to nutrient elasticities to show how the availability of nutrients varies with income based on the Engel demand relationship. Findings - The income elasticities diminish as income rises. Households in the top tier of the income distribution appear to have reached a saturation point in the consumption of most food items. As income rises, most additional spending is on foods with higher unit values that may reflect better cuts of meat or branded items. The pattern of food purchases for households at different income levels suggests that protein, saturated fat, and cholesterol intake rises with increased income. The change in diets prompted by rising income is most pronounced for low-income households. Originality/value - This paper applies a unique approach to measure income, quality, and nutrient elasticities within the same framework of Engel relationship. The finding has important implications for opening new market opportunities of imported foods and understanding dietary change in China.

Financial Reforms Push Capital to the Countryside

In the past, rural finance was neglected. Now China has utilized its abundant capital to recapitalize rural credit cooperatives, increase financing for agricultural commodity procurement, and promote microlending on an unprecedented scale. It has begun experiments in creating new village banks, loan guarantee companies, and formalizing informal lenders. Restructuring of institutions appears to have addressed some of the most egregious problems that existed in earlier decades, but the basic structure of the rural financial system is unchanged. The overarching theme of reforms appears to be to push more capital into rural areas.

Using food prices and consumption to examine Chinese cost of living

This paper considers two approaches to examining potential bias in Chinas consumer price index: (i) inferring true changes in cost of living from consumer behaviour; and (ii) creating alternative price indices to compare with official indices. For (i), our semi‐parametric estimates agree with the recent finding of a large understatement in increases to the true cost of living. For (ii), we focus on food prices and explore potential causes of bias. We find some evidence of a new‐good bias. Chinas large‐scale migration also causes changes in the cost of living that are not reflected in the consumer price index.