Friday, February 18, 2011

China's Shifting Needs


According to USA Today China will have an increased demand for the US's agricultural resources. China is already the number one importer of US agricultural products, but due to China's rapid growth and a severe drought in northern China, their need for commodities like grain and meat from other countries has soared. The countries expanding middle class has also increased their need for imported foods because of the rising incomes. As increasingly well-off consumers get fewer of their calories from rice and wheat, they will demand more from high-value products such as meat, fish, dairy and fruit. China plans to use this demand to garner as much economic growth as possible. China's goal of course is to be as self sufficient as possible so they've increased the quantity of the staple foods like rice.

China's rapid urbanization has created a scarcity of land more so than a scarcity of labor. Because of the scarcity of labor China imports land intensive crops and exports labor extensive products. One example of that trend is China's purchases of raw soybeans to be crushed in China for oil. These shifts are obviously more in line with China's comparative advantage.

4 comments:

Smith said...

Great analysis. How could China’s rising demand for US imports affect the US’s circular flow?

Elizabeth said...

If China becomes increasingly dependent on the US for certain products, the relationship between the two countries may begin to balance out. The US is currently in great debt to China, but this new relationship may decrease the manner in which China has the upper hand. If the trend mentioned in the post continues to occur, it seems like the dependence on rice and wheat will decrease even more. This sounds like China's move to increase the quantity of these products may not play out the way they hope it will.

Garrett T. said...

Sounds like China might just help the U.S. get out of debt if they can't be as self sufficient as they need to be. With more demand in foods from the U.S. this will just help the strength of the American dollar and slowly rise from the trough of this recession.

Alison said...

China is having to learn to be more and more dependant. It is still influential and a major exporter of a lot of products, but it's need for higher quality food will hurt its influence. This could be a good move for other countries, especially the US, who aren't as powerful as they once were. This will level the playing field a bit.