Food Demand in China : Lessons from Guangdong Province

There is a substantial controversy in the economic literature over the magnitude of the expenditure elasticity for food grain in China that is caused, to a large extent, by whether time-series or cross-section data are used in the analysis. A set of reasonable elasticities for a complete demand system is estimated by using a panel of county level data in Guangdong Province for the last ten years. The results show that food grain has a small positive income elasticity, implying that food grain is not an inferior good in China. A 20-year forecast of China's food grain and feed grain consumption, based on the estimated demand system, demonstrates that the demand for feed grain will grow faster than for food grain, as expected, and that consumption will be higher than most other published forecasts.