Technical efficiency of food processing in China: the case of flour and rice processing

Abstract

PurposeThe purpose of this paper is to examine the technical efficiency of wheat and paddy rice processing in China. Understanding the level of technical efficiency of food processing helps to decide whether efforts are warranted to improve this efficiency. Studies on China's technical efficiency of flour and rice processing are scarce. This paper fills this gap.Design/methodology/approachWith a unique set of firm‐level survey data collected by China's State Statistical Bureau, this study adopts a stochastic frontier model to investigate the technical efficiency of flour and rice processing.FindingsThe technical efficiency for both flour and rice processing is low in China, being only about 50 per cent. On average, rice processing firms have slightly higher technical efficiency than flour processing firms. It is also found that a significant proportion of firms experienced negative growth of technical efficiency during the time period of investigation.Originality/valueEach year, some 300 million tonnes of wheat and paddy rice are processed in China. Any small improvement in technical efficiency is translated into huge economic gains. Further, a tiny improvement in flour or rice output rate is equivalent to an enormous increase in food supply, contributing to China's food security. The paper confirms the need and potential to raise technical efficiency in China for wheat and paddy rice processing.