Effects of market liberalization on income from sugarcane farming in Guangxi, China

Abstract

The economic reforms characterized by trade liberalization, market opening, change of land tenure system, etc. have had significant impacts on the agricultural sector in China. In order to examine the effects of market liberalization on farmer income in relative poor regions, a case study of sugarcane farming in Guangxi province has been conducted. The study shows that the effects of liberalization of international trade, as well as domestic output and input markets, etc. on farmer’s household income are considerable. After liberalization of international trade on sugar and sugarcane in 1995, the domestic sugar price responses to the world sugar price more significantly than before the liberalization. The elasticity of domestic sugar price to world sugar price is 0.52. The liberalization of domestic market also had significant effects on the sugarcane production and producer price. The local sugarcane price did not respond to domestic sugar price significantly before the liberalization, but it does respond to the domestic sugar price significantly after the liberalization. The liberalization in input markets leads to dramatical increase in input prices particularly in short run, and increase the total cost of sugarcane farming. As a result, the household incomes from sugarcane fanning are affected significantly. Simulation study shows that sugarcane farming in Guangxi would be affected more greatly after China’s WTO accession, and it will affect the rural household income eventually.