The Transmission of International Food Commodity Prices to China

He Shuquan
2018 Financial Markets Institutions and Risks  
Food commodity prices stability is a great concern in developing countries. The food commodity prices spike during 2007-2008 has put many developing countries short of food supply. Food has been the key issue in China. In this paper, we aim to study the price stability of China's three main food commodities, examining the transmission of world prices of rice, maize and wheat to China during the recent food commodity prices spike and the factors influencing the transmission. The study
more » ... he study contributes to the academic research by giving new insight to the transmission of world food price to developing countries. (1) To understand the world price transmission to China for these three food commodities, we conduct econometric analysis using monthly data. We perform the unit root test using Dickey-Fuller Test with GLS de-trending (DF-GSL) test for the data series and run the error-correction model (ECM) to estimate the price transmission. (2) The empirical results suggest that the price transmissions are weak, and china's prices of these three commodities are relative stable, with speeds of adjustment less than 5%. (3) We go on to explore the factors that contribute to the week transmission. As an important factor to market price salability, China's production of rice, maize and wheat keeps an increasing trend during the last decades. And these are the results of reforming agriculture policies in China during the past years. The reforms are related to production, price, taxation and trade, etc. (4) With the empirical results and analysis from the policy perspective, we conclude that the food prices were relative stable during the world food price spike and this is attributed to the agricultural policy reform in China.
doi:10.21272/fmir.2(3).52-61.2018 fatcat:27pr775c7bhnlfi4kd35zow4ha